Nintendo Puts Business In Brazil On Hiatus

jones_supa writes: Nintendo has announced that it will end distribution of its consoles and games in Brazil. In a statement, Nintendo attributed the move to high import duties, which makes doing feasible business difficult. The company could avoid those duties with a local manufacturing operation, but has chosen not to establish one, presumably for the costs involved. In a statement e-mailed to Polygon, Nintendo of America said that the company's distributor for Latin America would no longer send products to Brazil, but it would continue to distribute Nintendo goods to other parts of South America. Nintendo will also keep monitoring the evolution of the business environment in Brazil and evaluate how to best serve Brazilian customers in the future.

Comments

Brazil has long had a very protectionist

[Crashmarik]

Environment for electronics and just about anything else. http://www.insidesources.com/c... . The problem is this doesn't serve them well. Trying to recreate the rest of the worlds industries internally just insures they have many second rate products, or have to pay hefty premiums for the tools they need to get things done. Really surprising after all these years they haven't tried to emulate more successful models, ala Japan, Singapore or Taiwan and encourage their industries to pursue ventures where they can have a competitive advantage.

Re:Brazil has long had a very protectionist

[Billly Gates]

Kind of hard to debate to go more free when your neighbors are vastly more poor with zero taxes. Wouldn't it be easier to go Uruguay or Venezuela?

The US too lost and still the middle class never has recovered from NAFTA. Wages have not increased in 20 years regardless of inflation! The US can argue it will benefit CEOs and lobbyists as the companies are at least owned here. Not true for Brazil so cutting taxes would only cut your revenue as nothing is based there.

Re:Brazil has long had a very protectionist

[Anonymous Coward]

There are no local industry to be protected. Brazil has almost no electronic industry, and absolutely no computer/videogame/high-tec industry.

The whole protection excuse is meant only to justify absurd taxes, that goes directly to the pockets of politicians. While most import taxes in EUA are about 3%, the default rate for imports in Brazil are about 80%.

And it doesn't get better if you put a local subsidiary, you still have an absurd amount of local taxes. Except if you're a friend of the government, you have no way to be competitive in the internacional market.

Re:Brazil has long had a very protectionist

[jonwil]

It doesn't matter if the taxes and tariffs in Brazil are set at 0%, 50%, 100% or even 1000%, it wont do a thing to encourage electronic manufacturing in the country. In fact, I suspect there is nothing that the Brazilian government could do that would get electronic manufacturers to build product there short of dropping wages and other costs low enough to make building there (instead of building in super-low-labor-cost countries like China) viable.

Re:Brazil has long had a very protectionist

[rtb61]

Easy, peasy, drop all patents on products they want to be manufactured locally, go partners with manufacturers from China that have very small patent portfolios and you are done, screw the US and the patently corrupted USPTO. Now when it comes to primary resources, you can bullshit till your blue in the face but if you don't have enough, you simply will never have enough. Unless like the US you invade countries, murder the local populations and the pretend to sell those resources to US corporations who then install corrupt autocrats to keep the population down and murder as many of the population as necessary to keep profits flowing. Brazil is obviously seeking to reduce association with the US.

Re:Brazil has long had a very protectionist

[Crashmarik]

I was thinking of a similar experiment -- if a company refuses to sell a product in your country, then it loses all copyright / trademark / patent protection. Locals would then be free to open up shop and start making the hardware or copying the software. I'm not sure if this would work, but I'd be interested in seeing the result nonetheless.

Ok let me get this straight.

1. Put into place a law that lets you steal the patents of products not being sold in your country
2. Raise Tariffs on said products to the point they can't be sold
3. ....
4. Hope your military is sufficient to deter retaliation from the countries you have been robbing ?

Now admittedly a military response maybe a little much. At the very least you can certainly expect the other nations to go after your assets abroad, pursue economic retaliation, hell they could issues letters of mark and reprisal against your merchant shipping.
 

Re:Brazil has long had a very protectionist

[vux984]

The problem is this doesn't serve them well. Trying to recreate the rest of the worlds industries internally just insures they have many second rate products, or have to pay hefty premiums for the tools they need to get things done. Really surprising after all these years they haven't tried to emulate more successful models, ala Japan, Singapore or Taiwan and encourage their industries to pursue ventures where they can have a competitive advantage.

