As the largest economy in Latin America and the ninth-largest economy worldwide, many foreign investors looking into the region are considering doing business in Brazil.
Brazil has experienced some economic hardship in recent years, though the country is pulling itself together to attract greater numbers of foreign investment. The country experienced a reduction in demand for Brazil’s commodity-based exports.
Brazil is nevertheless positive about the future. The government intends to reduce its intervention in local markets, eliminate corruption, open the country to foreign participation and reduce unnecessary layers of bureaucracy. Additionally, President Jair Messias Bolsonaro has expressed his desire to improve commercial relationships with their northern neighbour, and global superpower, the US.
For these reasons, among others, international business is now looking firmly at Brazil as an appealing investment destination.
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Key benefits of doing business in Brazil
With an estimated population of over 214 million people, Brazil presents a number of opportunities for foreign investors to do business in the country.
We outline several key advantages that foreign investors can maximise on to conduct successful commercial activities.
1. Large consumer market
Brazil has the fifth 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.
2. International trade access to the rest of the Americas
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.
The trade group’s objectives include:
- Free movement of goods and services through the removal of customs duties and non-tariff restrictions
- Standardized external tariffs and commercial policies among members, including economic, agricultural, industrial, fiscal capital, services, customs and transport policies
- Cooperation in international economic forums
- Integrated legislation to make it easier for businesses and people operating across MERCOUR member countries.
Companies incorporated in Brazil have direct access to Argentina, Paraguay, and Uruguay (founding members of MERCOSUR), and also 7 other Associated Members through this multilateral agreement.
BRICS is another trade group – made up of Brazil, Russia, India, China and South Africa – that market observers expect to see greater cooperation and free trade initiatives in the coming years. Though off to a slow start, this alliance of emerging regional powers offers significant potential in terms of accessing significant member country populations, should they successfully establish future trade cooperation initiatives.
MERCOSUR and BRICS therefore create trading and commercial opportunities, plus an ease of access to members’ markets. The country’s international connections are among the most attractive advantages for companies operating out of Brazil.
3. Desirable geographic conditions
Brazil is geographically large and naturally diverse, providing an ideal climate for agricultural production and business ventures.
Traditionally, agriculture has been a staple 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. This innovative section of agribusiness, known as ‘agritech’, also contributes to a wider national agenda of ensuring and improving food security. It’s therefore in Brazil’s interest to support agribusiness growth on a medium and large scale, and improve outputs generated by the large proportion of small, family-owned agriculture businesses.
4. Openness to foreign investment
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 the country; 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.
5. 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 land transportation.
There are 175 maritime and river ports in the country, 32 of which are public. There is therefore an extensive network of land and maritime logistics support for businesses moving goods across the country and internationally.
Brazil is optimally set up as a key trading hub for South America.
Market opportunities for doing business in Brazil
Brazil’s diverse market presents investors with a raft of appealing commercial opportunities. 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.
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 the agricultural sector more efficient. 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.
Mining in Brazil
The Brazilian mining sector is often overlooked for those sectors in other high-performing economies such as Chile and Peru. However, it has a lot to offer foreign investors. Its relative size, and certain bureaucratic formalities that create a somewhat ‘natural barrier to entry’ for competitors, generates potential for commercial success that may be easier to achieve in other more saturated markets.
Mining experts in regions such as Canada, the US, and Australia should look to bring their METS (mining equipment, technology, and services) companies to Brazil to fill a market need for technological sophistication in one of the world’s largest producers of certain metals. With the new government seemingly ‘pro-mining’, barriers to entry will likely be managed or diminished over time, 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 incorporate a business in Brazil. With the right specialist support, the process to incorporate a business in Brazil is relatively straightforward. The basic steps to setup a business include:
- 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.
To successfully incorporate a business in Brazil, you will need to engage with a local legal expert that can successfully guide you through this process and connect with all relevant government authorities. This will ensure you can do business in Brazil with minimal delay, and in full compliance with local law.
Biz Latin Hub supports foreign investors doing business in Brazil
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.
To expand your business to Brazil, you’ll need a corporate law specialist on your team to ensure you can incorporate, register with tax authorities and begin operations in full compliane with Brazilian law.
Get in touch with Biz Latin Hub for specialist support. Our team has ample experience in assisting companies of all sizes to develop their operations through providing a range of customizable market entry and back-office services. Contact a member of our team today here at Biz Latin Hub for support.
Latin America offers a great environment for foreign mining companies looking to expand their operations. Check out the video below for more information on doing business in Brazil.
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