Brazil
Brazil is the largest economy of Latin America and one of mayor ones worldwide. The country, with a population of over 200 million people, offers a huge and diverse market for a wide range of products and services
A regional powerhouse brimming with opportunities
Brazil is the largest economy of Latin America. Its growth has slowed down in recent years and continues to have an important public debt in relation to its GDP. The country still needs to undertake structural reforms to improve productivity, competitiveness and fiscal sustainability. Following the first government of Luiz Inácio ‘Lula’ da Silva implicated in several corruption scandals and with the arrival of Jair Bolsonaro (2019-2022) to power, Brazil saw its credibility and international relations worsen as the result of Bolsonaro’s decisions regarding the COVID-19 pandemic and his environmental policies. With Lula’s return to power, Brazil seems to have returned to the international stage, championing a multipolar world.
The country is highly dependent on its agricultural exports, a sector exposed to the consequences of disruptive climate phenomena. Brazil envisages its GDP growing by an average of 2% between 2024 and 2028 after years of economic upheaval. The forecast is for some years of continued job creation, stabilisation of the monetary policy, rise in the granting of credit and of the minimum salary; those are aspects that will drive greater consumer spending and household investment that will stimulate the country’s economy. Furthermore, the government proposes a new simplified tax model with the aim of generating a better climate for business. Moreover, agriculture and mining exports are forecast to rise between 2024 and 2028 as world demand is consolidated.
Even though Brazil posted a current account deficit of 1.4% of its GDP in 2023, the risks to its economy are limited thanks to a commercial surplus arising from its huge agricultural exports, controlled external debt, strong foreign direct investment, and good reserves. Exports of minerals and agricultural products, particularly to China, are expected to keep the trade account in surplus between 2024 and 2028.
A variety of business opportunities can be found in Brazil due to its geographical size, large market and its diversified economy. However, given the size of the Brazilian agricultural sector, there are great opportunities related to agricultural technology, such as machinery, fertilizers and precision crop management solutions. There are also business opportunities in the e-commerce and logistics sectors, which is booming thanks to the greater demand for goods by its 215 million inhabitants. Other sectors such as the development of infrastructures and energy with millions invested, as well as in the mining sector, particularly in improving the processes of the mineral extractive chains, offer good opportunities for Basque companies.
The reform of the goods and services tax is expected to streamline Brazil’s complex tax system, lower the administrative burden, attract investors and boost the economic growth of the country. Foreign investment in the country is focused on the automotive industry and on the renewable energy sector. Brazil’s global alliances, along with the surplus of its trade balance, are hoped will lead to sustained economic growth.
Brazil is reforming its tax system with the focus on simplifying it, by seeking to reduce multiple taxes into a single goods and services tax. The reform is expected to lower the administrative burden, attract investors and create a favourable business climate for companies. The government is striving to reduce the obstacles to trade, with actions such as the approval of the PIX instant payment system. In short, the Brazilian government is willing to make the Brazilian market more attractive for investors.
The Brazilian economy is based on exporting agricultural products, minerals and fuels, and the exports depend on the US and Chinese markets to a great extent. That means that Brazil is extremely vulnerable to changes in the prices of raw materials and to adverse weather conditions. Brazil has import tariffs of up to 35%, along with many non-tariff barriers such as very strict standards. In the near future, Brazil aims to become a destination particularly for greenshoring and, to a lesser extent, for nearshoring for North America, along with Argentina and Mexico. The government is also investing in improving the industrial sector, by opening up the market so that multinationals can set up manufacturing centres.
Brazil has several tariff and non-tariff barriers to trade, such as quotas that limit imports, strict health and safety standards, and a complex bureaucratic system. The tax system is complex and has high taxes, which is a hurdle to international trade. Other obstacles that hinder trade are the country’s political instability, the fluctuations in the value of its currency or the shortcomings of its infrastructures. Furthermore, many of Brazil’s close partners have begun to apply protectionist policies, thus limiting Brazil’s export market. The import duty, a federal tax on imported goods, varies according to the Mercosur Common Nomenclature Harmonised System (MCN/HS) for the product; in general, it ranges between 10.0% and 20.0%, with a maximum rate of 35.0%. Even with the Mercosur tariffs, Brazil has many exceptions that apply higher tariffs to certain products; agricultural products are the ones that have most import tariffs. The protectionist tendency of the government, which seeks to encourage the setting up of own industry in the country over importing, can affect multiple industries.
Brazil’s legal system is gradually improving thanks to initiatives such as Justice 4.0 programme that seeks to streamline the country’s complex judicial system. These reforms are also expected to lead to a significant improvement to the country’s intellectual property protection legislation. Even so, the efficiency of the anticorruption measures continues to be a factor for concern. The digitalisation of the judicial system will lead to a more efficient system and thus to increased confidence of foreign investors.
