The Federative Republic of Brazil is Latin America's biggest economy and is the fifth largest country in the world in terms of land mass and population with about 192 million people. Brazil’s economy, the 6th largest in the world, grew 2.7% in 2011. Growth slowed due to reduced demand for Brazilian exports in Europe and Asia, despite solid domestic demand and a growing middle class.
During the past decade, the country has maintained macroeconomic policies that controlled inflation and promoted economic growth. Inflation was at 6.5% in 2011, and urban unemployment reached a historic low of 6.0%. Interest rates, though high compared to the rest of the world, remained historically low at the Central Bank benchmark rate of 8.0% as of July 2012.
In 2011, the U.S. was Brazil’s largest source of imports followed by China, Argentina, Germany, and South Korea. U.S. merchandise exports to Brazil in 2011 were US$42.9 billion, and U.S. imports from Brazil were US$31.3 billion.
Brazil has a large and diversified economy that offers U.S. companies many opportunities to export their goods and services, and U.S. exports are increasing rapidly.
Doing business in Brazil requires intimate knowledge of the local environment, including both the explicit as well as implicit costs of doing business (referred to as the “Custo Brasil”). Such costs are often related to distribution, government procedures, employee benefits, environmental laws, and a complex tax structure. Logistics pose a particular challenge, given infrastructure limitations posed by nearly a decade of economic expansion. In addition to tariffs, U.S. companies will find a complex customs and legal system.
There are few, if any, sectors in Brazil that do not have excellent short term opportunities. Certain sectors of the Brazilian market have experienced higher than average growth, such as air transportation, telecoms, oil and gas, and mining. Under the second phase of the Growth Acceleration Program (PAC II), the Government of Brazil will spend R$955 billion (the equivalent of around US$470 billion) in development of the country’s energy generation and distribution system, roads, railroads, ports, and airports as well as stadiums as it prepares for the World Cup in 2014 and the Olympics in 2016. Other promising areas for U.S. exports and investment include agriculture, agricultural equipment, building and construction, aerospace and aviation, electrical power, safety and security devices, environmental technologies, retail, and transportation.
The Brazilian national oil company Petrobras' expansion may represent the largest global business opportunity in the oil & gas sector until 2020. The offshore pre-salt oil deposits discovered in 2006 and 2007 are estimated to exceed 60 billion barrels in probable or recoverable reserves, and could place Brazil among the world’s top ten oil-producing countries. Petrobras anticipates that it will invest $224 billion in exploration and development through 2015.
Brazil is one of the largest IT markets within the emerging economies. IT end-user spending in Brazil is expected to grow to $134 billion in 2014. The largest share of spending will be on telecom equipment, representing 72% of the market, followed by IT services at 13.3% and computing hardware at 11.9%.
In the years leading up to the 2016 Olympic Games in Rio de Janeiro, Brazil will host several international mega-events. In 2011, Brazil hosted the World Military Games and the Pan-American Maccabi Games and in 2012, Rio de Janeiro hosted the Rio+20 global environmental sustainability conference. In 2013, Brazil will host a papal visit and the World Youth Day event as well as the soccer Confederations Cup. In 2014, twelve Brazilian cities will host the soccer World Cup. The Government of Brazil expects to invest $106 billion in the preparations for these events. These investments, which will include outlays for infrastructure, construction, transportation systems, port improvements, public security, and airport infrastructure upgrades, will present significant commercial opportunities for U.S. companies. Most of the major infrastructure upgrades will be carried out through Public-Private Partnerships under Brazil’s Growth Acceleration Program.
Brazil’s business culture relies heavily on the development of strong personal relationships. Companies need a local presence and must invest time in developing relationships in Brazil. The U.S. Commercial Service encourages U.S. companies visiting Brazil to meet one-on-one with potential partners. One of the best ways for U.S. companies to enter the Brazilian market is by participating in local trade shows or using the U.S. Commercial Service’s Gold Key Service (GKS), through which they can meet with pre-screened potential clients or partners. It is essential to work through a qualified representative or distributor when developing the Brazilian market. Some firms establish an office or joint venture in Brazil. Further discussion of these alternatives can be found in the “Marketing Products & Services” chapter. It is very difficult for U.S. companies to get involved in public sector procurement without a local Brazilian partner.