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Analyst predicts the growth of mining in Brazil in 2023Posted 22/03/2023
The mining sector has always been kept strong in Brazil because the country is rich in ore deposits. For 2023, analysts forecast that the segment will generate more revenue, mainly due to the economic opening in China. This certainly draws the attention of foreign entrepreneurs who have observed mining as one of the great business opportunities in Brazil.
According to the Brazilian Mining Institute (IBRAM), the revenue from the mineral sector made a total of BRL 250 billion in 2022, registering a drop before the billing record of 2021, which was BRL 339 billion. Meanwhile, the area shows to be promising for those who plan to start their investment in Brazil. After all, the trend is that of a strong recovery in terms of revenue.
After the covid-zero policy, China is warming up its economy again, which creates good expectations for investors. In addition, the Brazilian mining market has close relations with the Chinese demand for iron ore.
Important points to know when investing in Brazil in the mining market
First of all, it is important to know that investments in mining offer risks, as what happens in any other segment.
On the one hand, betting on this niche directly causes higher costs for foreign entrepreneurs.
Meanwhile, if the excavation field has ore and presents viability for extraction, the whole investment is rewarded. In addition, the type of mineral extracted, and the frequency of extraction are factors that interfere with the equipment used. Therefore, such factors also influence financial contributions destined for the purchase of this equipment.
3 ways of doing business with Brazil in the mineral sector
There are direct and indirect practices (with greater or lesser risk) for investing in Brazilian mining. We have listed down three:
1. Stock Exchange
Through the intervention of the Stock Exchange, it is possible to invest indirectly in the mining segment. In addition, an alternative is to purchase ores through the capital market.
In this investment model, it is worth knowing that profitability varies according to the specific results of a mining company and certain extraction mines.
Just as all actions in the stock market change, actions in mining are influenced and can generate revenue or losses over time.
2. Purchase and sale of ore fields
Not all entrepreneurs need to bet high on extraction activity. In the case of the purchase and sale of mining fields, for example, the work is just a “brokerage”.
Investors then investigate favored fields and find buyers who intend to explore the region for research and extraction.
3. Mineral research and extraction
This third option is much riskier, but also more profitable if all goes well. The whole process consists of doing the requirement of a specific area. After that, the investor carries out mineral research, and, under the results found, the mineral extraction stage starts.
Which Brazilian regions favor the extraction of ore?
Currently, the main Brazilian extraction regions are Minas Gerais, Pará, and Mato Grosso do Sul. From deposits situated in the Iron Quadrangle (Cuadrilátero Ferrífero) (MG), in Pará, and MS, millions of tons of iron are extracted annually.
In Minas Gerais, there are deposits of manganese (used in the manufacture of steel and chemical products) and niobium (used in the manufacture of turbines of airplanes and computers).
Minas Gerais: the main scenario in Brazilian mining
The name “Minas Gerais” emphasizes the importance of the mid-southern region for the Brazilian mining market. With numerous productive deposits, the state began to concentrate a high number of startups that invest in the segment.
The most important startup community is called San Pedro Valley, located in Belo Horizonte, and has more than 300 startups. The capital of Minas Gerais has a solid innovation hub, that is just behind São Paulo.
In addition to startups and innovation companies, Belo Horizonte has taken in factoring agencies and economic development institutions that support projects that are innovative and tends high profitability.
Belo Horizonte also has a technological park inaugurated in 2012, on the campus of the Minas Gerais Federal University, in addition to universities that produce qualified labor every year.
In all likelihood, this is a good scenario for investors who plan to do business or to open a company in Brazil during 2023. If this is in your plans, count on the expertise of the Europartner team to manage the opening of your company in Brazil!Author's post: Europartner Accounting