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Brazil: Market Profile

Picture: Brazil factsheet
Picture: Brazil factsheet

1. Overview

With an estimated population above 210 million, Brazil is one of the world’s most populous countries, after Mainland China, India, the United States and Indonesia. Brazil has a diversified economy with well-established large companies in the agricultural, commodities, industrial, and service sectors; and it has one of the biggest middle classes. The Brazilian economy is among the top ten largest economies in the world in terms purchasing power parity (PPP). Economic indicators seem to point towards the initial signs of a slow but constant economic recovery for Brazil. As of July 2019, accumulated inflation has remained below the projected range by the Brazilian Central Bank and largely under control. Furthermore, 2019 also marks a period of government transition and reform implementation. The new government platform is based on austerity and major reforms, such as pension reform, tax reform, and further labour market reforms. Brazil's ability to carry out much-needed fiscal reforms at all levels of government will determine whether investor confidence continues its recovery. Restoring fiscal sustainability is the most pressing economic challenge for Brazil. Brazil also needs to accelerate productivity growth and infrastructure development.

Sources: World Bank, Fitch Solutions

2. Major Economic/Political Events and Upcoming Elections

August 2016
Senators voted to remove President Dilma Rousseff from office. Michel Temer was subsequently sworn in to serve the rest of her term to January 1, 2019.

December 2016
Senate approved 20-year government austerity reforms aimed at restoring economic health to Brazil.

October 2018
Jair Bolsonaro won the presidential election over the Workers' Party candidate with 55% of the vote and was inaugurated in January 2019.

June 2019
CSN Cimentos plans to build a new cement plant in Campo Largo in the Brazilian state of Paraná (Valor Econômico). The factory would have a production capacity of three million tonnes a year and is expected to require an investment of around BRL1.5 billion (USD384.9 million).

July 2019
McCain Foods has unveiled plans to build its first frozen French fries production facility in Brazil. The facility would come up at Araxá in the state of Minas Gerais. The project would entail an investment of around USD100 million and is due to be opened in H121.

August 2019
Accelerating rates of deforestation in the Brazilian Amazon rainforest have drawn international interest, particularly amid a sharp spike in forest fires burning across the Amazon region. Satellite imagery reportedly has identified a decade-high number of fires, with thick clouds of smoke reaching São Paulo, thousands of kilometres from the forests. Many of the fires appear to have been started by agricultural interests seeking to expand grazing or farmland, efforts that Bolsonaro has long promoted.

September 2019
The Brazilian government has signed 30-year concession deals with three winning bidders for 12 airports divided into three regional blocks - Northeast, Southeast and Midwest, according to a press release from the Ministry of Infrastructure.

Sources: BBC country profile – Timeline, Fitch Solutions Political Risk Analysis

3. Major Economic Indicators

Graph: Brazil real GDP and inflation
Graph: Brazil real GDP and inflation
Graph: Brazil GDP by sector (2018)
Graph: Brazil GDP by sector (2018)
Graph: Brazil unemployment rate
Graph: Brazil unemployment rate
Graph: Brazil current account balance
Graph: Brazil current account balance

e = estimate, f = forecast
Sources: IMF, World Bank, Fitch Solutions
Date last reviewed: November 9, 2019

4. External Trade

4.1 Merchandise Trade

Graph: Brazil merchandise trade
Graph: Brazil merchandise trade

e = estimate
Note: Only the import value is an estimate
Source: WTO
Date last reviewed: November 9, 2019

Graph: Brazil major export commodities (2018)
Graph: Brazil major export commodities (2018)
Graph: Brazil major export markets (2018)
Graph: Brazil major export markets (2018)
Graph: Brazil major import commodities (2018)
Graph: Brazil major import commodities (2018)
Graph: Brazil major import markets (2018)
Graph: Brazil major import markets (2018)

Sources: Trade Map, Fitch Solutions
Date last reviewed: November 9, 2019

4.2 Trade in Services

Graph: Brazil trade in services
Grapg: Brazil trade in services

Source: WTO
Date last reviewed: November 9, 2019

5. Trade Policies

  • Brazil has been a World Trade Organization (WTO) member since January 1, 1995 and a member of the General Agreement on Tariffs and Trade (GATT) since July 30, 1948. Brazil's maximum bound tariff rates at the WTO are set much higher than the average tariff, at 35% for industrial products and 55% for agricultural products. This allows the government considerable scope to adjust tariff rates in order to protect domestic industries and manage prices, causing significant uncertainty for Brazil-based firms reliant on intermediate inputs.

