As the largest economy in Latin America and the 9th largest economy worldwide, Brazil is a force to be reckoned with. Unfortunately, in recent years, Brazil has experienced economic hardship. For example, in 2009, Brazil’s economy shrank 0.3%. This was caused in part by a reduction in demand for Brazil’s commodity-based exports. In the past decade, a combination of tight credit restrictions, high levels of bureaucracy, political turbulence, and damaging corruption scandals have hindered Brazil’s economic growth and investor confidence in the region.
Despite these years of economic hardship, the country is positive about the future. The new government took power in 2019 and has plans to reduce government intervention in local markets, eliminate governmental corruption, open Brazil to foreign participation and reduce unnecessary layers of bureaucracy which Brazil is famous for. Additionally, Jair Messias Bolsonaro has expressed his desire to improve commercial relationships with their northern neighbour, and global superpower, the USA.
For these reasons and more, international business is now looking firmly at Brazil as an appealing investment destination.
Doing Business in Brazil – Key Benefits Brazil has the 5th largest global population and a growing middle class, creating a huge consumer market.
To begin with, see below some key advantages that Brazil has in regards to doing business, and the reason that many investors consider the region an attractive Latin America jurisdiction to conduct commercial activities.
Business Opportunity – Huge Consumer Market
Brazil has the 5th largest global population and a fast-growing middle class (as is present across the entire Latin American region), meaning that there is a huge consumer market. The size and diversity of the consumer market has created a wealth of exciting commercial opportunities for foreign businesses looking to access new clientele within Brazil.
International Trade – Access to Latin America
Establishing a commercial presence in Brazil gives companies easy access to other countries in the region and allows them to take advantage of strategic trade agreements. Brazil is part of the Southern Common Market, commonly known as MERCOSUR, which was established in 1991. Companies incorporated in Brazil have direct access to Argentina, Paraguay, and Uruguay (Founding Members) and also 7 other Associated Members through this multilateral agreement. MERCOSUR creates plenty of trading and commercial opportunities and provides attractive fiscal advantages for companies operating out of Brazil.
Desirable Geographic Conditions
Brazil is geographically large and diverse and provides an ideal climate for agricultural production. Traditionally, agriculture has been a key national sector, and despite the effects of the Global Financial Crisis, Brazil continued with strong agricultural output. For companies looking to invest in this sector, there are ample opportunities. One example of an opportunity includes the introduction of new technology and equipment to improve efficiency and increase agricultural output. (Most Companies chooses to incorporate there business in Sao Paulo).
Foreign Investment Openness
For those thinking about incorporating a local company in Brazil, 100% foreign ownership is allowed and companies are able to sponsor the visas of foreign employees. Additionally, local companies can be incorporated in Brazil without the need to physically visit Brazil; the process can be completed through a Power of Attorney. The new government has declared their support for foreign investment in Brazil and are extremely ‘pro-business’, giving confidence to foreign companies interesting in engaging the local market.
Great Infrastructure for doing business
Unlike some of its neighbours, Brazil has excellent infrastructural and transportation facilities. Brazil has large and developed roads (and one of the largest highway systems in the world) and has various different railway systems. For companies involved with the importation and exportation of goods, this is highly-valued and makes Brazil a great trading hub.
Doing Business – Market Opportunities in Brazil
Brazil presents investors with a raft of appealing commercial opportunities.As mentioned, Brazil has traditionally been a global leader in agriculture, and this is still true today. Commercial opportunities are available to companies who have access to new technologies, equipment, and services, and who can assist to modernize and make more efficient the agricultural sector. This type of investment is true for other national sectors, including the energy sector, mobile application development, and financial technology, all of which are growing at an astounding rate. Brazil presents investors with a aft of appealing commercial opportunities. When combined with the key benefits of doing business in Brazil, the opportunities become clear and accessible. While the Brazilian business environment has its complexities, partnering with a local group will ensure that you are able to successfully navigate these complexities and experience success in the market.
The Brazilian mining sector is often overlooked for regions such as Chile and Peru, however, it has a lot to offer foreign investors. Mining experts in regions such as Canada, the US, and Australia should look to bring METS (mining equipment, technology, and services) to Brazil to fill the market need. With the new government seemingly ‘pro-mining’, barriers to entry will be diminished, making the market more accessible for foreign mining companies.
Key Steps to Incorporate a Business in Brazil
Once you have identified a market opportunity, you may wish to formally establish operations. With the right support, the process to incorporate a local business in Brazil is relatively straightforward. See below the basic steps to set-up a business:
- Obtain tax ID numbers for shareholders
- Draft the company bylaws and register the business
- Open a company bank account
- Register the company share capital with the Central Bank Of Brazil
Additionally, all companies in Brazil must meet some minimum corporate compliance requirements in order to remain compliant with the local authorities. These compliance requirements include:
- Appointment of a Local Director
- Appointment of Legal Representatives for the company shareholders
- Registration of a fiscal address within Brazil
- Preparation and presentation of monthly tax declarations with the national tax authority.
Doing Business in Brazil – Conclusion
Brazil is fast becoming one of the most desired Latin America economies for doing business. With the new government set to shake up the business environment and create more favourable conditions for foreign business, all eyes are firmly planted in Brazil.