Brazil Country Commercial Guide
Learn about the market conditions, opportunities, regulations, and business conditions in brazil, prepared by at U.S. Embassies worldwide by Commerce Department, State Department and other U.S. agencies’ professionals
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Investment Climate Statement
Last published date:

Overview

The U.S. Department of State Investment Climate Statements provide information on the business climates of more than 170 economies and are prepared by economic officers stationed in embassies and posts around the world.  They analyze a variety of economies that are or could be markets for U.S. businesses. The Investment Climate Statements are also references for working with partner governments to create enabling business environments that are not only economically sound, but address issues of labor, human rights, responsible business conduct, and steps taken to combat corruption. The reports cover topics including Openness to Investment, Legal and Regulatory Systems, Protection of Real and Intellectual Property Rights, Financial Sector, State-Owned Enterprises, Responsible Business Conduct, and Corruption.

Executive Summary

Brazil is the second largest economy in the Western Hemisphere behind the United States and the eleventh largest economy in the world (in nominal terms) according to the World Bank. The United Nations Conference on Trade and Development (UNCTAD) named Brazil the fifth largest destination for global foreign direct investment (FDI) flows in 2022 with inflows of $86 billion, an increase of 68 percent in comparison to 2021 and above pre-pandemic levels (in 2019, inflows totaled $65.4 billion). In recent years, Brazil has received more than half of South America’s FDI inflows, and the United States is the largest foreign investor in the country.

Brazil’s economic performance in recent years has been steady but slow, with modest growth prior to and after the pandemic. Although the country experienced a recovery in 2021, with its Gross Domestic Product (GDP) growing 4.6 percent, it slowed again in 2022 and 2023, increasing 2.9 percent each year. As of March 2024, analysts forecast 1.78 percent GDP growth for the year. The unemployment rate was 7.4 percent at the end of 2023, with around one-fifth of the labor force unemployed or underutilized. The nominal budget deficit stood at 8.1 percent of GDP ($175.8 billion) in 2023 due to the anticipation of judicially mandated expenses, and Brazil’s debt-to-GDP ratio increased to 74.3 percent.

The first year of the new administration of President Luiz Inácio “Lula” da Silva (Worker’s Party/PT) was marked by important advances such as the approval of tax reform legislation to simplify the complicated Brazilian code and a fiscal framework that restricted government spending. Although Brazil has been able to advance some reforms to reduce the cost of doing business in Brazil over the last several years, a number of reforms remain pending, including reforms to reduce the country’s primary deficit.

The Lula administration announced a “New Industrial Policy” in January 2024 that focuses on agro-industrial chains, health, urban welfare, digitalization, bioeconomy and energy transition, and defense. Foreign investors in Brazil receive the same legal treatment as local investors in most economic sectors; however, there are foreign investment restrictions in the health, mass media, telecommunications, aerospace, rural property, and maritime sectors. The Lula administration has stated support for public-private partnerships and concessions instead of privatizations.

Analysts contend that high transportation and labor costs and low domestic productivity hamper investment in Brazil. Foreign investors also cite concerns over poor existing infrastructure, rigid labor laws, and complex tax, local content, and regulatory requirements, all of which are part of the extra costs of doing business in Brazil.

The impact of Russia’s war of aggression against Ukraine exposed some of Brazil’s fragilities in its production of certain commodities. Brazil’s strong dependence on imported fertilizers, particularly from Russia and Belarus, temporarily caused agricultural production concerns at the start of the war and impacted food production costs, boosting inflation. Since the start of the war in 2023, Brazil also relied on a huge increase of imports of cheap Russian diesel.

To access the ICS for Brazil, visit the U.S. Department of State Investment Climate Statement website.
 

Political Environment

For background information on the political and economic environment of Brazil, please click on the following U.S. Department of State link:
 https://www.state.gov/countries-areas/brazil/.