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Small Brazilian Industries Seek Trade Finance to Grow in the International Market, Overcoming Challenges in Access to Competitive Instruments, Claims João Costa Pereira of Ouribank.
Small businesses in Brazil are looking for trade finance as a strategy to expand in international trade. According to João Costa Pereira, product specialist at Ouribank, the trend of market diversification is growing, but many companies still face challenges in accessing instruments that can make their businesses more competitive abroad.
With an increasingly globalized productive scenario and the lessons learned during the pandemic, the need for trade finance solutions becomes crucial. International trade financing is one of the key mechanisms that can help these companies overcome financial barriers. João Costa Pereira states that the use of trade finance can allow for a more robust entry into external markets, facilitating the development and sustainability of their businesses.
In light of recent supply chain shortages in relevant sectors, medium and small Brazilian industries have doubled their attention to opportunities in the international market. This situation is noticeable for those seeking to sell their products abroad as well as for those needing to import critical inputs for their production lines.
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Increasing Competitiveness in International Trade
Most of these companies, however, especially those just starting down this path, do not know which tools can make them more competitive and sustainable in international trade, according to João Costa Pereira, Product Specialist at Ouribank, a bank active in the trade finance sector for about five years.
According to the executive, the demand for trade finance has increased substantially year after year since the bank began its operations in this segment. ‘There is a growing trend among smaller Brazilian industries to diversify markets. However, these companies are still timid compared to other countries, which delays their expansion abroad,’ he observes.
Challenges and Potential of Trade Finance
In Pereira’s view, the lack of experience in international business also justifies this gap. ‘In the case of exports, for example, Brazil is a large exporter of agricultural commodities and minerals, sectors where companies are quite experienced. About 70% of Brazilian external sales are concentrated in commodities. But the country does not have as much tradition in selling industrialized products abroad.’ Brazil has climbed two positions in the global export ranking of the World Trade Organization (WTO), reaching 24th place in 2023. However, it had previously ranked 21st in 2011.
Nonetheless, the country is far from nations that invest more in industrialized products, such as Italy, France, and the Netherlands, which are among the top ten global exporters. ‘In the major exporting markets, such as the United States and Europe, small companies have been selling worldwide for some time, whereas in Brazil, this movement is much more recent.’
Necessary Stimulus for Small Industry
Small and medium-sized Brazilian companies also receive less stimulus for international trade compared to the incentives provided by the main manufactured goods exporting markets. ‘There is a need to ‘democratize’ access to the global market for these Brazilian industries, which lack the necessary instruments for this important step in growth,’ analyzes Pereira. ‘To export, many companies want to receive payment upfront, which limits their export capacity and the ability to capture new markets,’ he states.
Importers, on the other hand, are hesitant to make advance payments because they do not know if they will actually receive the products, thus impacting the development and diversification of the supply chains, explains the executive. These uncertainties can be easily addressed by various financial products and services available to provide security in international trade, going beyond the Letter of Credit, which serves both exporters and importers, and the Finimp (Financing for Imports).
Modern Financial Instruments
‘These are the most well-known products in Brazil, but they are more expensive and bureaucratic, losing ground to faster and more effective instruments. The letter of credit, for example, has been stagnant for about 20 years. Medium and small industries can ensure more effective foreign purchases and sales with the help of financial institutions experienced in international trade financing,’ highlights the executive.
Companies understand their products, and banks know the mechanisms that facilitate these exchanges between companies, enabling them to focus solely on their business. Among the instruments for exporters, in addition to the ACC (Advance on Exchange Contract) and ACE (Advance on Delivered Exchange Contracts), which are essential for accessing international markets with security and speed, he mentions the risk analysis of markets and clients abroad, the coverage of risks with the assignment
Benefits of Market Risk Analysis
of credit (receivables) for the bank and support in international collection services. Importers, on the other hand, have access to Supply Chain Finance (SCF), which allows the buyer to guarantee payments to the supplier and benefit from the necessary terms for their business cycle. ‘The importer needs to ensure stable and diversified supply chains, negotiating better payment terms and providing credit comfort to suppliers.’ According to Pereira, globally, SCF has already surpassed the mark of US$ 2 trillion in financed volume, showing an average annual growth of 20%.
‘To be competitive in the international market, it’s necessary to have a good product, a good price, and good selling conditions.’ The executive further highlights that financial institutions with greater expertise in this market design tailored instruments according to clients’ needs and each transaction, with integrated solutions to follow operations step by step.
About Ouribank: History and Commitment
With over 40 years in the market, Ouribank is a reference in specialized currency services. Committed to transparency, seriousness, and innovation, Ouribank has served over 500,000 clients and executed more than 1 million currency operations, transacting over 30 billion dollars in 2023. The history of Ouribank is distinguished by excellence in personalized service, reflecting its commitment to innovate, bring efficiency, and exceed client expectations.
Source: © sistemas@comuniquese6.com.br
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