A regional powerhouse brimming with opportunities
Brazil is the largest economy of Latin America. Its growth has slowed down in recent years and continues to have an important public debt in relation to its GDP. The country still needs to undertake structural reforms to improve productivity, competitiveness and fiscal sustainability. Following the first government of Luiz Inácio ‘Lula’ da Silva implicated in several corruption scandals and with the arrival of Jair Bolsonaro (2019-2022) to power, Brazil saw its credibility and international relations worsen as the result of Bolsonaro’s decisions regarding the COVID-19 pandemic and his environmental policies. With Lula’s return to power, Brazil seems to have returned to the international stage, championing a multipolar world.
The country is highly dependent on its agricultural exports, a sector exposed to the consequences of disruptive climate phenomena. Brazil envisages its GDP growing by an average of 2% between 2024 and 2028 after years of economic upheaval. The forecast is for some years of continued job creation, stabilisation of the monetary policy, rise in the granting of credit and of the minimum salary; those are aspects that will drive greater consumer spending and household investment that will stimulate the country’s economy. Furthermore, the government proposes a new simplified tax model with the aim of generating a better climate for business. Moreover, agriculture and mining exports are forecast to rise between 2024 and 2028 as world demand is consolidated.
Even though Brazil posted a current account deficit of 1.4% of its GDP in 2023, the risks to its economy are limited thanks to a commercial surplus arising from its huge agricultural exports, controlled external debt, strong foreign direct investment, and good reserves. Exports of minerals and agricultural products, particularly to China, are expected to keep the trade account in surplus between 2024 and 2028.
A variety of business opportunities can be found in Brazil due to its geographical size, large market and its diversified economy. However, given the size of the Brazilian agricultural sector, there are great opportunities related to agricultural technology, such as machinery, fertilizers and precision crop management solutions. There are also business opportunities in the e-commerce and logistics sectors, which is booming thanks to the greater demand for goods by its 215 million inhabitants. Other sectors such as the development of infrastructures and energy with millions invested, as well as in the mining sector, particularly in improving the processes of the mineral extractive chains, offer good opportunities for Basque companies.
The reform of the goods and services tax is expected to streamline Brazil’s complex tax system, lower the administrative burden, attract investors and boost the economic growth of the country. Foreign investment in the country is focused on the automotive industry and on the renewable energy sector. Brazil’s global alliances, along with the surplus of its trade balance, are hoped will lead to sustained economic growth.
Brazil is reforming its tax system with the focus on simplifying it, by seeking to reduce multiple taxes into a single goods and services tax. The reform is expected to lower the administrative burden, attract investors and create a favourable business climate for companies. The government is striving to reduce the obstacles to trade, with actions such as the approval of the PIX instant payment system. In short, the Brazilian government is willing to make the Brazilian market more attractive for investors.
The Brazilian economy is based on exporting agricultural products, minerals and fuels, and the exports depend on the US and Chinese markets to a great extent. That means that Brazil is extremely vulnerable to changes in the prices of raw materials and to adverse weather conditions. Brazil has import tariffs of up to 35%, along with many non-tariff barriers such as very strict standards. In the near future, Brazil aims to become a destination particularly for greenshoring and, to a lesser extent, for nearshoring for North America, along with Argentina and Mexico. The government is also investing in improving the industrial sector, by opening up the market so that multinationals can set up manufacturing centres.
Brazil has several tariff and non-tariff barriers to trade, such as quotas that limit imports, strict health and safety standards, and a complex bureaucratic system. The tax system is complex and has high taxes, which is a hurdle to international trade. Other obstacles that hinder trade are the country’s political instability, the fluctuations in the value of its currency or the shortcomings of its infrastructures. Furthermore, many of Brazil’s close partners have begun to apply protectionist policies, thus limiting Brazil’s export market. The import duty, a federal tax on imported goods, varies according to the Mercosur Common Nomenclature Harmonised System (MCN/HS) for the product; in general, it ranges between 10.0% and 20.0%, with a maximum rate of 35.0%. Even with the Mercosur tariffs, Brazil has many exceptions that apply higher tariffs to certain products; agricultural products are the ones that have most import tariffs. The protectionist tendency of the government, which seeks to encourage the setting up of own industry in the country over importing, can affect multiple industries.
Brazil’s legal system is gradually improving thanks to initiatives such as Justice 4.0 programme that seeks to streamline the country’s complex judicial system. These reforms are also expected to lead to a significant improvement to the country’s intellectual property protection legislation. Even so, the efficiency of the anticorruption measures continues to be a factor for concern. The digitalisation of the judicial system will lead to a more efficient system and thus to increased confidence of foreign investors.
Iñaki Gambus
Director of Basque Trade & Investment Brazil
Basque trade & Investment
Av. Paulista 2.300, Andar Pilotis. Sl. 46/47
CEP 01310-300 Sao Paulo (SP)
* Office hours:
Monday to Friday: 8.00 a.m. to 5.00 p.m.
