EPISODE 78: LUÍS MEIRELES, CEO & CO-OWNER AT MDI

Episode’s transcript

Julio Martinez: 0:00

Welcome to the Latin Metech Leaders podcast, a conversation with Metech leaders who have succeeded or plan to succeed in Latin America. Please subscribe on your favorite podcasting platform. Apple Podcast, Spotify, Google Podcast. Amazon Music is teacher tuning. I heard radio, Pandora. All these are

Julio Martinez: 0:20

Welcome to the Latin Method Leaders podcast, a conversation with leaders who have succeeded or plan to succeed in Latin America. Today our guest is Louis Mares, PhD and CEO at MDI Industrial, a medical device manufacturer in Brazil. Reese is also a senior consultant for European companies looking to do business in Brazil. So Louis, it's great to have you here in the show. Uh, welcome.

Luís Meireles: 0:49

Thank you for invitation to be a pleasure to share some experience and some thoughts if they are useful.

Julio Martinez: 0:58

Excellent. Uh, Louis, I'm, I'm so happy to have you here today. I'm, I'm sure many of our listeners are very curious about Brazil. Brazil, as you know, is a huge market. It's the largest market, uh, for medical devices in Latin America. So I always enjoy speaking with people like you. I've actually, I've only had about two guests like you, two or three, I don't remember. But, uh, it's such a huge country that we can have 200 guests. I still don't cover the whole market. Right.

Luís Meireles: 1:27

<laugh>. It's a difficult market, but huge. Huge. Very large.

Julio Martinez: 1:32

All right. So Louis, let's get started talking about, um, your journey to Latin America. You are from Portugal and you moved to Brazil. How is it that you got involved with the medical device business in, in Brazil and Latin America?

Luís Meireles: 1:47

Well, this is a very long story that I will try to resume<laugh> in a few minutes, otherwise, we can stay all day speaking about this. Okay. But I'll try to do it fast. Okay. So I, I'm by a technology. So my life started in the academy. I was a university teacher for a few, a few years during my PhD, and I started post-doc doctorate as well. But then I decided to raise my own company, and that was in Portugal. That was almost 20 years ago, kind. Uh, and then I started to work in the medical field. Uh, I always was very close to the medical field. I found out the cardiology market, and I started to work with several cardiologists. We raised a company in Portugal that was, uh, targeting that, that market. It was a startup, it was doing well. But, uh, with the crisis in Portugal, uh, I don't know if you remember, but Portugal, Spain, Greece. We had the fm fm i in, uh, there. So it was kind of tough at that moment for the startups. And we were growing in Brazil. Okay. We have had already a partnership in Brazil. We had our product certified here. So I moved here initially for, uh, one year or a couple of years just to launch the project here, try to make some, uh, some grow in Brazil, which was the same language, and, uh, and then go back. But during that, that course, I decided to stay here and, uh, started to understand this market. And I started to work with another companies here. Uh, and uh, and now I'm here for more than one day working in the medical device industry.

Julio Martinez: 3:33

Wow. Fascinating journey. I'm sure you have so much to tell about your, uh, stories and challenges in Brazil, because Brazil is famous for being kind of a difficult market to penetrate lots of laws and regulations, and it's protective, right?

Luís Meireles: 3:51

Uh, supposedly not, but its, its protective and it is difficult to, to penetrate. It's not very easy. You need to understand the culture first. Uh, and everything is different. Everything is different. So it's, it's really hard to just pick up products from America or Europe, which can be market leader there, and then implement it here and be, be successful because the challenges are, uh, are are very big. They are. And it's difficult to understand how to, how to do that. So you need first to understand the market, then to understand the people, the culture, and to set up a plan to, to do that. I did it with one American company at that time. Uh, we implemented instruments. Marta was a Milwaukee based company. They were leader in, uh, in cardiology at that, at that time in Europe. They were growing fast. And we started distribution here in, in Brazil, and we were running to be market leaders. So we, we, the grow was enormous, but then the mortal was acquired by hi and the Hi and then was acquired by Bax and uh, whatever. So things changed, but the project and the experience remain, and we are still known as the persons that that brought mortal and implemented mortal here.

