The LATAM HUB
Why Brazil is becoming interesting for international companies
In light of geopolitical developments and increasing isolation of markets, entrepreneurs and executives are looking for new growth regions. Latin America is coming into focus – especially Brazil. With gross domestic product growth of 3.8% in 2024, the country’s economy has developed dynamically. A gigantic infrastructure program and incentives for companies are intended to further stimulate the economy. This leads to exciting opportunities for companies from all over the world.
320,000,000,000 € – three hundred and twenty billion Euros (1.7 trillion Reais). That’s how much money Brazil wants to invest by 2026 to modernize its infrastructure. The Program for Accelerating Growth (“Programa de Aceleração do Crescimento” – PAC) comprises a total of nine areas:
Traffic and transport: Airports, railways, waterways, ports and motorways account for one fifth of the investment volume. Brazil wants to make the transport network more efficient and sustainable.
Energy: In addition, one third of the investment volume is to be invested in sustainable energy generation, power transmission, energy efficiency, electricity supply for all, but also mineral research and oil and gas production.
Urban development: The government wants to invest the largest part of the funding pot (about 35% (609.7 billion Reais) in urban projects. These include sustainable mobility in the city, sewage, waste management, disaster control including slope stabilization and drainage, and the urbanization of favelas.
Water supply: another 30.5 billion Reais are to be invested in water supply and water treatment in order to supply as many inhabitants as possible with fresh water.
Digitization: 27.9 billion Reais will be used to promote the expansion of the 4G network and the introduction of 5G, internet coverage in schools and health facilities and digital television, among other things.
Education and science: the government wants to spend 45 billion reais on education, research and innovation.
Social infrastructure: 2.6 billion Reais will be used to promote culture, public safety and sports.
Healthcare: 30.5 billion Reais will be allocated for the expansion of basic services and telemedicine, among other things.
Defense: 52.8 billion Reais are earmarked for national defense.
International companies are expressly encouraged in all nine areas. “In my experience, foreign know-how is very much in demand. The infrastructure is to be modernized with the latest technologies. Any company can participate in the public tenders,” says Parvis Papoli-Barawati. The lawyer and management consultant, who is based in Germany and Brazil, has been helping companies enter the Brazilian market for decades. He is currently registering increasing interest.
Zero import duty on certain goods
“On the one hand, this is due to the continuous economic growth and the role of Brazil as a hub for Latin America. On the other hand, the last few years have shown that the country is politically stable despite changes of government,” Papoli-Barawati emphasizes. In addition, there are great incentives for foreign companies to set up a location in Brazil. The Brazilian Chamber of Commerce CAMEX grants customs relief for the import of certain goods: there is no import duty on the import of new machinery and equipment that is not manufactured in Brazil. This so-called “ex-tarifário” was recently extended until 31 December 2025 and requires an application procedure in which the Brazilian Machinery and Equipment Association is consulted.
Shorter depreciation period increases demand
In addition, a new depreciation regulation results in interesting sales potential for foreign manufacturers of machinery and equipment: the “Accelerated Depreciation” investment program (Depreciação Acelerada) will run until the end of 2025. “If a Brazilian company buys new machinery, plants, equipment, devices and instruments, it can fully depreciate the investment amount within two years instead of 25 years,” emphasizes Papoli-Barawati. In this way, the government wants to incentivize Brazilian industrial companies to modernize their plants.
Future potential through MERCOSUR agreement
An additional growth spurt could be provided by a new partnership. Just a few weeks ago, the European Union and the MERCOSUR states Brazil, Argentina, Uruguay and Paraguay agreed on the MERCOSUR free trade agreement in December 2024. After 25 years of negotiations, it had been agreed to largely dismantle tariffs between the two trading regions. It would create a free market with more than 700 million inhabitants. The tariff reduction could result in savings of around four billion euros per year for European exporters. Now the agreement still has to be ratified by the parliaments of the participating countries. “The EU should wrap this up. This would be a win-win situation for both sides and would give the EU a competitive advantage over China, for example, which is also trying to reach a similar agreement but has been rejected,” says Papoli-Barawati.
Market entry mostly via sales representatives and partners
Entrepreneurs and managers who want to set up a location in Brazil can get an initial overview through local chambers of commerce. Market entry is often carried out by commercial agents or distributors. “If you want to set up your own subsidiary on the basis of initial experience, the choice of the right location is important in addition to an in-depth market analysis and, if necessary, adaptation of the product to the Brazilian market,” says Papoli-Barawati. Because of the size of the country and the considerable regional differences in terms of infrastructure, mentality, climate, tax incentives, availability of skilled workers and customer proximity, one must take a close look at which location is suitable. “If they are not Brazilians, they should bring flexibility and empathy with them in addition to international experience, preferably gained in Brazil, without which it cannot work in Brazil in the long run.” After all, the financial budget should not be too tight, because the initial phase is often more time-consuming and cost-intensive than assumed.
Cultural peculiarities
In addition to the organizational aspects, cultural peculiarities must also be taken into account. “Brazilians attach great importance to personal contact. Even in business life, it means a lot to a Brazilian to get along well with the business partner, the customer, the supplier, etc. Personal conversations and small talk are therefore an essential part of building relationships, especially in the getting-to-know-you phase,” says Papoli-Barawati from experience. Brazilians are emotional and easily vulnerable. Open criticism is usually not appropriate, especially not in the presence of third parties, as a Brazilian then quickly loses face. “Brazilians want to feel comfortable, which applies equally to private and business coexistence. My recommendation is: appear correct and friendly, accept personal invitations as a rule, show interest in the person of the other person, not only in his business. Kindness opens almost every door in Brazil.”
Board Journal – February 20th, 2025
