1- Quick Facts about Brazil
- Capital City: Brasilia
- Population: 204,259,812 (The World Factbook, est. 2015)
- Language: Portuguese
- Unemployment Rate: 6.4% (The World Factbook, est. 2015)
- Inflation: 9.28% (The World Factbook, est. 2016)
- Currency: Brazilian Real
Brazil’s Economic Figures
- GDP: USD $3.166 trillion (The World Factbook, 2015)
- GDP growth rate: -3% (est. 2015)
- GDP per capita PPP: $15,800 (est. 2015)
- GDP Composition by sector (2015): Agriculture (5.9%), Industry (22.2%), Services (71.9%)
Export Partners (2014)
- China (19.1%)
- USA (12.6%)
- Argentina (6.8%)
- Netherlands (5.3%)
Import Partners (2014)
- China (18.1%)
- USA (15.3%)
- Germany (6%)
- Argentina (6%)
- Nigeria (4.2%)
Import Export Commodities
Main Exports (2016)
- Soybeans and related soy products (15%)
- Transport equipment and components (10%)
- Oil and oil products (9%)
- Meat (8%)
- Iron ore (7)
- Chemical products (7%)
- Metal products (7%)
Main Imports (2016)
- Raw material and intermediate products (47% of the total imports, of which chemical products account for 14%)
- Capital goods (22%, of which machinery accounts for 6%)
- Fuels and lubricants (13%)
- Durable consumer goods (9%, of which passenger cars account for 3%)
- Non-durable consumer goods (9%, of which pharmaceutical products and food account for 3% each)
- 2- Economic Outlook
Trade and Economic Challenges
Brazil is in a state of economic crisis. It is causing much concern over the long-term growth potential of the country. Besides such economic woes, the political state is in disarray with the impeachment of President Dilma Rousseff. Members of Michel Temer’s cabinet and ministry asked for resignations and criminal prosecutions. Each month, businesses and politicians announced new corruption charges and national fraud. Finally, the Brazilian Senate voted to hold an impeachment trial for Dilma Rousseff. She was ousted of the presidency and Michel Temer became the Brazil’s 37th President.
Safety is also a concern of investors and consumers alike. After the Olympics Games, many citizens fear of crime skyrocket. Indeed, a lack of money to fund police and Special Forces could raise crime rate within the country.
Thus, all these factors are contributing to a poor economic outlook for Brazil in the next few years.
Both Fitchs and Standard & Poors investment ratings for Brazil changed to BB. Whereas, Moodys rating is listed as Ba2 placing Brazil at an investment grade level. Despite government attempts, many investor concerns remain to create a stable and incentive-based environment to invest.
Some of such concerns are fear of a lack of long-term sustainability. The economic growth is not projected to improve in the coming years. An over-spending is projected by the government and nationwide budget cuts. Brazil is working to make the investor environment more secure. The country is far from lacking in investment opportunities.
Investment opportunities exist in every sector and in every desired investment range. Brazil allows for both public and private investing. Some of the most appealing investment opportunities exist in sectors such as manufacturing, tourism, energy, logistics, real estate, agriculture, healthcare, and information, communication, and technology. Besides such projects, it is possible to invest in both state and federal projections throughout the country.
Brazil was one of the best countries in Latin America to do business for years. Now, the country has fallen off all reputable lists. Many neighboring countries are thriving during these trying economic and political times in Brazil.
Brazil’s Technology and Connectivity
139,111,185 people in Brazil are Internet users. The penetration rate is of 66.4% of all Brazilian residents. It is higher than some Latin American countries. However, it is well below those countries in the region with the best penetration rates. Like other technologically advanced Latin American countries, you will find Wi-Fi across all major cities. It includes 2G, 3G, and 4G connectivity and nationwide fiber optics.
In rural areas, you will find the same challenges with connectivity as any country in the world. You will find many of the most popular businesses and services even have their own apps now.
Brazil improved its Internet penetration rate in recent years. The development of an accessible technology infrastructure was a priority in the past. Nonetheless, continued penetration growth may slow after the Olympics Games due to budget cuts.
E-Commerce and Startups
Brazil is a large economy with hundreds of millions of consumers. It has a healthy sized middle class, eager to spend their acquired disposable income. The startup scene has been burgeoning. In all major cities like São Paulo, well-organized investor and startup groups have formed. Unfortunately, due to the state of the economy and the decline of investor and consumer confidence, the startup environment is beginning to struggle as well. Today, São Paulo is no longer on any list as one of the best cities to launch a startup as a result.
The government has supported several technology and incubator programs such as Start-up Brazil. Nonetheless, the private sector is catapulting and fostering growth in the startup scene.
