Considered the eighth-largest economy in the world and the largest in Latin America, Brazil is one of the leading economic figures in the region. In 2018, Brazil’s GDP reached US$3.365 trillion, and according to the International Monetary Fund (IMF) the country’s GDP is expected to increase by 1% in 2019.
Brazil is considered one of the most attractive countries for foreign investors in Latin America. This attractiveness is due to the size of its domestic market (211 million inhabitants), its wealth of raw materials, and its economic diversification. We look at the latest trends in foreign direct investment in Brazil.
Foreign direct investment in Brazil
Like most countries in the region, Brazil is in strong demand for foreign direct investment (FDI) to support the development of its economy. In 2018, Brazil received US$46 billion in FDI, according to data provided by the Brazilian Central Bank (Banco Central do Brasil). The main investor countries are the Netherlands, the United States, Germany, Spain, and the Bahamas. These investments were mainly directed towards oil and gas extraction, the automotive industry, financial services, trade, electricity, paper production, ICT, storage and transport, food industry, and mining.
In August 2019, Brazil’s FDI reached US$72 billion, representing nearly 3.91% of the country’s GDP in the same month. In September, foreign investment increased by an additional US$6.3 billion, which points to a good outlook for the end of the year.
Main drivers for foreign investment in Brazil
There are a number of options for foreign investment in Brazil, such as:
- Natural resources in abundant quantities and varieties: Brazil is a world-leading producer of tin, iron ore and phosphate.
- A strategic geographical location in the centre of Latin America with privileged access to the Atlantic Ocean
- A diversified economy
- Strong exports, particularly in industry, representing real international trade opportunities.
Industries with the highest FDI inflows in 2019
Brazil’s highly diversified economy means that FDI trends show a range of industries of interest to foreign investors that offer profitable returns.
All data in this section is adapted from the Central Bank of Brazil, which provides the latest foreign direct investment data by sector in US dollars.
Trade, except vehicles
From January to March 2019, this sector accounted for the most significant amount of inward FDI. Total foreign investment amounts received totalled US$ 1.5 billion in just 3 months. Such figures in a short period of time indicate that the sector represents great potential in the country.
Non-metallic mineral products
Brazil is a significant producer of non-metallic metals, in particular, aluminium. Aluminium output has grown by 3.9% per year over the past 15 years. Additionally, the country also produces significant quantities of zinc, glass, cement, and other building materials. These industries brought in US$977 million in foreign investment during the first three months of 2019.
Brazil’s chemical industry is recognized as the eighth-largest in the world. It has grown substantially since the beginning of the millennium. Marcos de Marchi, Chairman of the Board of Directors of Abiquim, the national professional association of the Brazilian chemical industry states: “Brazil is a natural destination for the global chemical industry because it is rich in oil, gas, minerals and rare earth and has high biodiversity.” It makes industry the third-largest industrial sector in the country, accounting for 10% of total industrial GDP.
From January to March 2019, the industry received US$482 million in FDI.
Financial and ancillary services
Supported by the emergence of Brazil’s Fintech ecosystem and the development of the Internet of Things, the financial and ancillary services sector is doing well. Brazil currently nurtures the second-largest fintech startup ecosystem in the region, generating significant interest from innovative entrepreneurs and multinational companies looking at their expansion options.
The financial and ancillary services industries, collectively, is the fourth-largest FDI-receiving sector in the first three months of 2019, accounting for US$455 million of incoming FDI.
Motor vehicles, trailers, semi-trailers, and related parts
As one of the country’s pillar industries, it is logical to see that vehicles and trailers receive a significant number of FDI. In 2018, sales of all types of Brazilian vehicles increased, which explains the increased confidence shown by foreign investors. Over the first three months of 2019, the industry received a total of US$374 million in incoming foreign direct investment.
Other industries have made good progress compared to the previous year in attracting inward foreign direct investment: non-metallic mineral products, crops, livestock, and related services, ITC, and forest production.
Government measures to facilitate increased FDI
Brazil’s government is aware of the value of foreign investment into the country, and is seeking ways to encourage greater FDI flows into the country. In Brazil, at present most obstacles to foreign investors have been removed piecemeal by successive governments, particularly on the stock market. A macroeconomic reform strategy, introduced in august 2019 aimed at streamlining the Brazilian tax system was fundamental to this process. The government is also seeking to put in place new administrative procedures to reduce the time and complexity of processes to register investments and foreign-owned companies.
Invest in Brazil via company formation
In Brazil, you can find five different types of legal entities. However, we recommend two of these five types that are most relevant to foreign investors. These two types have been used in almost all cases of business start-ups by foreigners:
Limited Liability Company (LLC)
The most common and recommended entity for a foreign investor setting up in Brazil. It is both the cheapest but also the fastest solution to implement and the easiest to administer afterward.
This type of legal entity is best suited for large structures with a complex and publicly traded shareholder structure. Corporations are more legally binding with individual requirements throughout the year, it requires stricter corporate governance. This option is recommended for large companies.
Required documents to incorporate a company in Brazil
If you wish to invest in Brazil by incorporating a company, you will need to prepare certain documentation to present to local authorities. These documents must be notarized, registered, or filed with a Brazilian consulate.
You’ll need to provide:
- A copy of your passport
- Proof of your appointed Power of Attorney (POA), which is a document that allows you to designate a person or organization to make decisions for your business from a legal perspective
- The Articles of Incorporation (AOI), which is a document that proves the existence of the company
- Provision of a brochure or other representative document of the business model of your legal entity.
What are the key steps for incorporating a company in Brazil?
Incorporating a company in Brazil is a long process. This process involves no less than 40 steps. To help you make it more transparent, we have selected some essential steps in this process:
- Determine who the shareholders are. If they are not Brazilian, you must grant the power of attorney to a Brazilian legal representative.
- Decide on the type of legal entity. It allows you to define the types of records that will be required
- Inform the Central Bank of your proposed operations
- Choose a local director of the company. This person must be a Brazilian resident.
- Prepare the company’s bylaws through the articles of incorporation
- The bylaws and articles of incorporation must be professionally translated into Portuguese. This translation must be certified and registered with a Brazilian notary
- File your documents with a state trade office. Note: This registration with a national trade office automatically triggers the national registration of your company with all other national authorities, such as the tax administration, the national trade office, and other licensing committees involved in the activity
- To finish, you will need to open a bank account by depositing capital. No minimum capital is required.
Seek expert advice to invest in Brazil
At Biz Latin Hub, we support foreign entrepreneurs in setting up their own business and other regional expansion needs. With a team of local Brazilian experts offering a full range of market entry and back-office services tailored to each of your specific needs, we ensure your investment is secure, and your company gets the best possible start in a new market.
If you want to set up in Brazil and are not sure how to navigate the local legal and corporate requirements and processes, our local team of professionals can help. Contact us at [email protected] for a personalized proposal.
Learn more about our team and expert authors, and check out our short video below discussing the top reasons to do business in Brazil.