Julio Martinez: 5:22

Excellent, excellent. So Louis, let's talk about trends. What trends do you see happening in Brazil or in Latin America that are, are worth mentioning today that are relevant to our discussion? Any political, economic, social trends that you see?

Luís Meireles: 5:37

First, you need to understand, or people need to understand that Latin America's continent with several countries, and it is totally different to enter in Brazil or Colombia or she is different. And the strategies are totally different. And the countries are in different, in different, uh, positions. Right now, of course, Brazil is the major country of Latin America. There are 220 million people in Brazil is a huge, huge market. Uh, so it's a very good playground to enter. And if you enter Brazil, which is difficult, then you have the doors open to the rest of the, the Latin America. Ok. Because you can have a very strong base. Brazil is, is not a, it should be one of the wealthy and rich, uh, countries in the world. There is everything here. You have oil, you have gold, you have diamonds, you have, uh, amazing agriculture. You have, uh, the rain forest, the Amazonian rain forest should be the most rich country

Julio Martinez: 6:46

In the world. Manufacturing. There's so much manufacturing happening there. Airplanes, cars, medical devices, everything. TVs, I mean,

Luís Meireles: 6:55

Everything. They do everything here. Uh, it's a huge, huge market and should be quite rich and wealthy. It's not because of political and historical reasons et set, but it should. But what I see, and I see a huge evolution in the last 10 years, It'll take 100 years, maybe it'll take a few generations, but it is getting stronger and the market is getting bigger, and things will, will, will, will evolve. So these emerging countries will be, will be to be focused in the next, in the next, in the next years. Okay. One trend that I see in the medical device in industries that I didn't see when I arrive is that, uh, is getting more and more protective. Ok. Uh, it's getting more difficult to register products here, for instance, uh, than it was 10 years ago. The regulation is getting tighten and, uh, is not that easy now to get a medical device. Certification, certification here, especially

Julio Martinez: 8:02

If it is of a higher class right, has

Luís Meireles: 8:05

Three, especially if it is a higher class. So I think that it was kind of easy, it was cumbersome and usually it took time because, uh, because the processes were bureaucratic. But it was easy. It was time consuming, but easy now it is the opposite. And Visa, which is the medical device regulator here, is working pretty much well. They answer fast, they answer professional, but they have tightened the rules and is not that easy to get to that get things done, which is good for good companies. Ok. So we are filtering the markets and the strongest and the organized and good products will stay. And the poor products and Chinese products and products with less, with less regulatory systems, we less, uh, difficult to, to to, to grow. The last legislation that arrived, uh, last, last, uh, couple of months is, I believe it was, it was May, uh, April of May is now, for instance, medical device software is subject to regulation, which was not, which was not. So for instance, if you, if you were to register a medical device, the test, uh, the equipment, the device and a software, the regulation was only on the device. The software was not subject to regulation. Now it is. So they will add it, the software engineers, how it was done, you has to give all the documentation of the software, how it is done, et cetera. Similar to Europe, for instance, which, which is new. And it'll change lots of things now because, because it, uh, it will make things, things, uh, harder. So that is a trend that we need to, to consider. It is getting difficult to get registration yet is, uh, is possible and uh, and professional. And that is, uh, a huge change because few years ago, people didn't want to come to Brazil because to register product in Visa was very difficult because they don't, it takes two years and it's nothing like this right now, it's professional. But if you have the right consultants and the right team and the correct quality management management system, you are able to do it in the, in the precise times. And also if you have a reference country approval, I guess that helps a lot. It helps, but it's not, uh, it is not, uh, mandatory. Okay. Okay. But, but it helps Now on Visa is part of international, uh, plan that has fda that test Japanese and Canadian. Oh, MD ist it. Yes. So you can, you can use my up with Misa or my, with Brazil and Visa as well. Europe is still out, but it is expected to come and that will, that will maybe do things. So for me, that is a major trend. Regulatory is now professional, but more difficult. That is one trend. The other as is that the market is getting more and more, uh, competitive. Okay. Uh, in Brazil, we now are facing, uh, I don't see a problem, but it is a trend.<inaudible> have two markets, the public sector and the private, and they are totally, totally different. And Thes must be different for both because it's, it's like two different markets, two different countries, two different approaches. But on the private sector, what we'll see and what we are seeing, there are major groups which are very few, three or four groups that are buying all the hospitals in, uh, in Brazil, for instance, I live in, uh, Salvador. And in the past four years, all the private hospitals were acquired. There are no more private hospitals.