And yet, day after day, post after post, we see people here on /. advocate that US at least be able to manufacturer everything locally, to reduce dependency on foreign tech, to reduce brain-drain to foreign manufacturing, etc, etc, etc.

Then we see a country try and do that. And we tell them its wrong...

I realize /. is of course many people and many opinions... but I wonder how many people were reading your post nodding; while simultaneously thinking the US should be producing more locally, despite the competitive advantages of outsourcing the manufacturing (which is precisely is why we do it.)

Re:Brazil has long had a very protectionist

[diamondmagic]

You're not supposed to produce everything as cheap as your neighbors, it's actually bad thing to do that. Even if your neighbor produces literally everything below the cost of domestic production, so long as the two entities have different opportunity costs for different goods, it's still more beneficial to outsource stuff and trade. Economists call this comparative advantage and it's a mathematical theorem.

Re:Brazil has long had a very protectionist

[jittles]

Wouldn't it be easier to go Uruguay or Venezuela?

I've lived in Venezuela. It is not a poor country. The people are poor, but they have huge oil reserves, diamonds, gold and many other natural resources. They used to be the largest oil exporter to the US until Hugo Chavez started diverting that oil to Cuba for free. Venezuela also charges import duties on all products (with some exception in the state of Nueva Esparta, which is mostly duty free). They also charge an income tax that most people do their best to avoid ever paying.

The real problem with Venezuela is corruption. When I lived there, I did not keep an ID on me at all times, even though it was required by law. I kept my passport in a safety deposit box because it was cheaper to pay the fines for not having proper ID than it was to pay the bribes to get my passport back from the National Guard when they would do one of their regular shakedowns. If you were a mere janitor for the state-run oil company (PDVSA), you were probably set for life. If you didn't have some important friends or family, you probably couldn't get a job for PDVSA.

Customers?

[Bert64]

evaluate how to best serve Brazilian customers in the future.

Only they won't have any brazilian customers, they will cede the whole market to microsoft and sony... Any existing customers they did have will be angered as they're now unable to buy any games, and will end up going to a competitor and/or modding their console to play pirated games.

haha cost

[drinkypoo]

The company could avoid those duties with a local manufacturing operation, but has chosen not to establish one, presumably for the costs involved.

No, it's for the chaos involved. Brazil is ridiculous. People get kidnapped off the streets for a paltry few hundred dollars' ransom. I wouldn't open a factory there if it were guaranteed to spontaneously generate gold nuggets. It's not like it's that big a market anyway, their economy is terribly, horribly uneven.

Re:haha cost

[Half-pint HAL]

No, it's for the chaos involved. Brazil is ridiculous. People get kidnapped off the streets for a paltry few hundred dollars' ransom.

A decade ago, the travel advice for visitors to Amsterdam was to carry a €10 note within easy reach. Low-order mugging was big business and if you handed over a reasonable sized note, the mugger would walk away without harming you, and without demanding a wallet. This meant that there was a lot of crimes that were officially classified as "violent", but not a lot of violence. If the mugger hasn't hurt anyone, he's not facing a long sentence, and most were happy to stay that way. Furthermore, the police were never going to expend all that much energy trying to track down guys who have never injured anyone and only walk away with €10 at a time.

The low-ransom kidnap market runs on similar principles. Keep the price down, and most people will pay up, because it's not worth the risk. This means that the kidnappers almost never have to follow through on threats of injury or murder -- human beings generally don't like hurting each other. The end result is a series of crimes that are rarely reported, and even if reported are unlikely to be pursued aggressively by the police.

Both situations are wrong, but they represent a sort of "sustainability", a steady-state equilibrium of crime. It's not pleasant, but it's not a chaotic system.

Gray-market Nintendo smuggling

[Guppy]

In a statement e-mailed to Polygon, Nintendo of America said that the company's distributor for Latin America would no longer send products to Brazil, but it would continue to distribute Nintendo goods to other parts of South America.

So in other words, Nintendo's legitimate subsidiary cannot compete with gray-market smugglers who evade the tariff to bring in consoles and games from the neighboring countries.

