Are you looking into investing in Brazil? The biggest economy in Latin America has positive outlooks and economical forecasts for investments, which means being full of opportunity to foreign companies.
Brazilians are welcoming when it comes to foreign investments, as many different sizes of businesses have already noticed. With decreasing bureaucracy levels, government incentives and niche markets on the rise, multiple kinds of companies can find a fertile ground in Brazil.
However, starting to do business in another country requires proper planning and strategy. This means understanding Brazil’s particularities and having the right amount of flexibility to take advantage of all opportunities.
In this article, you will learn everything you need about investing your business in Brazil, the main reasons to do so and the most important contexts related to it. Check it all out below.
What do the numbers say about investing in Brazil?
If you are looking into investing in the Brazilian market in 2022, the first step you should take is to consider the country’s most important economical numbers. They will help you understand the context the region is in, as well as set your expectations accordingly when it comes to your business projections.
Below, you can see the most up-to-date information regarding Brazil’s economy with the appropriate context to invest in the country. Check it out!
Largest economy in Latam
Brazil sits at the top of the ranking as the largest economy in South America and Latin America as a whole. As a matter of fact, Brazil, Argentina, Chile, Colombia, and Peru, add up to 90% of the entire South American economy.
Additionally, Brazil is within the top ten world GDP ranking. It ranks above countries like Russia, South Korea, Australia, Spain and Mexico.
According to the latest data, Brazil’s GDP is at US$ 1608.98 billion. By the end of 2022, the projections indicate it might reach US$ 1750.00 billion, with it growing even more in 2023 to reach US$ 1890.00 billion.
This scenario is predicted by Trading Economics global macro models and market analysts. This shows how the country’s economy is recovering despite the adverse effects from the economical crises from the latest years.
Cross border e-commerce
With technological progress came new ways to do business, and this applies to Brazil as well. Around 47% of Brazilians have the habit of making international purchases online, according to data from 2018.
With the COVID-19 pandemic, that number skyrocketed to 91%. In 2021, online sales grew 72% when compared to the previous year. Results now include food delivery and online grocery shopping as the most requested services by Brazilians.
Foreign Direct Investments (FDI)
The Foreign Direct Investments metric comprises a matrix company and a foreign branch, which together form a multinational company. To be considered as IED, the investment must give the matrix control over its branch.
Between 1995 and 2022, Brazil’s Foreign Direct Investments (FDI) averaged at US$ 3871.30. As of 2022, it records an increase of US$ 4483.49 according to the country’s Central Bank.
Additionally, it is expected to grow to around US$ 4000.00 in 2023 based on Trading Economics global macro models and analysts.
What main events affect Brazil’s economy?
Like with any other country, Brazil’s economy is directly affected by current events. Some certainly have a bigger impact than others, while certain particularities in Brazilian culture make a difference when it comes to its economical numbers. If you wish to do business in Brazil, you can learn a lot about it by seeing how the country responds to certain events.
Below, we highlight the most important global events that affect Brazil’s economy.
The general elections
Brazil’s economy is directly affected by the government. The federal government had a historical protectionism stance, which changed in recent years with the country’s focus on being a pro-business country.
Additionally, specifically during elections, consumer goods related to politics tend to become highly popular. Voters decide to promote their candidates with various items and objects, and this is reflected on the economy.
In 2022, Brazilian voters will go to the polls to elect several members of the government. The current president is up for reelection, with old and new players as competitors. Additionally, the population will also vote for congressmen, senators and governors.
All of those choices might affect how the country deals with its economy, including foreign investment. In other words, if you wish to work with Brazil, you will need to keep a close eye on its elections.
The FIFA World Cup
Brazil is a five-time FIFA World Cup winner, the top winner in the world. Soccer is a big deal in Brazil, with its domestic and international competitions always being relevant in Brazilians’ daily lives.
For example, in Brazil, there is a specific increase in demand for TVs, smartphones, sportswear and other kinds of electronics during the World Cup. Plenty of stores create special sales related to it, which positively affects the local economy.
Therefore, it is no wonder that the World Cup directly affects the local economy. Businesses looking into investing in Brazil need to take this into account, especially since the 2022 World Cup is near.
The Pix innovation
The Brazilian Central Bank developed a new payments system that is open for any person and institution to use: Pix. With it, money transfers are instant and intuitive, as they simply require reading a QR Code.
The success of Pix was tremendous: it quickly reached 100 million users in its launch year. Additionally, over half of Brazilians made online payments using Pix, choosing it over traditional means like credit and debit cards.
Any business interested in investing in Brazil — or any country — needs to consider the customer’s purchasing habits. With Pix’s popularity, it is unthinkable for a new company to not support it as a payment method for goods and services.
Given how easy it is to use Pix, most businesses are able to reach customers who wouldn’t feel secure buying online in the past.
