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. Brazil’s 2014 Gross Domestic Product (GDP) of US$2.3 trillion ranks Brazil as the world’s seventh-largest economy. Annual growth during 2014 dropped to 0.1% due to reduced demand for Brazilian exports in Europe and Asia and modest consumer demand from Brazil’s large middle class.
During the past two decades, the country has prioritized macroeconomic policies that control inflation and promote economic growth. Recently, inflation has increased, reaching 8.47% in May 2015. Urban unemployment was at 6.4% in April 2015, increasing from 4.9% in mid-2014; and wages continue to increase. Brazil’s Central Bank has been steadily raising interest rates to combat inflation, from a historic low of 7.25% in October 2012 to 13.75%.
In 2014, the U.S. was the second largest exporter to Brazil, accounting for 15% of Brazil’s total imported goods; behind China and followed by Argentina, Germany, and Nigeria. In 2014, Brazil imported over US$229 billion of total goods, including US$42.4 billion from the U.S. – a 3.7% decrease from 2013. Brazil ranked as the United States' ninth-largest export market for goods in 2014. Brazil is also a large market for U.S. services, accounting for an additional $28 billion in exports in 2014. The United States maintains a trade surplus in services that has increased over the past decade, reaching $17 billion in 2012, before dropping to $11.9 billion in 2014.
Brazil represents an excellent export partner for experienced U.S. exporters. Major reasons to export to Brazil include:
Brazil has a large and diversified economy that offers U.S. companies many opportunities to partner and to export their goods and services. 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.
The Government of Brazil (GOB) is the nation’s largest buyer of goods and services. Navigating the government procurement process can be challenging. U.S. exporters may find themselves at a competitive disadvantage if they do not have a significant in-country presence – whether via established partnerships with Brazilian entities or some type of company subsidiary -- as well as the patience and financial resources to respond to legal challenges and bureaucratic issues.
The unfolding scandal connected to energy giant Petrobras poses another challenge to government and business, increasing uncertainty and creating a drag on growth. In response, senior government officials have pledged to support the on-going legal and investigative processes, and Petrobras has taken concrete steps to improve internal compliance mechanisms and restore confidence. While the economic and public relations consequences have been severe, Brazil may yet seize a silver lining: a comprehensive commitment to fight corruption could ultimately improve the business climate, benefitting local and international companies alike.
On June 9, 2015, President Rousseff unveiled a new infrastructure concessions program, which is intended to draw US $64 billion in investment over the next five years and beyond to upgrade and operate highways, railways, ports and airports across 20 states in Brazil. The new concessions will have less access to state bank financing than previous projects, as bidders will be expected to use private financing as well.
The first-ever Olympic Games in South America that will take place in Rio de Janeiro in the summer of 2016 are expected to generate numerous business opportunities for U.S. companies in several sectors. The main projects include logistics upgrades at seaports, airport modernization, mass transit build-out, and water sanitation. The Government of the State of Rio de Janeiro estimates that investments in the State between 2010 and 2016 will reach US$ 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 Rio de Janeiro Olympic Organizing Committee began their procurement process related to the Olympic Games in early 2014, but new opportunities will be released throughout 2015 and into 2016. 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 agricultural equipment, building and construction, aerospace and aviation, safety and security devices, IT, oil and gas, medical equipment, sporting goods, environmental technologies, retail, and transportation.
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.
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