Julio Martinez: 12:21

Individual, individual independence.

Luís Meireles: 12:24

They were acquired by major networks that are buying hospitals almost every month. Okay. Wow. So that is good and bad.

Julio Martinez: 12:33

That's what it's called systems in the United States, because the audience is familiar with that terminology.

Luís Meireles: 12:39

Why that is good, because if you get to enter that hospital network, you'll sell to all country. There are networks with, uh, that started with 10, 10 hospitals and now they have hundreds of hospitals. So if you get to your products inside, then you'll sell to all the network. So that is good. The part that is bad, it is more difficult because everybody's trying to do so, so you need to be good to be, so to do that. And then you have the pricing issues as they are big, what they're trying to do, they're trying to acquire in huge quantities, but lowering your, your margin. So you need to be very, very smart to be able to, to succeed, for instance, selling the products at lower margins so you can get in and then have a very good effective servicing that make you win during the, during the time with accessories, with servicing, with trainings, et cetera, for instance. So you need to have, to have strategies to go there. The good news is that you have to focus in a few, a few costs. It's easier, it's easier to do, uh, in terms of time or in terms of, uh, focus. But it's difficult. You need, you need to, you need to, to get in. So that is a trend. So you have now very, very big groups and there are a few others, but there are four that are just, just just exploding and buying hospitals and hospitals and hospitals.

Julio Martinez: 14:26

So it's consolidation of a fragmented industry. Yes. Used to be very fragmented. Now is more consolidated. So there is a trend of consolidation where the, the hospital systems are acquiring independent hospitals and creating large networks.

Luís Meireles: 14:42

Exactly. So one is the public sector for hospitals, the other is the private. And the private is, is being merged. So you need to know where you, where you, where you act. And anyways, the primary care, which for me is the most difficult one because Brazil's huge land, the infrastructure of transportations is poor. You was to travel by plane, you can't travel by car. There is no drains to travel between, between cities. So we always to to to be present. And if it, these hospitals, you can go to the major groups. If it's public, you have public standards, that's now everything online, etcetera. So you can, you can manage.

Julio Martinez: 15:27

So there's centralized, centralized, uh, purchasing in Brazil Yes. By the government, national government.

Luís Meireles: 15:35

But if your product, for instance, is for primary, primary care for physician offices, small, then you need to make, uh, sales representative network

Julio Martinez: 15:46

All over the country.

Luís Meireles: 15:48

All over the country because you can't be there easily. Ok. So you, you need to define different segments and then you, you have to attack each segment, uh, each segment, uh, differently. Ok. So that is, that is one, uh, one, uh, one issue that you need to understand. And as there were lots of companies coming to Brazil in the eighties and in the nineties that appear and disappear, they change distribution. Lots of times customers here, they don't trust, uh, outside brands in their offices unless they have somebody near that says, Look, doctor, I will support you. I have all information. I have a, if they don't have, uh, they don't pipe.

Julio Martinez: 16:35

Yeah. Interesting.

Luís Meireles: 16:37

It's, it's quite interesting. In cardiology, in cardiology, there are 17,000 cardiologists in, uh, in Brazil,

Julio Martinez: 16:45

17,000 cardiologists.

Luís Meireles: 16:46

1, 7, 17. Okay. Yeah. Thousand cardiologists. Uh, but the persons working, the cardiologists selling devices at the same, always the same. It's a, it's a very close, close group. And the brand is a commodity. Okay. The brand is a commodity. The cardiologist locally will buy what that person is selling him.

Julio Martinez: 17:09

Okay. Because he trusts him or her, because he's local, he speaks the same language. He's there forever. He knows where he lives.

