Despite political and economic instabilities, Brazil remains fertile ground for startups and foreign investors

Brazil is a huge country, full of opportunities, the question is to know how to analyze and identify where to find them, when and how to invest, measuring the risks in order to avoid unexpected surprises.


For decades, Brazil has been an unstable country, marked by political and economic oscillations. Other factors that now require attention from foreign investors are the high unemployment rates, the return of inflation, and the breaching of the spending cap, which generates the fear of a new wave of fiscal irresponsibility combined with the social crisis. Despite all this instability, foreign economic agents are still attracted to Brazil, due to its large consumer market (more than 200 million people), productive capacity, and the advance of the digital transformation in business. Proof of this is that foreign investments in Brazil grew 133% in 2021 ($58 billion) compared to 2020 ($28 billion). The values have not yet returned to the levels of 2019 (US% 65.8 billion), before the pandemic, but show a considerable recovery.

In other words, Brazil continues to be a great investment destination, with good advantages in relation to other Latin American countries. One of its advantages, according to market analysts, is that the country has the proper tools to overcome the crisis, because, since the 1990s, it presents certain continuity of principles in economic policy, regardless of the orientation of the different governments, which are/were considered solid. Brazilian democracy has also shown resilience, through strong institutions, which has been proven, in recent months, with a new attitude of the Presidency of the Republic in search of governability, ruling out the possibility of an institutional rupture in the short term.

Another positive aspect is that, despite all the human losses and the contribution to economic instability, the COVID-19 pandemic created a series of business opportunities in Brazil, especially in the area of technology. A clear demonstration of this is the contrast between the exit of large multinationals and the arrival of billions in investments from foreign startups. In other words, the attractiveness of foreign capital remains firm, even though the effective applications in businesses have decreased by 23% in relation to last year. The accumulated foreign capital flow in the year is R$57.65 billion, a very significant amount.

Simultaneously, mergers and acquisitions in Brazil reached R$ 76 billion (65% increase in relation to 2020). In other words, even in the face of all the setbacks and the oscillations of 2021, the market remains alive and seeks alternatives to expand new businesses.

This scenario indicates the dynamization of the market, not only with a greater variety of products and services, but also with a greater presence of technology in everyday life, as the digital inclusion of the population has intensified. For example, we can cite the expansion of the banking process, the vertiginous growth of e-commerce, and the offer (still incipient) of online education, in order to keep students in schools and universities.

The Brazilian population lacks quality products and services and is quite open to innovations. Brazilians like and consume technology, whenever they can afford it, adhering with great ease to novelties concerning applications and social media. In several areas, there is a good, repressed demand, and any sign of economic recovery will soon revert into a quick reward for startups that have decided to bet on Brazil.

Brazil is a huge country, full of opportunities, the question is to know how to analyze and identify where to find them, when and how to invest, measuring the risks in order to avoid unexpected surprises. In general, companies that establish in Brazil guarantee not only the return on their investments, but also good results in the medium and long term. For this, investors must always count on the administrative, operational, and legal support of a local consulting firm to understand the Brazilian business culture, support the development of strategic human resources, and overcome the fiscal, tax, and legal complexities.

*Article written by Dalton Locatelli, partner at Pryor Global.

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