Brazilian Market

1. Introduction to the Brazilian Market

1.1 Brazil’s Economic Overview

In 2025, the Brazilian economy demonstrates resilience, although it faces challenges stemming from restrictive monetary policies and uncertainties in the global landscape. The Institute for Applied Economic Research (Ipea) projects GDP growth of 2.4% for 2025, with a slight deceleration to 2.0% in 2026.

The services sector continues to be the main driver of the economy, with estimated growth of 1.9% in both 2025 and 2026. The industrial sector is expected to expand by 2.1% in 2025 and 2.0% in 2026, driven by domestic demand and the strength of the manufacturing industry. Agribusiness stands out with a robust 7% growth in 2025, although a moderation to 2.3% is expected in 2026.

Inflation projections, measured by the Broad Consumer Price Index (IPCA), indicate a rate of 5.55% at the end of 2025, with a slight decrease to 4.51% in 2026. The basic interest rate (Selic) is expected to close 2025 at 15.00%, with an anticipated reduction to 12.50% in 2026.

In terms of foreign trade, exports are expected to grow by 3.2% in 2025 and 3.5% in 2026, while imports are projected to increase by 5% and 4% respectively in the same years.

From a fiscal perspective, the new fiscal framework implemented by the government sets limits on expenditure growth, aiming for the sustainability of public accounts. The expectation is a primary surplus of 0.5% of GDP in 2025 and 1% in 2026.

In summary, Brazil presents a moderately growing economic environment, with key sectors showing positive performance. The outlook for 2026 suggests the continuation of this trend, though attention must be paid to monetary and fiscal policies that will influence the pace of economic activity.

1.2 Openness to Foreign Investment

In February 2025, Brazil recorded a significant volume of Foreign Direct Investment (FDI), totaling US$ 9.3 billion—well above market expectations (US$ 5.5 billion) and representing a notable leap compared to US$ 5.3 billion in February 2024. This result reinforces the return of international confidence in the country’s potential.

According to the World Investment Report 2024 by UNCTAD, Brazil was the fifth-largest recipient of FDI in the world, with US$ 65.9 billion in inflows in the previous year. The total stock of FDI in the country reached US$ 997.5 billion, confirming its global importance.

Europe is the main source of these investments, accounting for 61.5% of the total, followed by North America (23.3%). The leading European investors are the Netherlands (41.2%), Luxembourg (15.5%), and Spain (10%), while the United States accounts for 84.6% of North American capital invested in Brazil. By sector, the highlights in FDI are: financial services and investment funds (19.2%), trade (8.1%), oil and natural gas extraction (7.4%), and infrastructure in energy and sanitation (5.6%).

Brazil attracts investors due to its large consumer base (over 210 million inhabitants), a consolidated middle class, abundant natural resources, strategic geographic location, economic diversity, and resilience to international crises. The devaluation of the Brazilian real also favors export-oriented and industrial sectors.

However, the business environment still faces notable obstacles: burdensome labor legislation, high production costs (energy, credit, and logistics), deficient infrastructure, excessive bureaucracy, complex taxation, and a shortage of skilled labor. The country is also vulnerable to fluctuations in commodity prices.

Investment Incentives:

The Brazilian government offers a range of incentives to encourage foreign capital inflow, including tax exemptions, financing options, special regimes, and agreements to avoid double taxation. The main mechanisms include:

·         REPETRO: a special customs regime for the export and import of goods intended for oil and natural gas exploration and production, offering suspension of taxes such as Import Duty, IPI, PIS, COFINS, and the Freight Surcharge for the Renewal of the Merchant Marine (AFRMM);

·         REIDI: a special regime to stimulate infrastructure development, with suspension of PIS and COFINS taxes on the purchase or import of machinery, equipment, construction materials, and services destined for projects in transportation, ports, energy, basic sanitation, and irrigation sectors;

·         Regions with targeted incentives: tax reductions or exemptions for construction, expansion, modernization, or diversification projects in priority areas covered by the former Amazon Development Superintendency (SUDAM) and the Northeast Development Superintendency (SUDENE);

·         Manaus Free Trade Zone (ZFM): a special region that offers tax and customs benefits for industrial, commercial, and agricultural production.

