Blog do Planalto

The Ultimate Guide to Why You Should Do Business in Brazil

The Brazil Business

Updated

10 September 2012

You have already heard that Brazil is in vogue when it comes to foreign investments. But do you really know why? No? So, let us explain why Brazil is in a good moment for business.

Why invest in Brazil?

With the sixth biggest economy of the world – expected to occupy the fifth position in the next decade –, and the largest of Latin America, Brazil is currently one of the best markets for foreign investments. Check the main reasons for this yellow-green rise down bellow:

Economical and political stability

For the last decade, Brazil has succeeded in maintaining continuous and stable economic growth and low inflation, in spite of some fails in steering interest rates. The country economic stability directly benefited classes C, D and E with a raising of employment levels, income, consumption power and the possibility to get in financing programs. This enabled people to consume goods they could not have access before, increasing the potential of the internal market .

With consumption increasing, companies went in a positive and certain cycle of economic growth and had a moment of better planning and investment to expand their businesses.

We know that a country politically stable is a decisive condition to leverage investments. Since the end of a 20 year military dictatorship, in 1985, Brazil has gradually been improving as a Democracy.

Major changes came from 2003 to 2010, when the country could focus on economy and social improvement thanks to former president Lula, who managed to balance powers with the opposition, and maintain his popularity through open channels with press and society. Although great corruption crimes were found during Lula's administration, his well-known charisma and political ability saved Brazil from any political crisis that could reflect in the national economy.

With the country politically stable, the government could promote an amount of anti-crisis measures. On the one hand, it adopted an expansionary monetary policy; on the other hand, introduced a proactive fiscal policy.

The sum of these two actions put money into the economy by stimulating consumption, keeping jobs and increasing the business dynamics. President Dilma Roussef inherited this peaceful environment to work on, and seems to intend to maintain the same macroeconomic policies, as expected.

Huge and receptive domestic market

With almost 192 million inhabitants (130 million of them in working age), Brazil has a large and growing consumer market. In the last six years, more than 24 million people left extreme poverty, and another 27 million were incorporated to classes A, B and C. Brazilians' average income has been raising since 2004, at the same time inequalities levels diminished, due to a series of specific policies regarding subsidies and income distribution.

Also, Brazilians are known for its receptiveness to foreign products and people. Formed by a big mixture of cultures (Indians, Europeans, Africans and Asians) the population developed a plural and rather tolerant society. Brazilians respect different cultures and integrate easily to new habits and working methods.

Strategic geopolitical position

Brazil is, by far, the largest and strongest economy in South America with a GDP corresponding to 50% of the entire sub-continent's GDP. The country occupies a leadership spot on the integration projects taking place in Latin America and encourages trade treaties between its neighbors.

Also, Brazil occupies a very strategic location as its territory is bordered by all other countries from South America - with the exception of Ecuador and Chile -, and has a coast line of almost 7500km of extension.

Brazil is also the strongest military force and power in Latin America and, like we have already seen, has a staggering number of inhabitants. By way of comparison, Colombia, the second most populous country in South America, counts with one fourth of Brazil’s total population, about 45 million people.

Biodiversity and natural resources

As known, exploring biodiversity is fundamental to enhance agriculture, fishing, cattle and extraction activities. Brazil has the largest fauna and flora biodiversity of the world, due to its large territory and variety of climate conditions. Good news for entrepreneurs is that local biodiversity is still poorly explored, as Brazil lacks investments in research and technology, although the number of patents related to the area have raised in the past decade.

Abundance of energy sources

The Brazilian energetic matrix is abundant and diversified. The country is self-sufficient in oil and has several clean energy sources, like water, wind and ethanol. About 85% of Brazil's energy needs come from renewable sources.

Rich base of commodities

Brazil is one of the world's largest producer and exporter of commodities, especially minerals and food. Among the top productions are: iron ore, crude oil, chicken and meat and beef, coffee beans, soy and maize.

Infrastructure upgrade (World Cup + Olympics)

Investments related to the World Cup an the Olympics started back to 2010. Expectations go around engineering, civil construction, tourism, transportation, services and IT.

Most attractive sectors

Oil and Gas: there is still a vast and unexplored potential of oil and natural gas. The recent findings in the pre-salt layer have stimulated more foreign investments in the industry.
IT/BPO: the Brazilian IT/BPO market is among the strongest of the world and it is increasing rapidly. The higher revenues come from Custom Application Development, followed by Infrastructure Services, Business Process Outsourcing, and IT Consulting Services.
Life Sciences: Brazilian Biotechnology and Health Care industry are set to keep developing for the next decades. The country is a fertile environment for research and manufacturing of new Health Care products, due to its skilled workforce, technology parks, joint effort with universities, solid institutions in government working towards innovation and financial incentives. Other hot areas: Health Equipment and Pharmaceuticals.
VCPE: the Brazilian Industry of Private Equity and Venture Capital has a significant concentration in critical sectors for a competitive country, such as: computers, electronics, biotechnology, communication, energy, financial services and agribusiness.
Tourism: with a combination of natural beauty, cultural diversity, hospitality and recent improvements in tourism infrastructure, Brazil has become a very popular destination. Moreover, the large sporting events to be held in Brazil – such as the 2014 FIFA World Cup and the 2016 Olympic Games – reveal countless opportunities for foreign investors.