02/06/2023

Business environment in Brazil

Americas Business advisory

Marcus Kwong, Finance Director at TGS Orcansa (Brazil)

1. Business Environment in Brazil

Brazil is renowned for its abundant natural resources, including minerals and energy, spread throughout its vast territory. While agriculture and cattle-raising remain vital sectors of the local economy, international companies have identified growth opportunities beyond these areas in recent years. With a population of 214 million and a GDP growth rate of 4.06% in 2022, Brazil offers significant potential for expansion. As people’s purchasing power increases, opportunities in industries and services are also ripe for investment. Investors from around the globe have found Brazil to be an attractive market for expanding their businesses internationally.

2. Development Potential

Brazil’s economy spans the primary, secondary, and tertiary sectors, including tourism, public services, real estate brokerage, hospitals, restaurants, schools, and financial activities. Among these sectors, the tertiary sector is the strongest, currently contributing more than half of the country’s GDP and generating 75% of all jobs, making it the largest branch of the economy.

The tertiary sector encompasses a wide range of product sales and service provision, including trade, telecommunications, utilities, computing, communications, and technology. Brazil’s economic growth has been driven by foreign capital and multinationals establishing operations within its borders.

Despite its economic dependence on other countries, Brazil has developed diverse industries, from essential to high technology.

As the capitalist system advances and globalization spreads, the tertiary sector is not only the most prominent economic share in Brazil but also the fastest-growing in the world.

3. Kickstarting businesses in Brazil

When starting a new business in Brazil, it’s crucial to partner with a reputable company that has international experience. In this regard, TGS has been a leading provider of services to numerous companies, helping them navigate the local start-up process and offering ongoing support after operations begin.

It’s crucial to thoroughly evaluate business issues such as product/service acceptance, the risks of starting a new operation, Brazilian tax regulations, and the local economy. Our local team has over 50 years of expertise helping companies establish themselves in Brazil. With our guidance, you can confidently navigate these challenges and seize new opportunities in this exciting market.

4. Global Economic Scenario for the next 5 years

The International Bank’s (IBRD) latest Global Economic Outlook report reveals that the global economy is experiencing a significant slowdown due to high inflation, higher interest rates, reduced investment, and disruptions caused by Russia’s invasion of Ukraine. 

Given the current economic conditions, the report predicts a modest global growth of 1.7% in 2023 and 2.7% in 2024. This year’s growth prediction is 1.3 percentage points lower than previous forecasts.

Brazil’s growth is expected to be restricted by high-interest rates and a decrease in export growth, with an anticipated growth of 0.8% in 2023. The report also predicts a widespread deceleration in growth, with 95% of advanced economies and nearly 70% of emerging and developing economies expected to experience downward revisions in 2023. The International Bank cautions that further adverse developments could lead to a global recession, which would mark the first time in over 80 years that two global recessions have occurred in the same decade.

The report projects an average per capita income growth of 2.8% in emerging markets and developing economies over the next two years, one percentage point below the 2010-2019 average. In Sub-Saharan Africa, where approximately 60% of the world’s extremely poor population resides, per capita income growth in 2023 and 2024 is expected to be an average of only 1.2%.

Growth in developed economies is projected to decrease from 2.5% in 2022 to 0.5% in 2023—similar decreases in the past foreshadow a global recession. In the United States, growth is predicted to fall to 0.5% in 2023, 1.9 percentage points lower than previous predictions, and the weakest performance outside official recessions since 1970.

Overall, the outlook for the global economy is pessimistic, with the possibility of a worldwide recession looming. However, there is some positive news in the report, particularly for Brazil, which is expected to return to growth following the worldwide pandemic.

*Source: Infomoney ByRoberto de LiraJanuary 10, 2023 12h21

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