Other support instruments include financing and incentive programs such as those offered by BNDES (National Bank for Economic and Social Development), PROEX (Export Financing Program), and technical and institutional assistance from entities like Apex-Brasil and Invest & Export Brasil.

Legal Framework and Rules for Investors:

The legal regime for foreign investment in Brazil is broadly liberal. Foreign investors may hold 100% of the capital in Brazilian companies and enjoy freedom of establishment. Capital contributions must be registered with the Central Bank of Brazil through the RDE-IED system (Electronic Declaratory Registration – Foreign Direct Investment), and appointing a legal representative in the country is mandatory.

Certain strategic sectors require prior authorization for foreign participation, such as the exploration and mining of mineral resources in border areas, telecommunications, broadcasting, and healthcare services.

With regard to real estate acquisition, foreign residents and companies authorized to operate in Brazil may acquire or lease rural properties, subject to legal limits. For properties located in the border zone — up to 150 km (approximately 93 miles) from the country’s terrestrial border — prior authorization from the National Defense Council (CDN) is required.

The risk of expropriation in Brazil is considered low. The Federal Constitution guarantees that any restriction on property rights must occur through a judicial decision, with the right to full legal defense and fair compensation, including for foreign investors.

Sectors with Investment Opportunities:

The Brazilian economy includes strategic and expanding sectors that offer broad business opportunities:

·         Agribusiness and food production: sugarcane, coffee, orange, soybean, banana, cashew nut, corn, pineapple, and chili production, as well as cattle and poultry farming, and tobacco cultivation;

·         Mining and energy: extraction of minerals, iron, aluminum, oil, gas, and renewable energy sources;

·         High-value industries: aerospace, pharmaceutical, automotive, steel, and chemical industries;

·         Emerging and high-tech sectors: agricultural biotechnology, digital technologies, aerospace, petrochemicals, clean energy, commerce, transportation, basic metallurgy, vehicle manufacturing, and real estate activities.

The franchise sector also stands out, driven by the expansion of the middle class.

Privatizations and Partnerships:

Since 2019, Brazil has implemented one of the largest privatization programs in the world, aiming to reduce the number of state-owned companies from 134 to 12. The program includes assets valued at approximately R$ 470 billion (US$ 117 billion). Highlights include the sale of Petrobras’s pipeline subsidiary (TAG), acquired by a consortium led by French and Canadian companies for US$ 8.7 billion — the country’s largest merger and acquisition operation that year. Also noteworthy was the sale of 30% of BR Distribuidora for US$ 2.27 billion.

In addition to privatizations, there are numerous opportunities in public projects and public-private partnerships, particularly in infrastructure sectors such as airports, highways, energy, sanitation, and urban mobility.

Platforms for monitoring bids and projects include: Tenders Info, Comprasnet, and TendersOnTime.

Sectors with Restrictions on Foreign Capital:

Although Brazil offers a generally open and welcoming environment for foreign direct investment, certain sectors remain subject to specific restrictions, particularly those considered strategic or of national interest. These limitations are grounded in the Brazilian Federal Constitution and relevant legislation. However, even in these restricted areas, there are notable exceptions and ongoing regulatory discussions that may provide opportunities under specific conditions. Below is an updated overview:

·         Nuclear Energy:

Activities related to nuclear energy—including exploration, research, extraction, enrichment, industrialization, and commercialization of nuclear minerals and their derivatives—are constitutionally established as the exclusive monopoly of the Federal Government (Union), as per Article 21, XXIII of the Brazilian Constitution. Foreign capital cannot participate directly in these operations.

Exception and Opportunity: Despite the restrictions, there have been active debates within government and industry circles about allowing private and even foreign participation in segments such as uranium mining and nuclear energy generation. These discussions gained relevance with the potential completion of Angra 3 nuclear power plant and Brazil's interest in advancing its nuclear program. In the future, regulatory changes may open partnership opportunities under concession or joint venture models with government-owned entities.

·         Postal and Telegraph Services:

The delivery of letters and telegraph services falls under the exclusive competence of the Federal Government, as established by Article 21, X. This means foreign companies cannot operate in Brazil’s core postal service market.