Luís Meireles: 17:19

Yeah. And he's there for 20 years with a company there always support the customer. So to get his primary care, the, is to set up a sales representative network and get those small companies that are locally in supporting to work for you. So you need to be smart and to say that you have, uh, uh, a good portfolio with good prices, that you will support them, that you can, you can sustain. And then they will risk to change what they're doing and try to promote, to promote your brand. And they'll never, they will never do a swap like instant. They will test you. They will test in smoke once they will see how work. So there is a trust relation that you need to build until they really promote, promote your brand. So, and that's difficult to, that is difficult to acquire until you get, uh, a sales representative network. It takes a while. And you see, you have 27 states in Brazil, they are all separated and all with very individualities and different things. So it's, it's difficult. So you need to have at least 25, 20, 20 5 cents reps around, around, uh, around Brazil. And you have to be able to manage them and to teach and to coach and, uh, but it's, it's possible to, to do it.

Julio Martinez: 18:51

Hmm. Interesting. So let's go back to the public system. There's only one public healthcare system or there are several. For example, in Mexico there have like five, you know, the military, the teachers, the, the, what the government provides for the low income people. So how many systems do you see in Brazil?

Luís Meireles: 19:15

A lot. Look

Julio Martinez: 19:16

A lot. Yeah. That's very Imagine it's a huge country.

Luís Meireles: 19:19

You have the central government look, because Brazil is a federation of states. So the states have some independence about the federal government. So you a federal, uh, tenders,

Julio Martinez: 19:31

Healthcare systems,

Luís Meireles: 19:33

Okay. And

Julio Martinez: 19:34

National healthcare systems too, which will be national.

Luís Meireles: 19:37

Uh, then you have the local states which will, uh, will, will also provide tenders and they are all different. And then you have smallest ones, like big cities like Sao Paulo,

Julio Martinez: 19:53

Oh, they have their own hospitals in the city,

Luís Meireles: 19:56

More or less different

Julio Martinez: 19:57

Layers.

Luís Meireles: 19:59

And look, of course they are public, of course they are tenders. And there is now a, what they call the transparency portal, which is a huge, uh, online system where you can consult all public tenders and results of the public tenders and what was paid, what was delivered when was delivered, who has delivered that is public information. If you have time, uh, if you have time to, to do it, Okay. That, that will be public. So you can, and there are companies that are doing, uh, that are doing all data mining of that. And, uh, they provide you very, very

Julio Martinez: 20:40

Intelligence,

Luís Meireles: 20:41

Pricing intelligence who market share for companies. That is, that is, uh, quite helpful. Okay. So you can buy these kinds of information and you can have a very good understanding of the market. The question is, although they are public, uh, they try to, of course, direct for their intents so you can simply appear and win. Okay? Usually now they have, uh, uh, a pre-election where you have to demonstrate the product. So it's better if you know prior. So if you are involved with the departments, you know that, that, uh, tailor will, will appear. First you demonstrate the, the products you demonstrate, the solutions you prove that your solution is, is, uh, is the best one. And then they'll try to direct the tender for your, for your, uh, solution, not for your particular company, but at least with the features that you are, that you are, uh, proposing, uh, and, uh, that you are proposing and that, uh, are good for them. Of course, there is another company with exactly the same feature that, uh, can provide,

Julio Martinez: 22:00

But very likely you'll not be

Luís Meireles: 22:03

That. Yeah. But, so you have to do that work, okay? You wife to do that work. And they try to protect themselves to, to, to these kinds of things. Okay? Like they don't want, they don't want, uh, like I, I don't want to, they don't want ship products, for instance, to be there and to appear and to win, uh, everything. So they are trying to protect. So the specifications of the tenders are getting more and more, uh, tough to, to get in. So to win you need to do the work before you need to do your homework, you need to prepare everything. And then you need to be ready to be, to be in the tender. It is possible. But that works better in partnership with local, Uh

Julio Martinez: 22:56

Oh, totally. Absolutely, yes. Yeah. Manufacturers or the shooters who, who know the game,

Luís Meireles: 23:01

There are lots of companies that do that OEM here, Okay. A lot. What oem? So what they do is that they have tenders one, uh, oem. Okay? So what, what they do, they, they provide their OEM products to local manufacturers, and they will win the public market with OEM products, national branded, because they have advantage on the tenders because they are national, the prices are different because you can have lower transference prices of parts you can assemble here. So you'll be more, more, more competitive. So that is a good approach for public, for the public, uh, public sector, do it assemble here.