  • Brazil is a member of regional customs union MERCOSUR, along with Argentina, Paraguay, Uruguay and Venezuela (although the latter is currently suspended), which facilitates trade with these countries through the removal of tariff and non-tariff barriers and creates common external tariffs for imports to all five members. There are also free trade agreements (FTAs) in place between MERCOSUR and Bolivia, Chile, India, Israel and Peru and negotiations are ongoing with other free trade blocs and customs unions, including the Caribbean Community and the European Union (EU), with the latter particularly expected to move ahead in 2019. These agreements will help to ease the process of exporting and importing and aid further diversification of trade partners, with the EU providing an important market for Brazilian exports.

  • Brazil imposes significant duties on imports, which average 7.8% (2017), the fourth-highest figure regionally out of 20 states in Central and South America. Although a common external tariff is applied by virtue of Brazil's membership of the MERCOSUR customs union, a number of significant exemptions are permitted, which allows the government to set variable (and in most cases higher) import tariffs. Agricultural products face the highest import tariffs, which can be up to 55% under WTO most-favoured nation rules, while vital commodities which are required for the basic functioning of the economy, including refined oil, gas and coal are not subject to customs duties. There are also non-tariff barriers to imports which can take the form of limited entry via specified ports, high maritime transport costs, restricted storage or special processing requirements.

  • Import transactions in Brazil are subject to regulation, authorisation and inspection by the Ministry of Finance's Federal Revenue Secretariat and the Ministry of Development, Industry and Foreign Trade's Foreign Trade Secretariat (SECEX). To obtain such authorisation, the importer must follow import procedures, which are currently conducted electronically by means of the Integrated System for International Trade (Sistema Integrado de Comércio Exterior), known as the SISCOMEX – a computerised system through which customs clearance and import licensing operations are processed. Enrolment is automatic upon the execution of the company's first import transaction. Such registration enables the company to directly operate within the SISCOMEX system. Once registered with SECEX, an importer must obtain an import licence for certain goods prior to the shipment of the goods. The import licence may be obtained through SISCOMEX. There are three types of import licences – exempt, automatic and non-automatic. Most goods are exempt from import licensing requirements. However, the importing of some products, such as spectacles and toys, currently requires import licences. The process and procedure of import licence application are very time-consuming and involve lots of paperwork. Delays in the granting of import licences have been widely experienced. Aside from duties and taxes, certain products must comply with applicable standards and certification requirements as required by the relevant national regulatory agency.

  • Apart from registration and licensing, Brazil applies import duties as well as a wide range of indirect taxes on imports. Import duties are Brazil's primary instrument for regulating imports. As a MERCOSUR member, Brazil uses the MERCOSUR Common Nomenclature classification which is consistent with the Harmonised System classification. In general, the customs value of goods is determined on a cost, insurance and freight (CIF) basis. Most imports from non-MERCOSUR members are subject to MERCOSUR's Common External Tariff (CET) which ranges from zero to 35%. Brazil adopted a July 2015 decision by the Common Market Council to extend the mechanism that allows MERCOSUR countries to have a national list of exceptions to the CET through to December 31, 2021. The new mechanism is limited to a maximum of 100 tariff lines at the eight-digit level, down from 200 tariff lines under the mechanism that expired at the end of 2015.

