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Investing In Brazil Or Argentina: Which Country To Choose?Posted 01/07/2022
Brazil and Argentina have always been competitive in the eyes of foreign investors. After all, the countries were South America’s main developing countries, with vast natural resources and skilled labor.
These aspects certainly stimulated many foreign companies to open a business in Brazil and Argentina, driven by the opportunity for rapid and solid expansion.
Currently, after numerous political changes in both countries, most foreign investors reassess the strengths and weaknesses of each nation. A step that, in fact, is fundamental in the establishment of new business units and branches.
Given that political transformations always cause impacts and reforms in the labor and fiscal areas, among others.
But, in this Europartner article, you will find out why do business in Brazil is still a good option in order to expand your business operations. Keep reading!
Political-economic scenario in Argentina and Brazil
Even with the recent crises and recessions, Argentina and Brazil are still the biggest economies in South America. The two regions are key markets for foregin investors, especially when it comes to exporting products.
Adding to the wealth of the two nations, they account for more than 50% of the total economic value added in South America.
In addition, each region provides industries and opportunities in agribusiness. This draws attention to the creation of the most diverse ventures.
Argentina: How is the country dealing with the recession?
According to the economic outlook released by the OECD – Organization for Economic Cooperation and Development, an intergovernmental economic organization that brings together 38 member countries, the projection is that the Argentine economy should grow 2.5% in 2022.
Besides, the economic expansion is expected to be 2.3% in 2023. The estimates are based on the recovery of the economy, which began in 2021, adding two more factors:
- The drop in the number of COVID-19 infections.
- The increase in vaccination rates.
Stronger private consumption has helped to rebuild the country, as well as an increase in exports, as a result of high commodity prices.
On the other hand, high inflation (it is around 55%) is likely to remain that way for a long time, according to experts. And that is because a large part of the fiscal deficit is monetized.
Likewise, there is a drop in foreign currency reserves and the high informality of work is a concern. It should also be noted that poverty affects more than 40% of the population.
Brazil: what is the current potential?
As a member of the BRICs, Brazil currently has the ninth largest economy in the world. A factor that keeps the country in the global spotlight as it reinforces its high growth potential, which has increased in the last 10 years.
Furthermore, Brazil is one of the main targets in South America for German exporters and foreign investors.
The automobile, petrochemical, mining and construction industries are positioned as the main sectors that leverage the Brazilian economy.
However, it is worth noting that the automotive industry has lost competitiveness in recent years and suffers retraction, with consequences such as:
- Loss of sales volume
- Closing several production units
- Mass layoffs
In fact, such negative consequences were promoted by the COVID-19 pandemic, which caused the production shutdown in factories.
Agribusiness in Brazil
Agribusiness is one of the biggest drivers of the green and yellow economy, motivating many investors to open business in Brazil in this segment. With an increasingly high production, the agro sector accounted for the sum of BRL 1.98 trillion of goods and services in 2020, representing 27% of Brazilian GDP.
In 2021, the Brazilian agribusiness trade balance had a surplus of US$ 105.1 billion, as a result of the rise in international commodity prices.
Why do business in Brazil?
Despite some losses and obstacles in the economic sector, whether or not derived from the pandemic, Brazil is still an attractive market for investors.
The opening for new businesses is due to advantages such as:
- Abundant natural resources
- Strategic geographic location, facilitating the connection with other continents and countries.
- Expanding domestic market (5th largest population in the world).
- The country is largely composed of a consumer middle class receptive to new products and technologies.
- Diversified economy well anchored in international exchanges.
- Country with relevant foreign exchange reserves and low external debt.
- Industry and foreign trade sector present interesting investment opportunities.
In addition, the Brazilian government has instituted measures that stimulate economic growth and new investments, for example, the Brazilian government encourages foreign investment through shares in BNDES, one of the world’s major development banks.
Furthermore, some measures taken by the federal government aim to remove important barriers that limit foreign investors. This opens the door to better business opportunities in the country.
Therefore, if your company is thinking of investing in Brazil, it is worth looking for consistent information. Especially in the accounting and tax area, given that the nation has different bureaucratic processes.
Europartner has a specialized team that can guide your company through all the legal procedures for opening a business in Brazil.Contact our experts today!Author's post: Europartner Accounting