Julio Martinez: 23:47

Okay. Very good. All right. So we are speaking about so many things, uh, Louis, I think we, we, we can do like five different episodes. You're a wealth of knowledge and, and, um, but the, but the other question is about you. What is it that you guys are doing today in Brazil? Tell me about your business. Tell me about the challenges you're facing with your product or service In

Luís Meireles: 24:11

Brazil, I was working for other companies for many years here. Okay. But corporative companies, you know, they are acquired, they change, it, change, uh, leaders, etcetera. And then you set up all the business and they come and they change everything. So last time that happened, I decided that still I will keep working with the outside companies and I'm consultant and I'm helping some companies, uh, entering here. But I wanted to have my, my own, my own, uh, business. Okay. And as you told in the beginning, they produce everything in Brazil. Okay. Almost all kind of products. You can find local manufacturers. Some are oem, some are local technology, but they do them here. So you have a local, uh, competitors that are good, that are important. And, uh, we found a market niche. There was no competitors here. Okay? We were working in cardiology and there was a hole in the market. There is a product, which is a metabolic analyzer that is done in, uh, cardiology field to do a cardio pulmonary stress test, which now is quite important to post covid because it's one of the mandatory, uh, diagnosis tests. And although there are stress tests here, cardiology systems, the car, pulmonary stress test, the metabolic function analysis, there, there are no local factors in Latin America. Uh, so it's quite expensive to import because the dollar rates are, are, are

Julio Martinez: 25:49

Exchange rate.

Luís Meireles: 25:50

Yeah. The exchange rate is, is not good right now. So it was a hole in the market here. So we decided to create our own product and we create, uh, medical device industry with all the knowledge about certifications, products, sales reps, etc. We create vagina engineering team, we create our own product, and we are selling it in partnership with some outside companies because it's cardio pulmonary stress test. We are a part of that. But during that time, we found another market for that product, which is quite, quite interesting. We create a product for cardiology, but suddenly we found that in the fitness market like dietician, neologist, et cetera, they need that technology for other things, which is a side market of the car, of the medical device market. Easier to work, but with a huge, huge volume. So we are selling a lot for dieticians, nutritionists, uh, for sports centers, uh, some private clinics like wellness, et cetera. And we are getting quite stronger here. Okay. So now we are planning our moves outside, outside Brazil. Now we have a problem. The ma most major problem we have is that we cannot produce as much as we sell.

Julio Martinez: 27:13

Really? Wow. Congratulations. Quite a good problem. Yeah,

Luís Meireles: 27:16

It's good. Congratulations. It is a good problem, but not so good. Okay, Not so good. We have problems because we are a tiny industry, so we are small, a small industry, and you know that there is a problem of components all around the world. So we can't buy micro, we can't buy parts, we can, that's a problem. Okay. So we have a few strategies to overcome that, but it is, is difficult. I believe that the end of this year will be strong enough with the production well, uh, structured to start, uh, making some tests like Colombia for instance. We have a few contacts already in Colombia and she cetera. And we we'll start to, to, to grow around Brazil and then maybe fda, which is easier with than the Europe and the, let's see. But that, that is the, that is the plan right now to, to invert the, the balance, which is we always import things. We are doing very good technology and we want to do it the opposite world to see how it works. Wow.

Julio Martinez: 28:23

And and how's it being with the regulatory agency within Visa to get the product approved as it been a fairly straightforward process

Luís Meireles: 28:31

And Visa? Yeah, it, it, it's time consuming to get, uh, company built here. It takes, uh, it takes time because we have local approvals, you have local approvals, you have like firefighter approvals, you have, uh, uh, environment approval,

Julio Martinez: 28:47

Firefighters,

Luís Meireles: 28:48

Approvals. Yeah, you, you need to have firefighter approvals because you are a industry, so you have lots of certificates that you need, and then you apply for a local, uh, and Visa, which is the visa, which is the local system. And then you have to apply, apply to the national one. It takes one year and a half to get it done, but after you do that, you are protected because your competitors will take two years to do, to do the same. And now we can register almost any product until Class three devices here in Brazil,

Julio Martinez: 29:22

Just three devices

Luís Meireles: 29:23

Within new company. We're ready for three. We're only producing class two A, but we are now ready for class three. So we are injecting other products in our product lines and we can, uh, we can do other things as well.

