Buying motorcycle safety equipment - part 2 - on the failures of the Brazilian economy

The experiences of mine, recounted below, with purchasing basic, important safety equipment for completely standard purposes highlights a major problem with the Brazilian economy.  Brazil, contrary to what some politicians would have you believe, is NOT self-sufficient.  There are market failures - prospective customers who can not buy locally-made products, for no good reason.  Why can't you get a decent leather motorcycle jacket in Brazil?  There's no shortage of leather - cattle farming is one of Brazil's biggest industries; and no shortage of clothing manufacture - the textile and clothing industries are two of the other biggest industries in Brazil!  If they were available at non-absurd prices, at least online, people would buy them - as it's common to see the more dedicated bikers (owners of bikes with 500cc+ engines, motorcycle clubs, etc.) using leather, which they likely imported themselves or bought overseas.  I'm sure it's the same with motorcycling-grade denim&kevlar, leather chaps, boots, etc.

Why the market failure?  Reason one - starting a business in Brazil is a major-league pain in the ass.  According to the annual World Bank "Ease of Doing Business" ranking, Brazil is one of the harder places in the world to start a company (130 of 185), behind some countries at war!  Depending on the state and type of business, going from memory, you'll need approval from 7 to 11 government agencies, all of which has to be fetched in person; pay thousands of reais; and wait for months.  (there are initiatives to cut the time below two months, including in Rio de Janeiro, through such simple measures as maintaining an electronic version of the business registry so you don't have to spend hours flipping through folders looking for a name or risk wasting months of time because you picked a company name that someone has already registered)  A lawyer and accountant are required, and until very recently, so was a partner. Still is in most cases, I believe.  Compare this with Sweden (ranked #13 in the above survey), where you need an address (a PO Box is fine) and have to fill in a form, which I believe can now be done online.  That's it, from what I understand.  This is all without getting into the tax issues - the tax code in Brazil is so complicated that many companies, especially those needing imports or those handling food, collapse in a mire of endlessly complicated tax law red tape.

Reason two - in the rest of the world, it is accepted that imports will be a normal fact of life.  It's globalisation - there's no way to get around it; in basically any country you'll be able to buy an iPod, a Toyota, and Johnny Walker.  The Brazilian government has tried and continues to try to subvert this fact.  Their main sledgehammer-applied-as-a-bandaid is extortionate import taxes, as referred to above.  Import taxes are astronomical, especially on electronics.  Cost of an iPhone 4S on the US Apple store online: US$549, about R$1,110.  Cost of an iPhone 4S on the Brazilian Apple store online: R$1,999.  It's the same item, built in China either way.  Top-of-the-line electronics simply aren't available - I built my desktop PC years ago and was thinking of making an upgrade, but all the parts on the domestic market are obsolescent and crap!  The idea is to stimulate local industry by making Brazilian-made products (=lower total taxes than imports) competitive domestically.  That idea is an utter failure, because:

1. Opening a business is a pain in the ass.

2. Brazil has the highest effective banking interest rate in the world (unless another country passed Brazil in the statistics within the past few months, which isn't likely), meaning that bank loans for capital to open industrial production is absurdly, prohibitively, extortionately high.  Thus, new industries or new competitors to existing companies simply won't arise without an eccentric billionaire benefactor providing the backing.

3. While import taxes are high enough to be extortionate and depress consumption, they aren't even high enough to make Brazilian goods competitive!  I once needed a new PC mouse.  Went down to a local store, asked for the cheapest mouse he had.  He put two on the counter - one Brazilian for R$6, and one Chinese for $5.  I bought the Brazilian one to stimulate the domestic economy.  The mouse didn't work.  I exchanged it for the Chinese one, which worked perfectly.  Textiles - a major Brazilian industry, also subject to higher-than-normal import taxes I believe and certainly subject to more thorough customs inspection.  Many major international brands produce clothes here for export.  If you want cheap clothes in the local shops - they're all made in China.

Thus, you have a situation where there's a huge demand for consumption which is not being satisfied.  Brazilians now have more money to spend (especially since income inequality is slowly decreasing, so the lower and middle classes have ever more disposable income - those are the groups most likely to stimulate domestic consumption of manufactured goods or primary goods such as food), and want to spend it on minor luxuries such as clothes, electronics, and motorcycles (and motorcycle accessories). Prices become unnecessarily high, since there's high demand but low supply (from imports and lousy infrastructure) and low competition (because opening a business is a pain in the ass).  Concrete example: Brazil has an enormous automotive industry.  Car factories are all over the place, relatively speaking for the continent.  One of those manufacturers is VW, which makes the Gol - a Brazilian peoples' car.  No frills, low price.  (Still more expensive than a Chinese import, despite enormous tax benefits to domestically-produced cars)  For the price of a Gol in Brazil, you could buy two Gols in Mexico. That's despite those two Gols being built in Brazil, shipped to Mexico, and having import duties and taxes levied in Mexico before sale.  For the price of a Gol in Brazil, you could buy a Camaro in the USA.  (A Camaro in Brazil - yes, Chevrolet has factories here too - costs the same as 4 Gols)  What the hell for?  Taxes play a role, but mostly it's the near-cartel of the automotive industry levying as eye-wateringly high profit margins as their conscience will let them.  (OK, there's no conscience in business - it makes perfect business sense for them, and they'd be crucified by their shareholders if they acted otherwise).  Unfree market -> unnecessarily high prices.

Another important carryon effect, since I'm on the subject - since electronics are so expensive and outdated, Brazil's efforts at modernisation are crippled and lethargic.  How can Brazil become a high-tech society when residents can't afford decent computing gear or an affordable internet connection?  The federal government yammers about having to modernise, needing to stimulate domestic electronics production capacity through international cooperation such as the going-nowhere fighter jet purchase for the chair force and expansion of the submarine fleet for the navy, and needing to improve internet infrastructure and computer access for the people, but it's their own policies and legislation preventing any of this from happening.  Morons.

Anyway, that's just a broad look at the failure of the current economic situation in Brazil.  We need to cut out the bureaucracy and costs involved in opening businesses and promote entrepreneurship and venture capital financing.  In the meantime, either imports should be blocked completely (impossible under Mercosul treaties, although Brazil and Argentina are happy to ignore those treaties when it suits them), or they should be accepted - preferably along with the notion that decreasing import taxes will actually in the long run stimulate domestic consumption and modernisation, and promote domestic industry.  Until then, when, as is frequently the case, I want to buy something that the domestic economy doesn't provide, I will import it or go without.  Both of those results are sub-optimal for Brazil.