The COVID-19 pandemic
The COVID-19 pandemic had serious consequences around the world. It tanked several economies, including Brazil’s. However, with the crisis leaving its height, it is now possible to see reactions developing in different fields.
Brazil had a quick adoption to vaccines by its population, which helped the country get back to normalcy after the period of social distancing. At the same time, digital businesses focused on delivery grew exponentially, as people kept spending money even from home.
In 2022, the Brazilian economy is giving signs of recovery. Growth is still driven by the pandemic losses, but optimism is spreading. This is mostly perceptible when analyzing the popularity of online purchases in favor of physical stores.
Such habit also applies to international purchases. Advances done in logistics have allowed for faster deliveries and, therefore, more trust from the Brazilian customer when ordering online.
Top 9 reasons to do business in Brazil in 2022
Now that you know more about Brazil’s economy, it is time to see the advantages of investing your business in the country. There are a number of benefits available for entrepreneurs that look into the country for a foothold in the region as well as specific incentives at your reach.
Below, you can see the top 8 reasons to do business in Brazil in 2022 according to the latest economical forecasts. Enjoy!
1. Good trade infrastructure
When it comes to technology and innovation, Brazil is on the rise in its market. There is a quality infrastructure system for transportation through roads and the sea. This applies not only to domestic trade routes, but also international ones.
This is helpful to any kind of business that needs to transport goods internally or across borders. The high quality level of the trade infrastructure also provides opportunities to enjoy further advantages when operating in the country.
For example, Brazil is seeing a recent popularity boom in fintech development. These startups are injecting resources in the economy, which means further opportunities for external businesses to work with.
2. Large potential customer base
Brazil has the 7th largest population in the world, with estimates sitting around 214 million people. From that number, more than half is less that 35 years old. Despite income inequality still being an issue in Brazil, the country’s GDP per capita reached US$ 14,835 in 2020.
Different kinds of international businesses can tap into this demographic and take advantage of the economy’s good numbers. Having a large potential customer base means being able to explore niches and learn from the available data.
For example, Brazilians have recently began shopping online much more than in past years. They might also prefer an international solution instead of a domestic one for various kinds of demands in their daily lives.
3. Advantage in geographical elements
Brazil’s geography is another great reason to choose this country to do business. It is a large country and features high diversity in terms of climate for agricultural production and other kinds of business ventures related to it.
The agribusiness segment is always looking for innovative solutions and multiple kinds of businesses can take advantage of that. From crop optimization to food security initiatives, there are many advantages to your reach.
In addition, Brazil is geographically well situated in relation to its neighbors in the Americas. There are easy trade routes going out to the biggest economies in Latin America, the US and Europe. Most of its positive results come from the quality infrastructure in its ports.
4. Rising opportunities for growth
Despite the adverse effects of recent events, Brazil’s economy is on the rise. This means a growing number of opportunities for companies that decide to work with the country. For example, there are niche markets still unexplored and a population that is willing to spend.
In the past, Brazil relied mostly on its domestic economy like China. However, this changed in the last few years, with imports being on the rise. There are more and more trade agreements between Brazil and the US with focus on small and medium businesses.
Most of these valuable opportunities come from Brazil’s focus on raw materials exports. This means better results for businesses in multiple fields.
5. Government incentives available
Brazil’s government is admittedly pro-business, and has shown that through a series of initiatives that are focused on encouraging foreign companies to operate in the country.
This includes incentives for investments, programs dedicated to funding and agreements that limit double taxation.
Such programs include incentives to the industry of semiconductors and displays, TV equipment, packaging, infrastructure development, oil development, IT services and many others.
6. Flexibility for international investments
In recent years, bureaucracy is steadily shrinking in Brazil, making it easier to do business from abroad. This is due to the government’s incentives actions, which open up the country’s economy to external investors even further.
For example, business regulations allow for businesses to be 100% foreign-owned. In addition, registering and incorporating a business in Brazilian soil can be done from abroad without the need to visit the country.
Most of these initiatives contributed to the growth in Brazil’s Foreign Direct Investments (FDI). They will also be critical to your business’ success when working in the country.
7. Multiple opportunities in various fields
Brazil is ripe with opportunity for foreign investors and this applies to multiple different fields. Therefore, businesses in various markets can enjoy good results when working within Brazilian territory.
For example, the e-commerce segment is on the rise, with more and more Brazilians being used to buying goods and services digitally. The post-pandemic scenario has the biggest consumer base willing to buy online.
The mobile marketing growing means good opportunities for businesses in different fields. This also means being able to access different sections of the Brazilian population through a good segmentation strategy.
8. New niches are growing
With more technology available and Brazilians being more open to shop for goods and services online, niche markets have also began to grow. This is a golden opportunity for companies in any field and segment.
Working in niche markets has always been challenging, however recent times have made things easier for entrepreneurs. Globalization allowed for an increase in competition, but also helped people get used to the availability of certain services.
