The Brazilian economy is projected to become one of world’s largest economies. At present, it has positioned itself as the 12th largest economy with a GDP amounting to $1.75 trillion in 2022. The rise of Brazil will not stop there as it continues to recover from the devastation caused by its political uncertainty, sky-rocketing unemployment rate, inflation, and the ongoing COVID-19 pandemic.

Invest in Brazil : a growing economy on success recovery

 According to the International Monetary Fund (IMF), Brazil’s economy experienced a 3.7% contraction in 2021. During the peak of Brazil’s recession in 2014, the entry of foreign investments has been extremely volatile. From a staggering drop of 23% of foreign investments in 2014, it enjoyed a slight increase in 2016, only to fall again the next year. Since the election of President Jair Bolsonaro in 2018, the enthusiasm among foreign investors has been improving steadily. The highest peak of foreign investment influx recorded at $102 billion in 2011. The precipitous drop in foreign investment during the late 2019 to 2020 was expected as Brazil has one of the highest COVID-19 cases globally.

Brazil : a rich country for  long term run

Despite the ups and downs of its economy, Brazil remains a promising jurisdiction for foreign investors. The rich natural resources and skilled manpower makes it an appealing destination for investors in various industries. If you haven’t added Brazil as a prospective destination for your next capital investment venture, here are reasons why you should consider doing business in Brazil.

 1. Strategic Location and Huge Market Potential

 With a total land area of 8.5 square kilometres and 190 million residents, there are still many opportunities that investors can untapped.

• The Brazilian GDP in 2020,  measured in PPP comprises almost 35% of the entire Latin America GDP, estimated to be over $1.44 trillion.
• The consumer market in Brazil accounts for more than 900 million potential customers.
• Brazil borders almost all other countries in South America, with the exception of Chile and Ecuador.

2. Continuous Growth

 As of 2021, Brazil has positioned itself as the ninth largest economy, gaining a competitive edge against Canada, South Korea, Russia, Spain, and Australia.

• According to recent economic trends, Brazil showcases strong and sustainable economic growth.
• Since 2003, Brazil exports have shown an impressive growth rate bigger than other major world imports leading to its significant participation on the world trade.

3. Innovation and Technology

• Brazil has succeeded to create one of the most diversified scientific, technological, and innovative systems in Latin American.
• It remains a competitive players in various sectors, including aircraft manufacturing, oil and gas exploration, and software development.
• Sterling reputation in equipment production and medical supplies manufacturing.
• The country’s literacy rate has improved exponentially during the past decades. In 2018, its literacy rate was recorded at 93.23%.
• Almost 40% or 150 million Internet users are Brazilian residents.

4. Infrastructure

• A total of 528 public airports with an annual flow of 46 billion reals as of 2019.
• A total of 175 port installations for over 1.15 billion tons in 2020.
• A total of 30,485 kilometers of railways, the tenth longest railway network in the world.
• A total of 1.7 million kilometers, the fourth largest network in the world.
• 75.68% Internet penetration as of 2021.
• Brazil boasts one of the best communication infrastructures with 253.25 million mobile lines as of 2021.

5. Investment Profitability

• In recent years, Brazilian return on investment has improved significantly, overcoming double-digit annual mean.
• Foreign companies that establish presence in Brazil are free to send their income to their country of origin, tax-free.
• The stock of foreign direct investments (FDI) in Brazil has remained stable since 2020 and reached $608 billion at the end of 2020.
• Brazil is the eleventh largest recipient of foreign direct investments in the world, in terms of inflow and the largest among Latin American and Caribbean countries.

 Investing in Brazil : minimizing risk, optimizing returns

 Now that you are fully aware of why foreign investors are keen investing in Brazil, let’s now take a look at steps on how you, the foreign investor, can minimize risk while optimizing results in highly complex market. According to experts, the best way to do business in Brazil is by following a structured approach and entry in the market at its best conditions.

 Perform Market Pre-Assessment

 Conducting a preliminary assessment of the market allows you to gain a clear, more holistic view of your sector or niche. You gain clear understanding of both the qualitative and quantitative aspects, thus allowing you to make well-informed decisions as a prospective investor.

 Before gaining entry into a market of your interest, it is recommended to forecast demand, evaluate value chains, risks, costs, asses the availability of resources, identify challenges, and measure the competition.

 Establish Market Choice and Access Method

 After a thorough market assessment, foreign investors are encouraged to perform an internal assessment and analysis to determine your approach. What strategies do you use to determine the best entry method into a foreign market such as Brazil. Methods available to foreign investors include mergers, acquisition, joint venture, branch office formation, and many more.

 Thorough Preparation for Entry into the Local Brazilian Market and Long-Term Implementation 

• For those who prefer acquisition, the first step is to identify your target profile. Prioritize your goals and make shortlist of what matters most to you and other shareholders.
• If your investment preference is acquisition, it is necessary to carry out preliminary due diligence, comprehensive evaluation, and contract negotiation to ensure greater return on investment.
• When creating a subsidiary in Brazil, the first step is to create a detailed business plan. You must identify the location and product you wish to offer to the consumer market. It is also imperative to develop a thorough financial model, operational plan and tax exemptions to streamline operations after successfully incorporating a company in Brazil.
• Unless you are a well-informed investor with extensive knowledge in the investment landscape of Brazil, it is best to seek the expertise of a consulting firm that specializes in investing in competitive jurisdictions, such as Brazil. Having someone to guide you every step of the way, from incorporation, operations, and management to verifying existing double tax treaties with Brazil will ensure you reap excellent return on investment over time. 

 Brazil is a highly specialized investment market; hence it is imperative to learn everything about its prevailing conditions. Additionally, it is crucial to assess the long-term landscape for  strategic planning purposes.

Damalion offers wide full supports to international investors, both institutional and private, in the formation of a company in Brazil. As a trusted business consulting firm with years of expertise in the international investment landscape, we offer valuable insights that will allow investors like you to make decisions that will be advantageous to your company in the long run. Our extensive global service network of professional service providers facilitate the efficient management of various activities, including financial, administrative, accounting, and managing of Brazil subsidiaries and other company structures in Brazil. Discover your full potential and reach out to a Damalion expert today.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.