The Impact of Remessa Conformo on Brazilian Retailers
Introduction:
In a recent announcement, Shein’s general director, Marcelo Claure, emphasized that the company is as Brazilian as any other retail brand. This statement came after Shein’s adhesion to Remessa Conformo, a platform that guarantees exemption from Import Tax for purchases under US$50. However, it was the response from Marisa’s CEO, João Pinheiro Nogueira Batista, that caught the attention of many. Batista referred to the exemption as an “excrescence” and criticized the unfair advantage it provides to foreign competitors. This article will delve into the impact of Remessa Conformo on Brazilian retailers, with a focus on Marisa’s challenges and its recent partnership with Credsystem.
Marisa’s Struggles and Restructuring Efforts:
Marisa, like other Brazilian retailers, has been significantly affected by the increasing presence of Asian competitors in the country. In response to this challenge, Marisa has undertaken a rigorous restructuring process, which involved closing stores and reducing operating costs. Despite these efforts, the company continued to struggle financially, primarily due to its financial arm. Recognizing the need for a change, Marisa formed a partnership with Credsystem, which will now handle the financial operations of the company. This move aims to alleviate the financial burden on Marisa and allow the company to focus on its core retail business.
Marisa’s Alliance with Credsystem:
Under the partnership with Credsystem, Marisa will share the results of credit operations conducted at its stores. Additionally, Marisa will receive a sum of R$ 110 million within a year, with the possibility of an additional R$ 100 million based on loans receivable and liabilities. This collaboration not only provides immediate financial relief but also enables Marisa to offer its customers enhanced credit options and longer credit terms. However, despite these potential benefits, the reaction from the market regarding this alliance has been disappointing according to Batista. The lack of understanding about the strategic nature of this change demonstrates that there is still work to be done to regain the trust of banks and investors.
Future Plans and Market Trust:
Looking ahead, Marisa aims to issue bonds in the first half of the next year, provided that all goes well. The company also plans to adapt its remaining store network, which may involve modernization and downsizing. The market’s perception of these adjustments as steps towards positive change means that Marisa will have to seek further access to the capital market in order to secure credit lines. Recognizing past mistakes, Batista emphasizes the importance of a more defensive and long-term debt structure to prevent over-concentration of liabilities in the short term.
The Impact of Remessa Conformo:
Returning to the focal point of this article, the emergence of Remessa Conformo has generated significant debate within the Brazilian retail sector. While Marcelo Claure asserts that Shein is as Brazilian as any other retailer, João Pinheiro Nogueira Batista, CEO of Marisa, labels the tax exemption for purchases under US$50 as an “absurd” and “anachronistic” situation. This exemption, facilitated by registration with Remessa Conformo, allows foreign competitors to enjoy a competitive advantage by paying only 17.5% of the ICMS (a state-level value-added tax). Local retailers, on the other hand, must adhere to regular tax obligations, putting them at a disadvantage.
Batista believes that this distortion will be corrected in the near future, as the Federal Treasury has expressed concern about the tax exemption and there are signs that Minister Fernando Haddad intends to address this issue. The sentiment expressed by Batista reflects the frustration of local merchants who strive to compete on equal terms but find themselves facing unfair competition due to discrepancies in taxation.
Conclusion:
The impact of Remessa Conformo on Brazilian retailers, particularly Marisa, has been a topic of significant concern and debate. Marisa’s struggles in the face of increasing competition from Asian retailers have led the company to undergo a comprehensive restructuring process. The partnership with Credsystem aims to alleviate financial burdens and allow Marisa to focus on its core retail business. However, despite these efforts, the unfair advantage provided to foreign competitors through the tax exemption for purchases under US$50 remains a point of contention within the industry. João Pinheiro Nogueira Batista’s comments reflect the sentiment of many local merchants who seek a fair playing field. It remains to be seen whether this distortion will be corrected in the future, but there are indications from government officials that steps may be taken to address the issue. The path forward for Marisa and other Brazilian retailers involves ongoing restructuring, accessing the capital market, and establishing a more sustainable debt structure. Ultimately, the goal is to regain the trust of banks and investors and secure a stronger position in the competitive retail landscape.
Summary:
The adhesion of Shein to Remessa Conformo and the subsequent tax exemption for purchases under US$50 has sparked controversy in the Brazilian retail sector. Marisa’s CEO, João Pinheiro Nogueira Batista, referred to the exemption as an unfair advantage for foreign competitors. Marisa, like other retailers, has been impacted by the rise of Asian retailers in Brazil. However, the company has recently partnered with Credsystem to address its financial challenges. The partnership will enable Marisa to share credit results and receive a sum of R$ 110 million within a year. Marisa aims to issue bonds in the near future and adapt its store network for long-term success. The CEO believes that the tax exemption issue will be corrected, as there are signs of concern from the Federal Treasury and the intention to address the issue from Minister Fernando Haddad.
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One day after announced adhesion to Remessa Conformo, the general director of Shein, Marcelo Claure, stated through social networks that the “company is as Brazilian as other retail companies.” But what really caught our attention in this post was the comment from the competitor, Marisa’s CEO, João Pinheiro Nogueira Batista: “Friend.”
The comment, which was deleted as soon as Batista realized the repercussions, reflects the sentiment of local merchants regarding the exemption from the Import Tax for purchases less than US$50.00 that registration with Remessa Conformal guarantees. “It’s an excrescence,” he says. “Conformal shipping is an advance, but this exemption is absurd, an anachronistic situation,” he told the business instant messaging.
Batista says he believes that what he calls “distortion” will be corrected this year. This is because the Federal Treasury has expressed concern about the tax exemption that is causing the exemption. And because there are, on the part of Minister Fernando Haddad, signs that he wants to correct this lack of exemption. “I like to compete, but on equal terms. Not with someone who comes from abroad and pays only 17.5% of the ICMS,” he defines.
business instant messaging
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Marisa is one of the retailers most affected by the advance of Asians in Brazil. And it is another of the issues that Batista has had to face in recent months, in which he has launched a rigorous restructuring. After closing stores and reducing operating costs, the company announced this week a partnership with Credsystem, which assumes the financial arm of the operation. This area had been draining the company’s resources and energy. “We as retailers don’t know how to manage credit,” he says.
Batista says that Marisa and Credsystem will share the results of the credit operations closed at the chain’s counters. The company also receives R$ 110 million within one year of the association and has the possibility of adding another R$ 100 million, the balance between loans receivable and liabilities. “The market is challenging, saying that we don’t have access to credit, that we are going to have to dilute shareholders, a lot of nonsense. But, just for this joke, we have at least R$110 million over the course of a year,” he states. The ability to serve network customers, with more limits and longer credit terms, is another advantage of the partnership.
For the executive, the market reaction to the announcement of the alliance with Credsystem was disappointing. “I thought the action would be successful, but I don’t think they understood that it was a structural change,” he says. This shows that there is still some way to go to regain the trust of banks and investors. “I have a bridge to build, it is true, but it is a much easier bridge to cross, we have defined access to resources in a structured way,” he says.
If all goes well, he says, the retailer wants to issue bonds in the first half of next year. The next step in the restructuring is an adaptation of the remaining store network, which involves modernization and also an adaptation of the space, which may be smaller. And, since the market is convinced that these adjustments will give results, the company will have to access the capital market again to obtain credit lines. “A mistake in the past was concentrating all liabilities in the very short term. Therefore, we have to have a more defensive and longer debt structure,” he states.
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