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Brazil, the largest country in South America and one of the most developed ones. Though the pandemic has deeply impacted the global economy, Brazil is already on a mission to “recover, thrive and prepare the legacy for businesses”.
Why do business in Brazil?
According to the World Bank Group, Brazil ranks 124 globally, in ease of doing business. It is still considered a developing nation, which means there is scope for some of the industries to grow rapidly. Foreign investment in Brazil has easily doubled from 2008 to 2011, making it an attractive place for your international business.
Facts to consider before expanding your business to Brazil
Before building your business expansion strategy, you need to know the economy, business laws, legal framework, and the working culture of Brazil. ServiAp offers you high-level facts to understand the opportunities and risks of doing business in Brazil.
The Economy in Brazil
Brazil has a developing mixed economy that is the twelfth largest in the world by nominal Gross Domestic Product (GDP) and eighth largest by purchasing power parity in 2020. The country has an estimated $20.18 trillion worth of natural resources which includes vast amounts of gold, uranium, iron, and timber, showing an enormous human and natural capital.
Small and medium-sized companies
SMEs (Small and Medium-sized enterprises) play an important role in Brazil’s economy, accounting for 62% of total employment and fostering social inclusion. Although Brazil has a strong network of startup incubators and accelerators, according to a report, there is scope for growth and innovation-led investments in the Brazilian SMEs that you can fit in.
The Federal Constitution gives preferential treatment to SMEs in tax and labor laws. For example, Brazil implements different tax regulations for supporting the survival of SMEs.
Investments in Brazil
Energy, alternative energy, agriculture and technology are the main sectors that investors look for when expanding to Brazil.
Despite the demand for it, Brazil has fallen behind in the development of renewable and alternative sources of energy. According to Brazil’s Energy Research Office, renewable energy sources will reach 61 Gigawatts capacity by 2027.
The government also offers incentives and benefits to businesses like special tax redemptions for setting up fixed assets in the country as infrastructure projects in transportation, energy, sanitation, pipelines, etc.
Companies in the IT, ICT, Technology sectors also benefit from payroll relief. The government offers tax incentives, subsidies and benefits for trademarking, patenting or developing new technology and innovation in the technological sector.
Population Characteristics
Brazil is a diverse region, with varied and nuanced consumer behavior. To succeed in this market, ServiAp will advise you about your customer, show you what your target audience wants, and adjust your strategy accordingly. Here are some key points:
Demographic
Immigration has been a very important demographic factor in the formation, structure and history of the population in Brazil, influencing culture, economy, education, racial issues, etc. Brazil has received the third largest number of immigrants in the Western Hemisphere, after the United States and Argentina.
The Brazilian consumer market is made of roughly 516.2 billion people. The population is predominantly young, with people aged 15-34 accounting for nearly 50% of the working population (aged between 15-64 years). The median age in Brazil is 33.5 years.
Subways in cities like São Paulo transport around 3.5 million people per day. But, they are considered the most modern in Latin America and have received awards in the recent past as one of the cleanest systems in the world.
Geography
The Amazonian country is the largest in South America, bounded by the Atlantic Ocean. Brazil’s border touches all countries on the South American continent except Chile and Ecuador.
Two of the world’s largest cities are in Brazil – Sao Paulo and Rio de Janeiro – both the cities are cultural and historical hotspots. Sao Paulo state accounts for half of the country’s GDP, with a stronghold in manufacturing industries.
Consumer preferences
After facing one of the worst recessions in its history, Brazilian consumers are now more cautious and conservative. 3 out of 4 consumers are dedicated to saving more, actively looking for the best discounts and competitive prices for goods before making a purchase.
Almost 35% of Brazilians are loyal to brands but prefer to buy the most affordable or cheapest goods under the trusted brand. Almost 21% of consumers are willing to trade-down or switch brands for savings, as opposed to the global rate of 12%. This provides a huge potential for competitive goods, especially because Brazilian consumers do not tend to switch back, after the trade-down.
Workforce and laws in Brazil
After the economic recession, Brazil’s unemployment rate has been high (~12%).
The recent labor reform of 2017 brought about 100 changes, most notably creating new forms of hiring and termination. When expanding to Brazil, SERVIAP will be your local knowledge partner, helping you to navigate through the law and make the right decisions.
Human Talent
The skilled workforce of Brazil is highly diverse, as the country made commendable investments in education, skilling in the 2000s. However, this results in almost 67% of the population ready to be employed.
By expanding your business to this country, you’ll be able to take advantage of this and hire a diverse team that can offer you different opinions and views, fill skills gaps and shortages, and become a truly multicultural workforce.
Technological ecosystem
The technology sector in Brazil is ever-growing, and the government is spending to build a solid infrastructure for Agri-tech, fin-tech innovation and development. The e-commerce market is broadening, so is the need to serve consumers with efficient tech solutions.
Facilities for foreign investment
Brazil has made foreign investment easy by establishing a single institution – Direct Investments Ombudsman—to facilitate interactions between foreign investors and all other Brazilian government agencies. Also, it works closely with the WTO for easy facilitation of investments.
Brazilian Culture
Ships from Portugal arrived on the central coast north of Rio de Janeiro in the early 16th century. Now, Brazil is the only country in South America that speaks Portuguese, and one of the ten territories that consider it as an official language worldwide.
Slavery in Brazil lasted for 300 years, and it imported some 4 million Africans to the country. Making it the last country in the Americas to abolish slavery, in 1888.
Beside the hard past, Brazilians are known for being friendly and happy. Music is a vital part of everyday life in Brazil. Its cultural richness and its abundant innovation are based on the strong and spectacular racial miscegenation evident in the culture of the country.
In the summer during Carnaval, big cities host massive parties in the streets when the sun comes down. Meeting locals and tourists in one place, dancing and laughing together with the sound of drums on a fast-paced samba.
Gastronomy in Brazil
The gastronomy in Brazil varies from north to south, thanks to the strong African influence in the north you can find spicy and delicious seafood dishes, while in the center and south, beans and rice is the starting for any plate followed by big pieces of meat.
Fresh and strong flavored fruits are a gift from this land. The popular açaí (/əˈsaɪ.iː/), a palm tree appreciated for the nutritional properties of its fruit, is originally from Brazil and the north of South America. The global demand made it a trendy fruit for the modern cousin considered a healthy item for balanced diets.
Pão de queijo (cheese bread), mandioca frito (cassava chips), bolinhos de bacalhau (fried cod cakes), kibe (meat patties), brazilian acarajé with vatapá (African-style falafel), picanha (barbecued beef) and coxinhas (chicken croquettes) are some of the most popular items you would find walking around or in any household.
In a restaurant, a classic pair would be a caipirinha with the dish feijoada. Cachaça is a distilled spirit made from fermented sugarcane juice. It is the most popular spirit among distilled alcoholic beverages in Brazil with the caipirinha being the most famous cocktail.
Risks of investing in Brazil
Despite the benefits, doing business in Brazil also presents some risks. The recession in 2015, for example, led to high unemployment and economic and social inequalities creating an unstable political environment.
On the other hand, the intellectual property rights laws are restricted to the country of origin. Licenses and norms are something to always be aware in this country as a foreign investor.
Conclusion
Despite the economic turmoil, Brazil’s market is in no way saturated and presents great opportunities to investors and consumers. With a skilled workforce, increasing technological development and SERVIAP as your advisor, Brazil should be on your radar when thinking of doing business abroad in a safe and successful way.
