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Going Global: Expand Your Business to Brazil
June 21, 2018
There are currently 195 countries in the world in which companies may choose to do business. Successful companies looking to “go global” proactively seek out the most attractive opportunities. In making the decision of where to expand internationally, companies must consider business objectives as well as the business and legal environment of potential locations.
Follow Newland Chase’s continuing Going Global series where we take a look at a different country each month – ranking countries in tiers from 1 to 5 (with 1 being most attractive for international expansion) based on its current business climate and corporate immigration system. In this edition, we take a look at the country of Brazil.
Business Climate
Brazil is a member of the original four “BRIC” nations (Brazil, Russia, India, China), the term coined for the four countries expected to dominate the global economy by 2050. According to the International Monetary Fund (IMF), the Brazilian economy is currently the largest economy in Latin America and the 9th largest in the world. Despite some recent setbacks, as the global shift of wealth continues from Europe and North America to Asia and Latin America, most studies still predict Brazil to take its place in the top 5 largest economies by 2050, closely followed by Mexico.
Brazil’s economy is mixed, with roughly two-thirds of output in the service sectors, one-fourth in manufacturing, and the remainder primarily in agriculture and natural resources. Key industries include iron and steel production, automobile manufacturing, petroleum processing, and chemical production. The small technology sector has seen promising growth in recent years but still lags traditional industries.
Looking at a quick “snapshot” of economic indices, GDP growth since the 2008 global recession has struggled to break the 2 percent mark; but the IMF is looking for 2.3 percent for 2018, and the Brazilian government recently revised their projections to 3.3 percent for the year. Inflation has decreased over the last year from 4 percent to just under 3 percent. However, unemployment remains above 12 percent. With most economists believing that Brazil has finally now come out of its worst recession on record, hopes are that unemployment will now begin to come down over the coming months. The corporate income tax rate is officially 15 percent, but other taxes, including transactional taxes, make the effective rate more in the neighbourhood of 34 percent.
In international trade, Brazil has traditionally been slow to enter into many bilateral trade agreements, but it has maintained a healthy trade surplus since 2015, with exports on a general upward trend. China has been Brazil’s largest trading partner (both exports and imports) for several years, with the U.S. in second place.
Fundamentally, Brazil’s economy is free market but with significant hold-over command economy government controls from the pre-democracy period before 1985. In terms of economic freedom, the Heritage Foundation’s 2018 Index of Economic Freedom ranks Brazil just the 153rd freest in the world, with the primary factors weighing down the score being challenges due to government – namely corruption, fiscal health, and labour laws.
The World Economic Forum’s 2018 Global Competiveness Report ranks Brazil 80th of 137 nations measured and ranked for attractiveness to business. The WEF report is critical on most of its measured factors, but the sheer size of the market buoys its ranking somewhat. The major factors dragging down its performance primarily centre around the functioning of government and the widely publicized corruption and political instability of recent years. However, there are factors where the WEF’s report notes significant improvement in recent years. The “institutions” pillar recovered 11 positions in the 2018 report due to recent efforts to investigate and deal with government corruption. Overall, the area with the largest recent improvement has been in the business community’s capacity for innovation – including increases in industry-business partnerships, research and development, and science and engineering training.
Looking specifically at the labour market, Brazil currently ranks 114th overall in the WEF’s report for labour market efficiency. Local labour and pension laws, while navigable with expert assistance and benefiting from some recent reforms, are still in dire need of more extensive reform. However, strong opposition from labour unions and a government politically weakened by scandal will make major lasting reforms difficult for the time being.
Corporate Immigration
The corporate immigration system in Brazil underwent a whole-scale revision in 2017. Brazil’s New Immigration Law, which went into effect in November 2017, rewrote much of Brazil’s immigration laws, which had been a hold-over from the pre-1985 military dictatorship. The new legislation touched on all aspects of residence and work authorization for foreign nationals in the country. Normative Resolutions implementing its provisions were adopted in December and continued into the early part of 2018. The administrative implementation and changes are ongoing with resulting delays as authorities struggle to adopt the new procedures. However, the long-term effect of the reforms will be to modernize the immigration system into a more business friendly scheme.
Once fully implemented, the new law will streamline Brazil’s previous scheme of multiple visa categories into five major categories. Most applicable to business, Visit Visas will include the visas issued for business purposes, and Temporary Visas will apply to all employment-based immigration. A new Residence Permit will be available through an in-country application process for long-term work assignments where the applicant first enters via a Temporary Visa. The new law also provides numerous rights and protections for foreign nationals residing in the country, including protection of local labour laws and access to social security.
Beneficial to business travellers to Brazil, the government also introduced a new electronic visa system in November 2017. The new system issues electronic e-visas for business travellers within 72 hours of application. The new e-visas are now available to citizens of Australia, Canada, the United States, and Japan, with additional countries expected to be added over the coming year.
Taken together, the reforms of the immigration and business travel system in Brazil signal a sincere desire on the part of the government to encourage both international companies and local companies to employ foreign talent in expanding business operations and the overall economic base of the country.
Summary and “Going Global” Tier Ranking
Newland Chase places Brazil in Tier 2 on our Going Global Ranking. Uncertainty regarding the ongoing challenges in the government and political arena prevent us from placing Brazil in Tier 1. However, the sheer size of the market, both in terms of supply and demand opportunities, and the demographic and macroeconomic reality that long-term Brazil will emerge as one of the five largest world economies make it almost a necessity for global companies to have a Brazil strategy. Recent significant improvements in the business travel and immigration system will make entry into the Brazil market more navigable for direct foreign investment going forward.
For more information on corporate immigration in Brazil, readers are invited to contact one of the 85 fulltime immigration specialists in one of Newland Chase’s three Brazilian offices – in Rio de Janeiro, Sao Paulo, or Macaé. They can be reached at:
Newland Chase
Rua da Assembléia, 65. 15th floor
Centro, Rio de Janeiro – RJ
20011-001
Brazil
+55 021 3993-8902
Readers are also referred to additional resources and information on Brazil and Newland Chase’s capabilities in the country – including our recent webinar “Brazil's New Migration Law: Immigration and Compliance in the Spotlight” (request a recording at [email protected]) and “Newland Chase Opens New Office in Rio de Janeiro”.
