The Federative Republic of Brazil is Latin America's largest economy. With 3,290,000 square miles, bordering 10 other countries and with 4,650 miles of coastline, Brazil is the largest country in Latin America and fifth largest in the world. Its population of 202 million makes Brazil the world’s sixth-most populous nation. With a Gross Domestic Product (GDP) in 2013 of US$2.3 trillion, Brazil is the world’s seventh-largest economy, spurred by a 2.5% annual growth during 2013. Growth slowed during last year due to reduced demand for Brazilian exports in Europe and Asia and modest consumer demand from Brazil’s large middle class. By 2020, Brazil is projected to be the fifth-largest consumer market in the world, ahead of France and the United Kingdom.
During the past decade, the country has maintained macroeconomic policies that control inflation and promote economic growth. Inflation was 6.3% in April 2014. Urban unemployment was at 4.9% in April 2014, dropping from 6% in mid-2013; wages continue to increase. Interest rates are high by international standards: Brazil’s Central Bank benchmark rate was at a historic low of 7.25% in October 2012, but as of May 2014 had climbed to 11%, which is still low by Brazilian standards.
In 2013, the U.S. was Brazil’s second largest source of imports, accounting for 15% of total imported goods; behind China and followed by Argentina, Germany, and Nigeria. In 2013, Brazil imported over US$239 billion of total goods, including US$44 billion from the U.S. – a modest 0.7% increase over 2012. Brazil was the United States' seventh-largest export market for goods in 2013. Brazil is also a large market for U.S. services, accounting for an additional $24 billion in exports in 2012 (latest available data). The trade balance with Brazil for U.S. services has continually increased since 2003, reaching a surplus for the U.S. of $17 billion as of 2012.
Brazil has a large and diversified economy that offers U.S. companies many opportunities to partner and 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 direct as well as the indirect costs of doing business in Brazil (referred to as “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 the lack of sufficient infrastructure to keep up with nearly a decade of economic expansion. In addition to tariffs, U.S. companies will find a complex customs and legal system.
Brazil’s infrastructure sector will receive an estimated US$800 billion in investments from 2013 through 2017. The sum will be divided between the energy and infrastructure sectors, with a larger amount allocated for infrastructure development such as roads, rail, ports and airports.
Brazil is experiencing major growth in the construction sector. The country has captured global attention as its major cities undergo a construction boom related to the 2014 World Cup and, specifically for Rio de Janeiro, the Summer Olympic Games in 2016.
The Government of the State of Rio de Janeiro estimates that investments in the State between 2010 and 2016 will reach US$ 50 billion, in sectors including infrastructure, construction, transportation and others. Most of these investments will be done under Brazil’s Public-Private Partnerships (PPPs).
The first-ever Olympic Games in South America will generate numerous business opportunities for U.S. companies in several sectors. The main projects include logistics upgrades at seaports, airport modernization, mass transit build-out, and water sanitation.
Funding for projects will be accomplished with a significant appropriation by the GOB under its “Plan for Growth Acceleration” (PAC). This program encompasses infrastructure investment in logistics, energy, and social services and urban mobility infrastructure.
The Rio de Janeiro Olympic Organizing Committee began their procurement process related to the Olympic Games in early 2014. For further information or to pre-register as a supplier, please visit http://portaldesuprimentos.rio2016.com/en/ . Companies that are pre-registered through the portal will receive information as specific bids are announced.
Other promising areas for U.S. exports and investment include oil and gas, agricultural equipment, building and construction, aerospace and aviation, safety and security devices, IT, medical equipment, sporting goods, environmental technologies, retail, and transportation.
The Brazilian national oil company Petrobras' expansion plans may represent one of the world’s largest business opportunities in the oil and gas sector until at least 2020. Despite Brazil’s government-mandated local content requirements, industry contacts have been speculating about possible flexibility or compensation mechanisms that they can propose to the Brazilian oil regulator to deal with limited availability of domestic supplies. Petrobras, in fact, may increase purchase of specific foreign goods and services to speed up their projects. In February 2014, Petrobras announced that it would invest US$220.6 billion (approximately US$44 billion/year) from 2014 through 2018, with 70% of this investment being destined for exploration and production (E&P). Brazil accounted for 63% of all deep water oil discoveries in the world from 2005 to 2010. Once these oil fields are developed, Brazil will post the largest oil production growth among non-OPEC countries, sometime in the late 2020s.
Success in Brazil’s business culture relies heavily upon the development of strong personal relationships, the keystone of productive business partnerships. In most cases, U.S. firms need a local presence and thus should invest time in developing relationships through frequent visits to Brazil. The U.S. Commercial Service encourages U.S. companies visiting Brazil to meet one-on-one with potential partners, and offers a slate of services such as our Gold Key Service (GKS), through which companies can meet with pre-screened potential clients or partners in personal meetings. We also lead delegations of Brazilian buyers to connect with U.S. businesses at more than 30 International Buyer Program trade shows in the U.S.
It is essential to work through a qualified representative or distributor when developing new business in the Brazilian market. Some firms may need to establish an office or joint venture in Brazil. It is difficult for U.S. companies to get involved in public sector procurement at the federal or state levels without a Brazilian partner, or a physical presence in Brazil.