Exception and Opportunity: The restriction does not apply to express delivery (courier) and logistics services. Companies such as FedEx, DHL, and UPS operate freely in this segment, including with full foreign ownership. This represents a significant market niche, especially with the expansion of e-commerce logistics in Brazil.

·         Aerospace and Satellite Launch Industry:

The aerospace sector is subject to limitations on foreign participation, especially in activities directly related to national security—such as satellite launching and control, and operation of strategic aerospace infrastructure.

Exception and Opportunity: Manufacturing of aircraft, parts, and equipment is not restricted, and Brazil already has strong international cooperation in this area. Foreign capital is welcome in aerospace production—Embraer, one of the world’s largest aircraft manufacturers, maintains joint ventures and partnerships with foreign companies. Furthermore, the Technological Safeguards Agreement (TSA) between Brazil and the United States allows foreign companies to use the Alcântara Launch Center in Maranhão for satellite launches, under certain conditions, making Brazil a promising player in global space operations.

·         Summary for Investors:

While Brazil maintains certain constitutional safeguards over strategic sectors, these restrictions are relatively narrow and often balanced by exceptions, public-private partnerships, or emerging opportunities through regulatory modernization. Foreign investors are advised to evaluate not only the legal boundaries, but also the evolving regulatory landscape and potential entry points through indirect participation or collaboration with state-owned or authorized entities.

Regional Highlight: Central-West of São Paulo State:

In this context, the Central-West region of the State of São Paulo stands out as a strategic territory for international investors. With excellent highway and railway connectivity, expanding urban centers, a qualified labor force, and growing demand for foreign products and services, the region offers ideal conditions for the establishment of new ventures aimed at both the domestic market and exports.

1.3 Opportunities and Challenges for International Companies:

Brazil represents a strategic market for international companies, offering multiple opportunities while also requiring close attention to local challenges to ensure the success and sustainability of investments.

Opportunities:

·         Expansion of the consumer market: With a population exceeding 210 million inhabitants and a growing middle class, Brazil offers a vast domestic market with diverse demand for products and services across various sectors.

·         Sectoral diversity: The country features consolidated and rapidly growing sectors such as agribusiness, mining, renewable energy, automotive industry, pharmaceuticals, information technology, e-commerce, and infrastructure.

·         Potential for technological innovation: Investment in research, development, and innovation has been encouraged, especially in areas like biotechnology, clean energy, digitalization, and Industry 4.0—opening doors to partnerships and technology transfers.

·         Incentive policies and government programs: The federal and state governments offer tax incentives, special regimes, financing lines, and facilitation for business setup and operation, particularly in strategic sectors and regions.

·         Privatizations and public-private partnerships: The robust privatization and concession program provides opportunities for companies interested in infrastructure, energy, sanitation, transportation, and telecommunications.

·         Geostrategic location: Brazil’s privileged location in South America facilitates exports and regional integration, benefiting companies involved in global value chains.

Challenges:

·         Regulatory and tax complexity: The Brazilian system is known for its high tax burden, a multiplicity of taxes, and rules that vary among the federal, state, and municipal levels, requiring specialized legal and tax planning.

·         Administrative bureaucracy: Procedures for business registration, licensing, and operation can still be slow and bureaucratic, although there have been improvements in digitalization and simplification.

·         Insufficient infrastructure: Despite major projects underway, logistical challenges and limitations in road, rail, port, and energy infrastructure may impact costs and timelines.

·         Labor-related issues: Brazilian labor legislation is complex and strict, with high costs and specific rules that require attention and qualified support.

·         Economic and exchange rate risks: Exchange rate volatility, inflation, and fluctuations in both global and local economies can affect business profitability and planning.

·         Cultural and language barriers: Adapting to the local culture and overcoming language barriers can pose initial challenges to communication and negotiation.

Main Consumer Markets Experiencing Growth in Brazil:

Brazil presents a dynamic and diverse landscape in consumer markets for final goods, with sectors showing rapid growth driven by economic, social, and technological factors. Below, we describe the ten largest and fastest-growing consumer markets, offering excellent opportunities for international companies interested in investing or operating in the country.

1. Food and Beverages:

The food and beverage sector is one of the largest and most promising markets in Brazil. Demand for healthy, organic, functional, and premium products has grown significantly, following greater consumer awareness of nutritional quality and sustainability. The expansion of the middle class and increased purchasing power also drive consumption, favoring the introduction of innovative and niche products. Additionally, Brazilian consumers show a growing preference for both regional and international products, creating opportunities for foreign importers and distributors.