  • The Brazilian government applies additional federal and state-level taxes to imports, which considerably increases the costs of inputs. The complicated tax regime, which can vary widely by state, causes difficulties for businesses importing goods, particularly if they are based in multiple locations. Over and above import duties, products imported and circulated in Brazil are essentially subject to industrial product tax (IPI), merchandise circulation tax (ICMS), social integration tax (PIS) and social contribution tax (COFINS). The IPI is a federal tax levied on most domestic and imported manufactured products. The IPI rates range between 5% and 35% and the same rates apply for both domestically produced and imported goods. ICMS is a state government value-added tax applicable to both imports and domestic products. ICMS rates range from zero to 25% but are generally levied at a rate of 18%. In addition, social contributions are levied at the federal level. They include the contribution for the PIS and the COFINS. These contributions are levied at a combined rate of 9.25%. All these duties and taxes are levied ad valorem on the CIF value of the imports on an accumulative basis.

  • In November 2004, Brazil granted market economy status to mainland China for the purposes of anti-dumping (AD) and countervailing (CV) duty investigations. This means that cost and pricing structures in the Chinese market are regarded as reliable and are used for calculating dumping margins. As it now stands, Brazil applies no CV measures on imports from mainland China or Hong Kong, but several AD measures on imports from mainland China, including:

    • Vacuum flasks
    • Table fans
    • Loudspeakers
    • Garlic
    • Eyeglass frames
    • Padlocks
    • Footwear
    • Hairbrushes
    • Ballpoint pens
    • Porcelain and glass tableware
    • Tyres for cars, motorcycles, bicycles and trucks
    • Cutlery
    • Pre-sensitised offset aluminium printing plates from both Mainland China and Hong Kong

  • Regarding exchange control, the Brazilian Central Bank does not impose a limit on the amount of currency bought by Brazilian importers. The regulation establishes that any individual or company can buy or sell foreign currency or transfer national currency to any country, with no amount limit, for any legal business transaction, in accordance with Brazilian tax legislation.

  • On October 17, 2014, the Brazilian government ratified the United Nations Convention on Contracts for the International Sale of Goods which is an international treaty promoting the harmonisation of rights and obligations by the parties in contracts for international sales made by companies located in different countries. Decree 8327/2014 adopts this agreement with the aim of providing greater legal certainty and predictability on international transactions, which may result in a reduction of cumbersome litigation and associated costs for companies that are involved in international trade.

  • Brazil’s Minister of Economy, Puelo Guedes, stated in May 2019 that the country plans to lower import tariffs by 10 percentage points throughout the current Bolsonaro presidency (a four-year term). The reduction of tariffs is set to follow a schedule of 1% in 2019, 2% in 2020, 3% in 2021 and 4% in 2022. The cuts to the country’s tariffs will need to be approved by the Brazilian congress before coming into effect. Businesses in need of imported materials will benefit from the lowering of tariffs, as will wholesalers and general traders relying on imported goods. The gradual relaxation of tariffs will also expose local businesses to new competition. Goods shipped in bulk, such as grains and cereals, may face increased price pressures from external suppliers.

Sources: WTO – Trade Policy Review, Fitch Solutions

6. Trade Agreement

6.1 Trade Updates

In May 2018, Singapore and Brazil started initial discussions on a free trade agreement (FTA) between Singapore and MERCOSUR. Singapore and Brazil signed a comprehensive bilateral avoidance of double taxation agreement as part of the ongoing effort to further facilitate bilateral trade and investment cooperation.

After nearly two decades of negotiations, MERCOSUR and the EU have agreed on the establishment of a FTA between the two bodies. The agreement would eliminate import tariffs for several Brazilian farm products – including orange juice, instant coffee and fruit – and give greater access through quotas for meat, sugar and ethanol.

6.2 Multinational Trade Agreements


  1. MERCOSUR: A Regional Customs Union with Brazil, Argentina, Paraguay, Uruguay and Venezuela (the latter is currently suspended). The MERCOSUR agreement facilitates trade with these neighbouring countries through the removal of tariff and non-tariff barriers. In particular, Argentina and Uruguay are key trade partners of Brazil. The customs union is still in the process of being fully implemented, however, with some significant exceptions to the CET in individual countries and double-application of import tariffs on goods imported to one member and subsequently moved into another. Bolivia is in the process of becoming a full member. MERCOSUR encompasses approximately 75% of South America's GDP and is one of the world's largest economic blocs.

