Doing Business in Brazil
This was originally published online by Altios.
From its varied terrain to its extensive natural resources to its multicultural and ethnically diverse people, Brazil is a nation of contrasts, It rose to be considered an advanced emerging economy by the turn of the millenium and is now well-established as an emerging power as it continues to draw interest from the international community. Brazil is the world's fifth-largest country by area and by number of inhabitants and eighth largest economy with a population of more than 200 million. Recently announced government initiatives continue to make the country more competitive in the global landscape and to create an abundance of opportunities for economic development. Doing business in Brazil is all about finding your niche in the country’s core industries and understanding the economic nuances in a country overflowing with resources.
Business to business companies that can help bolster the country’s largest industries are experiencing high demand. This includes, for example, technology and machinery that can support the agriculture and mining sectors. 2017 data from the World Bank showed that Brazil was still the world’s fifth-largest agricultural producer at 84.6 billion (US $). Other leading industries for the country include education and the medical field, due to a young and growing population.
The phenomenal size of the market coupled with a bounty of natural resources makes Brazil hard to ignore for many industries. For companies exploring the country, a full market analysis is particularly important before entering Brazil. Market size can vary greatly due to sometimes fluctuating economic conditions. Altios has helped many clients test the market by finding a successful import service to partner with, as well as hosting regional executives and employees. Recent policy changes to increase economic freedom are also promising to create more ease and openness for businesses looking to set up and expand in Brazil.
“We believe the new government initiatives will make Brazil more competitive in the global market,” Didier Koch, Managing Director of Altios Brazil said. “Altios has helped many clients navigate the traditionally bureaucratic processes, but we are seeing some exciting changes to be more pro-business.”
The first of those changes is a law (MP 881/2019) signed in April that amends legislation in order to enhance entrepreneurship and reduce bureaucracy to encourage more startups. The law speeds up the process and better clarifies the licensing and business rules required to do business in the country. This lowers expenses and risk for regulatory penalties. The Altios Brazil team has built a network of clearance specialists over the years. Combining these local resources with the new laws will allow for new levels of efficiency for businesses looking to incorporate in Brazil.
The law also establishes legal certainty in business contracts and agreements. The subjective interpretation of the old policies left many contracts uncertain. As a result, many business owners were only willing to do business with past acquaintances and family members, Koch explained. This mindset, of course, was limiting for foreign investors looking to move in to Brazil. “This update is restoring confidence in the market, allowing new connections and broadening opportunities.” Koch said.
Finally, the global economy is watching closely the movements on pension reform, which was just passed in Brazil’s congress. The reform is expected to reduce debt and allow for the government to assist with economic growth. It is expected that tax reform is next in line to be overhauled. Over the past years, new taxes upon taxes have compounded confusion and costs among business owners. Many states have over six taxes with complex calculations. As a result, businesses are prone to either over-save or under-save to pay their bill. The new tax reform is expected to offer a general goods and services tax to simplify the process.
“The new tax will allow business owners to be more efficient in their cash flow and planning,” said Koch. “This is an important part of Altios services to not only help clients plan for their expenses when expanding but also in our day to day services.”
These recent developments spell exciting opportunities for international investors. A particularly unique and complicated market highlights the need for a knowledgeable partner and advisor like Altios. Companies looking to do business in South America should not shy away from the Brazilian market. Brazil is more than just its beautiful beaches and landscape and continues to mark its place in the international market.
Population: 209 million inhabitants
GDP (2018): $1.86 tn
Currency: Real (BRL)
Unemployment: 12% (Q2 2019)