2. Personal Care, Perfumery, and Cosmetics:

The personal care, perfumery, and cosmetics segment is becoming one of the fastest-growing markets in Brazil. Brazilian consumers are increasingly interested in natural, organic, and wellness-oriented products. The country’s ethnic and cultural diversity contributes to varied demand, covering specific needs for different skin and hair types. E-commerce has become a key channel for boosting sales, especially among the young and urban demographic.

3. Electronics and Smart Home Technology:

Brazil’s electronics market is growing due to digitalization and the adoption of smart home technologies. Smartphones, smart TVs, virtual assistants, home automation devices, and connected appliances are in high demand. The rise of remote work, online education, and digital entertainment has also driven consumption in this sector, which benefits from constant technological innovation.

4. Fashion and Apparel:

The fashion and apparel sector is marked by diversity and adaptability, with a strong expansion of the fast fashion segment and growth of brands that promote sustainability and social responsibility. Demand for sportswear and casual clothing has increased, following global trends toward healthy lifestyles and comfort. The digitalization of fashion retail and the rise of e-commerce are expanding consumer access to new brands and collections, including imported products.

5. Baby and Children’s Products:

Brazil’s market for baby and children’s products continues to grow, especially in infant food, clothing, educational toys, and hygiene and care items. Rising household income, combined with greater parental concern for children’s health and development, boosts demand for quality and innovative products. International companies offering differentiated, safe, and certified products will find promising opportunities in this segment.

6. Furniture and Home Décor:

The growing appreciation for the home environment—driven by trends such as remote work and the pursuit of comfort—is stimulating the growth of Brazil’s furniture and home décor market. Consumers seek products that combine design, functionality, and sustainability, with a focus on customized solutions and certified wood. The growth of online sales and the expansion of marketplaces make it easier to access international products, creating opportunities for importers and manufacturers.

 7. Pet Products:

Brazil’s pet market is one of the fastest-growing in the world, reflecting the humanization of pets. Demand for premium food, accessories, medications, and specialized services is rising. Consumers are looking for innovative, natural products that promote animal well-being. This segment attracts investors and foreign companies that offer differentiation and quality.

8. Alcoholic and Non-Alcoholic Beverages:

The diversification and sophistication of Brazil’s beverage market present fertile ground for expansion. Demand is growing for craft beers, imported wines, premium spirits, and functional drinks across all consumer segments. At the same time, non-alcoholic beverages such as flavored waters, natural juices, and plant-based drinks are gaining prominence due to increased awareness of health and well-being.

9. Health and Wellness:

Greater awareness of health and quality of life is boosting the growth of the market for dietary supplements, vitamins, natural products, and fitness equipment. The Brazilian population is adopting healthier habits, generating opportunities for innovative products, including natural and organic alternatives. International companies offering certified and reputable products gain relevance in this segment.

10. Cleaning Products and Household Utilities:

The cleaning and household utilities segment has shown strong growth, particularly in the line of sustainable, biodegradable, and multifunctional products. The pandemic reinforced consumer focus on hygiene and safety, increasing consumption. The market seeks innovation and efficiency, opening space for products with environmental appeal and ease of use.

This outlook highlights the diversity and potential of Brazilian consumer markets, which, despite structural challenges, offer vast opportunities for international companies looking to expand their presence in the country. Adapting to local preferences, investing in innovation, and leveraging digital channels are key factors for success.

Recommendations for International Companies:

·         Conduct detailed market and feasibility analyses, taking into account regional and sector-specific factors;

·         Rely on specialized legal, tax, and accounting advisory services to navigate regulatory complexity;

·         Establish strategic local partnerships to facilitate market entry and adaptation;

·         Invest in team training and cultural adaptation;

·         Continuously monitor the economic and regulatory environment to adjust strategies;

·         Take advantage of available government programs and tax incentives.

In short, Brazil offers promising opportunities for international companies, provided they are prepared for the specific challenges of the national market. A strategic approach, grounded in deep knowledge of the local environment, is essential for the success of investments and operations in the country.