  2. MERCOSUR associate members: The FTA between MERCOSUR and associate members, such as Bolivia, Chile and Peru, also facilitates regional trade and is especially beneficial for trade with Chile, one of Brazil's top trade partners. However, MERCOSUR's associate members – Chile, Colombia, Ecuador, Guyana, Peru and Suriname – do not enjoy full voting rights or complete access to markets.

  3. MERCOSUR-India Preferential Trade Agreement (PTA): The PTA between MERCOSUR and India came into force on June 1, 2009. India is an important trade partner for Brazil, accounting for approximately 2% of Brazil's imports and purchasing 1.6% of Brazil's exports in 2018. India is expected to grow faster than top trade partner China over the medium term, creating even greater opportunities for Brazilian exporters.

Awaiting Ratification

MERCOSUR-EU: MERCOSUR and the EU are negotiating a trade pact which aims to provide a boost to trade flows with important export markets in the EU and help to stimulate new trade and investment opportunities. Talks between the two blocs are moving forward and agreement over remaining issues, including Brazil's maritime transport policy, is expected in 2019, which will allow the deal to be finalised. The deal will be particularly beneficial for automotive manufacturers. Both parties agreed to a draft of the agreement in a meeting held at the end of June 2019. The agreement still needs to be ratified by EU Parliament and the EU member states for it to be enforced.

Under Negotiation

Brazil-Mexico: Brazil and Mexico began talks on a FTA, with both parties seeking to diversify their trading partners amid trade tensions. Brazil seeks to increase its agricultural exports to Mexico, with Mexico set to benefit from increased access to the Brazilian automotive market.

Sources: WTO Regional Trade Agreements database, Fitch Solutions

7. Investment Policy

7.1 Foreign Direct Investment

Graph: Brazil FDI stock
Graph: Brazil FDI stock
Graph: Brazil FDI flow
Graph: Brazil FDI flow

Source: UNCTAD
Date last reviewed: November 9, 2019

7.2 Foreign Direct Investment Policy

  1. The Brazil trade and investment promotion agency Apex-Brasil works to attract FDI and promote Brazilian products abroad. To develop the strategic priority sectors such as automotive, renewable energy and environmental solutions, life sciences, oil and gas and infrastructure, the Brazilian government offers numerous tax incentives at the municipal, state and federal level. Most of them are granted upon the submission of a project indicating the minimum invested amount, addressing job creation and other relevant matters.

  2. A major aim of incentive programmes is to entice investment in Brazil's underdeveloped regions, particularly in the northern and central areas of the country. Two development agencies have been created to serve the north-east and Amazon regions (SUDENE and SUDAM respectively), with a licence to offer benefits for new investment. These include a 75% income tax reduction, valid for 10 years, for investment in priority sectors, and value-added tax (VAT) exemptions offered on a case-by-case basis. A number of free trade zones (FTZs) have also been created in these regions.

  3. In general, the government has a favourable attitude towards foreign investment and free trade, and foreign and local investors are treated equally under national legislation in most circumstances. All foreign investments must be registered with the Central Bank of Brazil in order to guarantee the payments of dividends and interest, and the repatriation of capital. The government has introduced a number of incentives in order to encourage FDI; these vary according to the region and the industry in question. One of the major advantages for investors is the availability of credit from the National Bank of Economic and Social Development (BNDES), which is one of the largest development banks in the world and offers attractive financing options such as low-cost loans to both domestic and foreign investors alike. There are also a wide range of sector-specific incentives which offer tax exemptions, reductions and credits for the automotive, IT and telecommunications industries, among others.

  4. Brazil is a highly diversified economy and one of the largest consumer markets globally. To foster the competitiveness of Brazilian companies by promoting the internationalisation of their businesses and the attraction of FDI, Brazil focuses on investment that will contribute to the development of technological innovation and new business models, strengthen industrial supply chains, have a direct impact on national job creation, and improve the volume and diversity of Brazilian exports.