Julio Martinez: 29:34

How many people do you have employee

Luís Meireles: 29:36

Working right now? Uh, direct employees, we are 26. Uh, but we have subcontracted, so we are about 35 people working with us right now. We were said and before the pandemic. Now we are 35. It's, it's, it's an, an adventure, but it's nice.

Julio Martinez: 29:54

Beautiful, beautiful. Well, Luis, we're close to the end of the show. I mean, again, I feel like we can talk for hours and hours. I mean, we do. Um,<laugh>, uh, the final question that I have for you is about your final words of wisdom. What would you say to the CEO of, uh, US or European company or Asian company that is looking at Brazil as a, as a place to do business? What would be your final thoughts or more source of wisdom to him

Luís Meireles: 30:24

Or? I think the most important advice I can, I can give is that, uh, you need to understand the local culture and not try to implement your own culture here. Because there is the idea that, uh, well we are from, uh, the first world. We are Europeans, we are Americans, we are Japanese, so we are better, our products are better. So we are going there and we are teaching them how to do. That's not true, okay? Brazil and the other countries are quite strong and they have a different culture that we need to understand. And what they do sometimes is more, uh, effective than what they do in other places. Uh, and we need to understand that we need to be cautious first, understand the culture, how they work in financials, in taxations, in the, in distribution, but I'll also, they do medicine how they, they behave in terms of natural business and not try to implement our, our our our not

Julio Martinez: 31:34

Try to impose things

Luís Meireles: 31:36

On the, so we are the foreigners here, it's their markets. So we need to adapt, not, they don't need to adapt to us, we need to adapt to them. And that is the yes is a mind change. And,

Julio Martinez: 31:49

And, and that's, and I mean, coming from you, you are from Portugal, just to make sure the audience, uh, uh, remembers that you, you know exactly what you're talking about because you went through that process.

Luís Meireles: 31:58

Yeah, I, I can tell the first years were, uh, were quite tough because, uh, the culture between, uh, Portugal and uh, and Brazil, although the language would be the same, the culture is different for many time, many big period of time people think I wasn't polite because really the structured way and the precise way I was trying to, to run, to run the things. For instance, in Brazil, they don't tell you no, you need to understand they don't want, they will give you some tips that they are not interested. But, uh, it's un polite to say, Look, no, I'm not interested in that. That's not polite<laugh>.

Julio Martinez: 32:44

So,

Luís Meireles: 32:44

So it's, it's how they behave, behave. It's how they grown and we need to understand that. And you need to try to behave, behave

Julio Martinez: 32:54

Exactly accordingly. Not to read the signals

Luís Meireles: 32:57

To the signals. Yeah, it's, it's, it's, it's different. And you can't fight that. You need to understand and uh, you need to understand and uh, and uh, and move. And that is the major, the major advice. I, I give, it's a huge market. It's really possible to win and to, to do lots of things. It's an, an exploit world, but you need to understand the culture first. Adapt to the culture in pricing, understand if, for instance, our pricing, it is, uh, it is, uh, good here if, et cetera. We need to first adapt study and then we need to act. If you try to do it like just box moving, it won't work.

Julio Martinez: 33:42

<laugh>

Luís Meireles: 33:43

Won't work.

Julio Martinez: 33:45

Well, Reese, fantastic. Thank you. Thank you so much for your wisdom for sharing the knowledge here in the podcast. I'm sure our listeners, uh, got a lot out of your, your, your comments, your, your experiences. And, uh, I look forward to keeping in touch with you. So thank you again.

Luís Meireles: 34:03

You're welcome. We'll keep in touch. Bye bye.