It is common for foreign investors to consider doing business in Brazil, a destination that presents itself not only as the largest economy in all of Latin America but also as one of the 15 largest economies of the world.
Although in recent years, Brazil has experienced some economic difficulties and a reduction in demand for its exports, Brazil still operates among the main destinations for foreigners to do business.
For these reasons, among others, foreign companies look firmly to Brazil as an attractive investment destination.
Main benefits of doing business in Brazil
With an estimated population of approximately 214 million people, Brazil presents several opportunities for foreign investors to do business in the country. We list some contexts for foreign investors to be able to analyze and maximize growth opportunities.
1. Brazil has a vast consumer market
With the fifth-largest population in the world and a consumer class that, after the peaks of COVID-19, tend to resume spending (it is estimated that the Brazilian population moved around R$ 5.1 trillion throughout 2021. The amount corresponds to an increase of 3.7% compared to 2020). Therefore, it is possible to understand that there is a large consumer market and infinite possibilities for doing business in Brazil.
The size and diversity of the consumer market has created a wealth of exciting business opportunities for foreign companies looking to access new customers in Brazil.
2. Access to international trade in the rest of the Americas
Establishing a commercial presence in Brazil facilitates companies’ access to other countries in Latin America, allowing companies to take advantage of strategic trade agreements such as Mercosur.
Brazil is part of the Southern Common Market, known as Mercosur, created in 1991. The trade group’s objectives include:
- Free movement of goods and services through the removal of customs duties and non-tariff restrictions tariffs
- Standardized external and trade policies between members, including economic, agricultural, industrial, fiscal, services, customs, and transport
- policies Cooperation in international economic forums
- Integrated legislation to facilitate companies and individuals operating in Mercosur member countries.
Companies in Brazil have direct access to Argentina, Paraguay, and Uruguay (founding members of Mercosur) and also to 7 other Associate Members through this multilateral agreement.
The BRICS is another trade group – formed by Brazil, Russia, India, China, and South Africa – that market watchers expect to see greater cooperation and free trade initiatives in the coming years. Although with a slow start, this alliance of emerging regional powers offers significant potential in terms of accessing relevant populations of member countries, if they successfully establish future trade cooperation initiatives.
Mercosur and BRICS, therefore, create opportunities and businesses, in addition to facilitating access to member markets. The country’s international connections are among the most attractive advantages for companies that are thinking of doing business in Brazil.
3. Favorable geographic conditions
Brazil is geographically large and naturally diversified, providing an ideal climate for agricultural production and commercial enterprises.
Traditionally, agriculture is a national base sector and, despite the effects of the global financial crisis, Brazil continued to have strong agricultural production.
For companies looking to invest in this sector, there are ample opportunities. An example of an opportunity includes the introduction of new technologies and equipment to improve efficiency and increase agricultural production.
This innovative agribusiness section, known as Agrotech, also contributes to a broader national agenda for ensuring and improving food security.
Therefore, it is in Brazil’s interest to support the growth of agribusiness on a medium and large scale and to improve the products generated by the large proportion of small family farm businesses.
4. Openness to foreign investment
For those thinking of doing business in Brazil or opening a local company, 100% foreign participation is allowed and companies can sponsor visas for foreign employees.
In addition, local companies can be opened in Brazil without the need to physically visit the country; the process can be completed through Legal representation. Raleigh specializes in supporting the entire process of starting a business, providing high-level power of attorney services with an operational focus and vast knowledge of Brazilian legal matters.
5. Great infrastructure for doing business
Brazil has infrastructure facilities for transport, with a vast road system, in addition to having different rail systems for land transportation.
There are 175 sea and river ports in the country, 32 of which are public. Therefore, there is an extensive maritime logistics support network for companies that transport goods across the country and internationally.
Brazil is configured as an important commercial center for South America.
Market opportunities for doing business in Brazil
Brazil’s diversified market presents investors with a number of attractive commercial opportunities. While the Brazilian business environment has its complexities, partnering with local companies can make it simple for companies to succeed in dealing with these complexities and succeeding in the marketplace.
As mentioned earlier, Brazil has traditionally been the world leader in agriculture. Companies have access to business opportunities that open the door to new technologies, equipment, and services that help make the agricultural sector more efficient and modern. This type of investment is available to a number of national sectors, including energy, mobile application development, and financial technology, which are growing at a surprising pace.