  5. Tax reforms have been centre stage in Brazil, as the government looks to reform the Brazilian tax system, including direct and indirect taxes in all federative levels. On the direct tax front, a reduction of the corporate income tax (CIT) is expected, while a withholding tax (WHT) on dividends may be created. For indirect taxes, the various taxes and ancillary obligations that take from the companies nearly 2,000 hours to be prepared and paid should be replaced for one streamlined federal value-added tax (VAT) in a single federal system, a dual federal/state system, or a three-layered tax that also applies at the local level, as neither states nor cities want to yield the power to divvy up revenue to the federal government. Special work has also been done to frame Brazil in the international standards of transfer pricing to reinforce the Brazilian plea to enter in the Organisation for Economic Co-operation and Development (OECD).

  6. Brazil has a history of interventionism in foreign investment and international trade that makes for an unpredictable regulatory regime, meaning that investing in Brazil may be profitable, but it is also subject to significant policy risk, onerous red tape and high levels of taxation. For example, with a strong currency choking off growth and exports in 2011-2012, the government imposed several restrictions on foreign investment in Brazil in an effort to slow capital inflows. This included higher taxes on foreign investment in local fixed income and other financial instruments, and restrictions on local deposit accounts, as well as higher tariffs on imports.

  7. Congressional approval is required for all large-scale land purchases, and foreign ownership of agricultural land is restricted to 25% of the land area of a given municipal district. Foreign nationals from a single country may own no more than 10% of agricultural land in a single district. Reforms under consideration may lift these restrictions as Brazil attempts to expand its agribusiness sector and open it up to foreign investors, but a bill to reverse the ban was delayed throughout 2017 and still requires congressional approval.

  8. There are few foreign ownership restrictions remaining, especially since the cap on civil aviation was lifted in April 2017, allowing 100% foreign ownership of airlines.

  9. The only major restrictions now in place are on newspaper and television broadcasting, in which foreign ownership is capped at 30%. This will not pose a major barrier to most foreign investors seeking to enter the Brazilian market.

  10. The state still plays an active role in several major industries. For instance, national oil company Petrobras retains a dominant presence in the hydrocarbons industry, hindering foreign participation in the sector. Reforms enacted in October 2016 will allow greater foreign involvement as the requirement for the company to hold a 30% stake in an exploration of pre-salt oil fields has been removed although it still has a 30-day first-refusal period on any new project.

Sources: WTO – Trade Policy Review, Fitch Solutions

7.3 Free Trade Zones and Investment Incentives

Free Trade Zone/Incentive ProgrammeMain Incentives Available
Zona Franca de ManausBrazil’s oldest trade zone, the Manaus Free Trade Zone (FTZ), is among the largest and most extensively developed FTZs in Latin America.

- 75% income tax reduction
- Lower import duties
- Exemption from the tax on industrial goods
FTZs in Tabatinga, Boa Vista, Macapa, Santana, and Guajara-MirimSuspended import and industrial goods taxes

Sources: Apex-Brasil, Fitch Solutions

8. Taxation – 2019

  • Value Added Tax: Between 10% and 15%
  • Corporate Income Tax: 15%-34%

Source: Secretaria da Receita Federal do Brasil

8.1 Important Updates to Taxation Information

  • On November 22, 2018, the government published Federal Decree 9,580. This revokes the previous Income Tax Regulation (RIR/99). The Income Tax Regulation (RIR/18) is meant to be a single piece of legislation compiling all the relevant income tax legislation for both individual and companies into a single document. In principle, the Income Tax Regulation does not create any new provisions; however, the total number of articles has increased from RIR/99, which could result in further analysis by the courts going forward.

  • CIT is charged at the same flat rate for both resident and non-resident entities (15%), which on the surface does not appear particularly onerous. However, the total profit tax rate is considerably higher for most businesses, as it also includes a mandatory social security tax of 9% and a 10% surcharge on taxable income above the BRL240,000.0 threshold. Consequently, the total CIT burden amounts to 34% of profits, the fourth-highest figure regionally. Profits of branches of foreign corporations are taxable at the normal rates applicable to Brazilian legal entities.