So they're just going to pull out and let the smugglers be their de-facto distribution channel.

Re: Gray-market Nintendo smuggling

[jsveiga]

There are a lot of shades of gray.
For years, Sony ignored Brazil in regards to the Playstation market. There was no PS2 nor PS3 officially sold nor supported by Sony in the country, no way to select Brazil when creating a PSN account, no Sony warranty nor repair centers, Nothing.
Nevertheless, nobody cared, and most people didn't even notice (until they tried to register a PSN account and had to resource to hacks to be able to register one as being in the US and makw Sony accept a Brazilian international credit card).
The consoles could be purchased by several "channels", from black to almost white gray market: From smugglers, by going to the US an bringing one, from legit stores who would legally import them directly and even provided a 1-year warranty, etc.
Sony did not spend a dime with the market. They would't even answer support questions from Brazilian customers, although there was a lot of money coming in from the indirect sales of the consoles, game sales, and PSN purchases.
After Brazil was finally "recognized" by Sony, soon US PSN accounts would no longer accept Brazilian international credit cards via the "hack". Makes one wonder if the well-known hacks (merely using a US city with the same ZIP code of your Brazilian city would work, for example) was tolerated before so Sony could get the profits without the burden of officially supporting the customers.
Maybe Nintendo just wants to save money with the same business model.

Re:customers should get pissed at their government

[RogueyWon]

Agreed it's moronic. But this is Nintendo we're talking about. Region locking isn't about the money; it's about a combination of their messed-up corporate structure (the various international companies are only loosely integrated) and nasty control-freakery. They have a long history of liking to say "title X does not fit with our irrationally conceived stereotype of region Y, so we won't release it there, or will cut it to hell first". Region locking is one of the tools they use for that.

The whole "region locking for differential pricing" thing at least had a simple motive behind it ("more money"), but it doesn't work all that well (markets where you need to sell cheap tend to have too much piracy to be worth it anyway). Most people who region lock for that reason are moving away from it now (Sony and MS have ditched it entirely).

I can understand

[mseeger]

I am working for a small (65 employees) company in Europe that serves customers with locations around the world. Of those locations that we have to deal with, Brazil is the worst nightmare.

Money (taxes, customs duties) is a solvable problem: it just costs the customer more. But getting definitive answers about the process, reliable delivery schedules or any kind of planning dependability is extremely hard. Due to the bureaucratic overhead, nobody there wants to deal with it.

I would rather skip the business than ruining our reputation through uncontrollable external influence.

Re: I can understand

[Anonymous Coward]

I live in Brazil for work on a longterm assignment.

It is a disorganized shit hole. The beauracracy is just as you described, a giant shit show. Nobody knows what the rules are, at the same time they seem to be constantly changed, and nothing can be completed quickly/effectively/efficienty.

My process for obtaining a badge in the USA for plant access involved an email, an appointment, and me showing up for that appointment. Two days and I have a functional badge.

For Brazil? A month, a myriad of paperwork, a physical examination by a doctor.

It's one of the most dysfunctional places in the world, and the cost of all goods besides labor is absolutely outrageous. Brwzilians are literally paying two to three times the American USD Msrp for almost all goods.

700 BRL for your drivers license, 3000 BRL to insure your car, 40,000 BRL for a base Ford Fiesta, 4,000 BRL for a play station 4. All on a salary of 60,000 BRL if you're fortunate enough to be a "middle class" engineer. Minimum wage is about 700 BRL.

And what do brazilians get for all of the taxes they pay? ridiculously high crime rates, shit infrastructure, shit schooling, shit hospitals, and a corrupt and worthless shitty government (at all levels, local, state and federal).

Re: I can understand

[esperto]

mod the parent up (sadly I have no more points)

It is sad but true, we pay huge amounts of taxes (almost 35% of GDP this year) and have no quality in government services.
This bureaucracy infects even the private organizations, that suppose to be more nimble than the publlic sector but are just as bad, because no one trusts their employees (rightly so, unfortunetly).
And politicians don't want to change anything, because they get wealthy in the chaos, big companies also (only those can navigate the paperwork and "grease" the wheels), and the people either don't know or don't care... it's depressing.