Check out some strong Brazilian markets:
Mining in Brazil
The Brazilian mining sector is often overlooked by sectors in other high-performing economies such as Chile and Peru. However, it has a lot to offer foreign investors. Its relative size and certain bureaucratic formalities that create a ‘natural barrier to entry for competitors generate potential for commercial success that may be easier to achieve in other more saturated markets.
Mining specialists in regions such as Canada, the US and Australia should look to bring their METS (Mining Equipment, Technology and Services) companies to Brazil to meet a market need for technological sophistication in one of the world’s largest producers of certain metals.
Automotive market
The Brazilian automotive sector, which accounts for 23% of the country’s industrial GDP and 1.5 million jobs in the production chain, has been developing in the country since the 1950s, with a large contribution of investments from foreign companies, bringing together traditional players of European origin and new entrants from Japan, South Korea and China.
There are opportunities, in particular, to fill gaps in the Brazilian automotive supply chain. The list of auto parts with a concession tariff regime currently imported reflects the need for local acquisition of some parts, which now depend on imports, being vulnerable to issues such as exchange rates.
Renewable energy
The National Energy Plan 2030 (PNE 2030) places non-hydro renewable energy as a fundamental alternative to meet the growing demand for electricity that Brazil will face in the coming years, as well as to increase the participation of sustainable sources in Brazil’s matrix of power. Brazil is the 7th largest country in clean energy investments, and the 6th most attractive.
Currently, the installed capacity of wind energy in Brazil is almost 9 GW, more than 5% of the Brazilian energy matrix and the second-cheapest source in the country, after hydroelectric power. In addition, Brazil has the largest wind capacity factor among all countries in the world, which reflects the Brazilian competitiveness in the sector.
Science and Life
Brazil may be a suitable place for multinationals wishing to diversify their Life Science activities.
A comparison between the increase in the current population in Brazil and expenditures on the health sector shows that, when expressed as a percentage of the country’s GDP, these expenditures are much higher than those of their Latin American counterparts.
Brazil has overcome a series of recent crises and its rapidly expanding middle class is demanding technology, services, and health care. Consumers have increased their spending on private health insurance by 50% over the past five years due to increased purchasing power and higher employment rates.
Developed laboratories, business incubators, high-tech production units, and links with universities combine to create an attractive ecosystem for investments in medical equipment in the South and Southeast regions. However, public laboratories, which can encourage foreign companies to enter the Brazilian market, can also be found in other regions of the country. A strong dedication to fostering Research and Development in Life Sciences is indicative of the potential for innovation and a huge long-term investment opportunity in Brazil.
Oil and Gas
According to the World Oil Outlook 2019 published by OPEC (Organization of Petroleum Exporting Countries), Brazil is about to become one of the largest suppliers of conventional oil in developing regions, ahead of current OPEC countries.
An investment in the Brazilian O&G industry will bring long-term returns. The extensive deposits and the forecast of rapid growth demonstrate great potential for the Brazilian O&G sector.
Any new Bidding Notice from the Brazilian Petroleum Agency or service and equipment contracts with Petrobras (part of the world’s 30 largest oil and gas companies, controlled by the Brazilian government) must meet the 70% local content requirement. This is expected not only to promote strong domestic investments but also to improve after-sales and maintenance services, delivery times, and protection against delays resulting from global demand.
Research and Development (R&D) has become essential in the Brazilian O&G sector, driven by growing demand for unconventional oil, improved recovery of existing fields, cost-effective solutions for new developments in deepwater fields, and new materials for pre-water basins.
Infrastructure
In a continental country like Brazil, infrastructure is an especially relevant issue. Transport, logistics, power generation, sanitation, and housing are key issues for the development of Brazil, as well as great business opportunities.
Investments in infrastructure have almost tripled in recent years, from BRL 48.6 billion (US$15.5 billion) in 2007 to BRL 132 billion (US$33.5 billion) in 2019, considering both public capital and private. This represents a compound annual growth rate of about 8.7%.
However, there is still a lot to be done and infrastructure remains a high priority, with several projects and funding programs underway. Brazil currently has the largest concession program for infrastructure assets in the world. The government’s project portfolio estimates at least R$ 217 billion in investments, in the coming decades, in ports, railways, highways, and airports, which will be granted until 2022.