8.2 Business Taxes

Type of TaxTax Rate and Base
CIT15%-34%% (the latter comprised of CIT at the rate of 15% and social contributions at the rate of 9% and surcharge of 10%).
Corporate Taxpayers with Annual Taxable Income in Excess of BRL240,00010% surchage on the annual taxable income in addition to CIT (as highlighted above).
Social Contribution on Net Income (CSLL)- 9%
- Exceptions: financial institutions, private insurance and certain other prescribed entities – taxed at a rate of 20%
- CSLL is not deductible for CIT purposes
- The tax base is determined as the company's profit before income tax
Capital Gains Tax- 15% on capital gains between BRL0 and BRL5 million
- 17.5% on capital gains between BRL5 million and BRL10 million
- 20% on capital gains between BRL10 million and BRL30 million
- 22.5% on capital gains above BRL30 million
- 25% on capital gains paid to non-residents in low-tax jurisdictions
Withholding Tax- 15% on interest (25% on interest paid to non-residents in low-tax jurisdictions).

- 15% on royalties (25% on royalties paid to non-residents in low-tax jurisdictions).
Contribution for intervention in the economic domain (CIDE)10% on royalties and technical and administrative service payments.
Payroll Tax8%-8.8% on gross salaries
Severance Indemnity Fund for Employees8% on gross salaries
Federal Excise TaxRates are defined by the product’s tariff code (normally around 5% to 15%, but in certain cases ranging to over 300%) and essential products will attract lower tax rates.
VAT on Sales and Certain Services (ICMS)VAT is collected in the state of São Paulo at an 18% rate. Certain products can attract a higher rate (usually 25%) or a lower rate (in most cases, 12%).
ICMS due on Interstate Sales of Goods to Non-ICMS TaxpayersICMS is collected by most states at internal rates ranging from 17% to 19% (some products attract a lower or higher rate). Special rates apply to interstate sales, which will be equivalent to 4%, 7% or 12%, depending on the location of the supplier and client, as well as whether the goods are imported, have a certain content of imported inputs or are domestically sourced.
Interstate ICMS- 12% on sales and services between businesses in the South and Southeast of Brazil.

- 12% on sales and services from any business in the North, Northeast and Midwestern province to anywhere in Brazil.

- 7% on sales and services between businesses located in the South and Southeast of the country with businesses in the provinces situated in the North, Northeast, and Midwest.
Municipal Service Tax2-5% on income from services
A Municipal Property Tax (IPTU) levied annually based on the fair market value of property in urban areasIn the municipality of São Paulo, the basic IPTU rate is 1% for residential properties and 1.5% for commercial properties.
Import Tax (II)/Customs DutyThe rates vary according to the product’s tariff code based on Mercosur Harmonised System (NCM/SH), usually ranging from 10% to 20% (there are some exceptions, but the maximum consolidated rate is 35%).
Social Security Financing Tax (COFINS)7.6% on gross income
Social Integration Programme Tax (PIS)1.65% on gross income
PIS and COFINS on imports- 11.75% combined rate on imported goods (for the import of certain goods listed in the legislation, an additional 1% for COFINS is also applicable).

- 9.25% combined rate on imported services

Source: Secretaria da Receita Federal do Brasil
Date last reviewed: November 9, 2019

9. Foreign Worker Requirements

9.1 Foreign Worker Permits

Attracting foreign workers remains somewhat difficult owing to bureaucratic obligations which must be met in order to obtain work permits and residence visas, as well as quotas imposed on the employment of foreigners. Employers in Brazil must apply for authorisation to recruit foreign workers from the Ministry of Labour, with both temporary (service contract) and permanent visas available. The application must include a copy of the foreign worker's passport, proof of address, curriculum vitae and supporting qualification documents. Once the application is granted, the worker is only approved for employment with the specified company. Once the contract ends or if the worker changes jobs, they are required to submit a new work permit application. Residence permits for foreign workers are subject to certain conditions, including the economic activity in which they may be engaged, the type of business they may establish and the region in which they may live.

9.2 Foreign Worker Quotas

For companies that employ three or more foreign workers, not more than a third of their employees can be foreigners. In addition, they must not be paid more than a third of the total payroll. Foreign workers with technical skills which are lacking in the Brazilian labour market are exempt from this quota. Nonetheless, this adds to the difficulties faced by businesses needing to employ highly skilled labour as these workers often come from abroad.