Millions of people who wish to become entrepreneurs. However, another challenge is the culture of the country. It has not yet embraced entrepreneurship as a whole, which is common in the majority of Latin American countries.
Brazil is the largest e-commerce market in Latin America. Even though Brazil has a weak economy, online retail sales increased 15.35% in 2015. Such growth contributes to an increase in consumer confidence of making purchases online. It also contributes to increased use of smartphones.
Brazil also has the most mobile users in Latin America. Nonetheless, Brazilians are also subject to credit card fraud and cyber-criminal activity, like anywhere in the world. To continue to experience growth in e-commerce and startup industries, much needs have to be done to protect consumers.
3- Brazil’s Key Industries
The service sector is the largest industry contributor to the GDP. The manufacturing industry also plays a significant role in the Brazilian economy and in regional trade throughout Latin America. Key industries in Brazil evolve as the government’s economic growth models continue to change and the economy continues to struggle.
Brazil has varied and diversified industries, particularly in comparison to most of Latin America. Some of the largest sectors include the manufacturing of cars, computers, planes, and steel. Agriculture is also important with the exportation of products such as coffee, sugarcane, and soybeans. All aid in reducing the current skewed import to export ratio.
The following industries are a few of the most significant now.
The Brazilian automobile market was one of the greatest manufacturing successes in recent times. However, the economic struggles both internally and globally have affected the industry. Automobile makers are working to restructure their organizations. They want to operate more efficiently. They also are putting pressure on the government to ease access to funding to the middle class.
The chemical production industry in Brazil is one of the largest in the world. Brazil uses its chemical production for exports, as well as in agriculture and mining. Currently exports continue to outweigh chemical imports. Nonetheless, analysts expect that local production continues to decline.
They expect that imports continue to rise, putting this industry in a precarious position. The government has made it difficult to import chemicals. They try to keep the industry from deteriorating from cheap imports.
Metals and Mining
Mining in Brazil has been a controversial industry for some time. Growing global concern for protecting the rain forest continues to pressure the government.
Demand for the precious metals and natural resources of the region grows. It is expected that silver and gold will continue to be a growing industry for Brazil through 2020. The steel industry continues to be a strong industry for the country. It supports both the automobile industry, the shipbuilding and ship repairing industry.
The Brazilian tourism industry is also facing crushing challenges. The strength of the Real currency is low compared to many North American and European currencies. Indeed, people from these regions are not taking advantage of the currency exchange rates as they expected due to the Zika outbreak. Analysts estimated that Zika alone will cost the region $3.5 billion in lost revenue in 2016.
Tourism could aid in Brazilian economic struggle, especially during Olympic Games. However, the negative publicity of Zika, the lack of safety, polluted waters, and political corruption are all contributing to the widespread mistrust of tourists visiting the country. Several Olympic athletes opted not to attend the 2016 Olympic games.
Brazil has several companies that run the country. Many of these companies are some of the largest employers, as well. The following are some of the largest employers, employing over 100,000 people in various industries such as electricity, metals, and banking.
- Banco Bradesco S.A
- Banco do Brasil S.A
- Companhia Siderúrgica Nacional
- Companhia Vale do Rio Doce
- Embraer S.A
- Gerdau S.A
- Itaú Unibanco Holding S.A
Within these industries today, you will find many of the largest employing sectors. It includes services like banking and tourism, but also automobile manufacturing, chemical production, and steel production.
Furthermore, it is also important to note that child labor is still an issue throughout Brazil in many industries. In 2013, the government launched programs to combat this issue on a large scale. It has already experienced some success but much more still has to be done to stop the problem.
4- Time and Cost to Import into Brazil
The time and cost to import into Brazil will vary depending of the following:
- The exporting country is part of a free trade agreement with Brazil and imported good is subject to the benefits of the agreement: no import tariffs or customs fees will apply.
- The exporting country is not a member of any bilateral agreement or trade bloc with Brazil: goods are subject to import duties, state sales tax, federal tax, and quite an excise tax. Shipment could be subject to a declaration fee, airport fee, air handling fee, or a storage fee.
In a free trade zone, shipped goods can be accepted, repackaged, and exported, without import fees. Do not forget to consider Incoterms before you sign any sales contracts. The transit time to Brazil will vary from several days from Miami to over a month for shipments from Asia.
5- General Business Taxes
Corporate tax will vary based on several aspects. Resident companies are taxed based on worldwide earnings. A foreign company will only be taxed on Brazil earnings as long as the company meets many specific expectations. Generally speaking, the corporate tax rate is 34%. Nonetheless, many exceptions exist including whether any funds are derived from tax havens.