The most important detail is to learn the habits of Brazilians and how they interact with businesses such as yours. That way, you will be able to deliver the best possible experience to your customers within your niche.
How to prepare your business to invest in Brazil?
At this point, you have a clear snapshot of Brazil’s economy to see opportunities for your business. However, such process requires a lot of care and planning in order to really enjoy said opportunities to their true potential. Otherwise, you risk taking the wrong approach when setting your plans in motion.
Next, see the most important steps you should take to prepare your business to invest in Brazil.
Understand the consumer’s habits
No business is successful if it does not take time to understand its consumer’s habits. People in different segments are different and need to have their particularities taken into consideration.
When doing business in another country, you must adapt your company to the foreign customer. This means understanding what is important to these people and offering what they usually look for in businesses like yours.
Such concept should also apply to differences between regions within the same country. For example, in Brazil’s northeast states, Pec Lotérica is a famously preferred payment method. Not offering such possibility for Brazilian customers means losing out on a sizeable potential consumer base.
Invest in the right technology
With recent technological progress, there are several great services at your reach for several aspects of your business. They help you deliver quality to your customers as well as obtain the best opportunities in several fields.
This allows for even small and medium sized businesses to operate in other countries by simply integrating different solutions.
So many options might pose a problem, though. So, to make things easier, make sure to consider your needs and the available options in your price range. For example, if you need to improve your e-commerce security, consider the most important requirements of that field before hiring any solution.
Offer the appropriate payment methods
As you have seen above, customers usually have specific preferences when it comes to payment methods for online and offline purchases. This means you might lose business if you do not work with the systems locals are used to.
Brazil has seen a surge in popularity for its local instant payment system Pix. This made most customers expect to be able to use it when buying goods and hiring services. Any foreign company that wishes to do business in Brazil needs to take this into consideration.
This also applies to methods such as local credit cards. Not all of your consumers might have internationally-enabled credit cards, which will limit your reach.
Work with a localized customer service
Brazilians value good customer service. Therefore, this is an aspect of your business that requires deep dedication, which means relying on local professionals. After all, they understand the culture and its needs.
A localized customer service should also consider the most important communication channels preferred by Brazilians. Social media is big in the country, with people expecting companies to reply quickly and efficiently.
Any foreign company that offers a customer service not prepared to deal with the local customer’s needs will see serious backlash. So, make sure to not drop the ball on this aspect of your business.
Learn about the legal and tax requirements
Working across borders involves adapting to the foreign country’s legal and tax requirements. While Brazil is loosening up on its bureaucracy, it is still necessary to fill out the right forms and organize your business the right way.
The first step should be to learn the particular legislation regarding your field. For example, Brazil has specific laws regarding e-commerce which regulates companies and also apply to foreign businesses.
If in doubt, you can count on a local law and tax specialist to guide you on this process.
How to get help when investing in Brazil?
As you have learned up until this point, the opportunities in Brazil to foreign businesses require strategic planning and execution. Not all companies have everything required to be successful in such a venture, but not all is lost. After all, they can count on the right partnerships.
Latam Gateway is a Brazilian payment institution that helps companies monetizing in the country. With over 15 years of experience in the payment market, Latam Gateway was founded and is managed by the founders of the first game monetization company in Brazil.
Working with a Brazilian company will help you navigate this market and take the best opportunities to grow your business from abroad. Latam Gateway is a specialist in instant payments, being able to offer what your customers will need when buying from you.
The right choice of partner can make a big difference to your results. Picking Latam Gateway will ensure you work within Brazil’s particularities to reach your business’ true potential in the country.
Latam Gateway’s services
Latam Gateway has an extensive portfolio of payment services available for businesses interested in operating in Brazil.
With Latam Gateway’s system, your company will be able to work with Pix, digital wallets, bank deposits, bank transfers, credit cards, boleto express and various other Brazilian payment methods. Payment confirmation is within 15 minutes for most of these.
Latam Gateway also has a 24/7 multichannel and bilingual customer support service available to help you whenever you need. We have a full team of specialists in financial transactions for full-time multichannel assistance.
Brazil’s customers like to choose among multiple different kinds of payment services. Any business that wishes to work in Brazil needs to adapt to this reality. Therefore, you need a partner like Latam Gateway to have the right infrastructure to receive payments.
As you have seen up until here, Brazil is filled with opportunity for foreign businesses. Events such as the World Cup and general elections affect the economy, but there is optimism for this post-pandemic period. You simply need to understand the Brazilian customer’s needs and preferences and adapt to them.
You can count on Latam Gateway, a Brazilian company, to help you reach this audience the best way possible. This means offering the appropriate payment methods and the best customer service for Brazil.
Do you have any lingering questions about this subject? Then, use the comments to ask us anything about investing in Brazil and payment methods