Doing Business in Brazil

Possessing the largest economy in South America, Brazil offers a variety of benefits for companies looking to expand their business. Foremost among them is a market with a massive potential for growth.

Brazil is also one of the most complicated jurisdictions for doing business.

Reasons for Doing Business

Brazil is one of the world's fastest growing nations, a developing economic powerhouse whose reputation as a global player was reinforced by the successful staging of the World Cup in 2014. Brazil was also chosen to host the 2016 Summer Olympics, edging out Spain, Japan, and the United States for the honor.

With the landing of two premier global sporting events, Brazil has made its mark as one of the world's prominent investment destinations. Recent estimates have suggested the World Cup and Summer Olympics could generate a combined $8.5 billion for the Brazilian economy.

Consumer confidence among Brazilians has skyrocketed in recent years, thanks to an emerging economic engine that has lifted 40 million citizens out of poverty in the last decade. This rapid development has created a larger middle class with significant buying power.

Other key factors in Brazil's economic rise are a strong manufacturing base, a young workforce, and a plethora of raw materials and resources. These elements have created the ideal conditions for growth, stimulating much enthusiasm among international investors about the country's prospects.

Though Brazil's growth numbers have lagged a bit in recent quarters, investors remain intrigued by long-term projections. Should Brazil's economy meet expectations, many international firms could seize the opportunity to move operations to Brazil, boosting foreign direct investment.

Challenges

While the combination of youthful workers, plentiful resources and untapped growth potential is no doubt alluring for investors, Brazil does present some significant challenges.

The country's economic boom has increased the cost of doing business in Brazil by a large margin. With the local currency near parity, many of the country's leading commodities and peers have seen significant spikes in price.

Brazil's tax system is notably unpredictable, so investors and business owners seeking certainty in this area may be disappointed. An article in The Economist recently described tax disputes as synonymous with Brazil as “string bikinis or samba," highlighting a number of high-profile tax dispute cases currently being litigated in the country.

While Brazil has almost all of the ingredients necessary for turbocharged growth, an underdeveloped technology sector has been slowing down progress. That may be changing, as exciting new startups and established technology giants have recently made headlines in Brazil. One example is Microsoft’s pledge to invest $100 million for a tech center in Rio de Janeiro.

Labor laws may also present a challenge for new businesses. Brazil's labor policies are complex and often difficult to negotiate successfully. Having a good grasp of these laws is essential. Failure to comply may result in financial penalties and a loss of reputation.