Sources: Government sources, Fitch Solutions

10. Risks

10.1 Sovereign Credit Ratings

Rating (Outlook)Rating Date
Ba2 (Stable)
Standard & Poor'sBB- (Stable)
Fitch Ratings
BB- (Stable)14/11/2019

Sources: Moody's, Standard & Poor's, Fitch Ratings

10.2 Competitiveness and Efficiency Indicators

World Ranking
Ease of Doing Business Index
Ease of Paying Taxes Index
Logistics Performance Index
Corruption Perception Index
IMD World Competitiveness60/6359/63N/A

Sources: World Bank, IMD, Transparency International

10.3 Fitch Solutions Risk Indices

World Ranking
Economic Risk Index RankN/A59/20156/201
Short-Term Economic Risk Score
Long-Term Economic Risk Score62.262.863.2
Political Risk Index RankN/A78/20179/201
Short-Term Political Risk Score
Long-Term Political Risk Score68.968.968.9
Operational Risk Index RankN/A110/20196/201
Operational Risk Score48.546.850.1

Source: Fitch Solutions
Date last reviewed: November 9, 2019

10.4 Fitch Solutions Risk Summary

Growth is seen gaining steam over 2020, on the back of recovering confidence and accommodative monetary policy. Inflation has decelerated, interest rates are falling and the currency has stabilised in recent months, supporting an improvement in Brazil's economic risk profile. In addition, household spending should receive a boost from a government measure to allow workers to tap into an unemployment benefit fund. Risks to the outlook remain, however, particularly from subdued external demand and the slow pace of reform momentum.

Brazil remains a key emerging market for investors. The country offers considerable opportunities for businesses in a broad range of sectors due to its attractive natural resources, large consumer and labour markets and its strategic location. However, economic growth potential continues to be constrained by a difficult operating environment, characterised by complex regulatory and legal systems, high taxes, an inadequate logistics network, still-weak investor sentiment and exorbitant labour costs. In addition, investor sentiment is dented by the legal risks and the high level of security threats posed by criminal gangs that remain prevalent in many areas.

Source: Fitch Solutions
Data last reviewed: November 29, 2019

10.5 Fitch Solutions Political and Economic Risk Indices

Graph: Brazil short term political risk index
Graph: Brazil short term political risk index
Graph: Brazil long term political risk index
Graph: Brazil long term political risk index
Graph: Brazil short term economic risk index
Graph: Brazil short term economic risk index
Graph: Brazil long term economic risk index
Graph: Brazil long term economic risk index

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Political and Economic Risk Indices
Date last reviewed: November 9, 2019

10.6 Fitch Solutions Operational Risk Index

Operational RiskLabour Market RiskTrade and Investment RiskLogistics RiskCrime and Security Risk
Brazil Score50.146.748.453.851.5
Central and South America Average46.049.545.246.243.0
Central and South America Position (out of 20)7
Latin America Average48.450.748.944.649.3
Latin America Position (out of 42)19
Global Average49.750.349.8
Global Position (out of 201)96122

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Operational Risk Index

Graph: Brazil vs global and regional averages
Graph: Brazil vs global and regional averages
Operational Risk Index
Labour Market Risk Index
Trade and Investment Risk IndexLogistics Risk IndexCrime and Security Risk Index
Costa Rica56.353.660.352.0
El Salvador42.6
Regional Averages46.049.545.246.243.0
Emerging Markets Averages46.948.547.445.845.9
Global Markets Averages49.750.349.8

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Operational Risk Index
Date last reviewed: November 9, 2019

11. Hong Kong Connection

11.1 Hong Kong’s Trade with Brazil

Graph: Major export commodities to Brazil (2018)
Graph: Major export commodities to Brazil (2018)
Graph: Major import commodities from Brazil (2018)
Graph: Major import commodities from Brazil (2018)

Note: Graph shows the main Hong Kong imports from/exports to Brazil (by consignment)
Date last reviewed: November 9, 2019

Graph: Merchandise exports to Brazil
Graph: Merchandise exports to Brazil
Graph: Merchandise imports from Brazil
Graph: Merchandise imports from Brazil
Date last reviewed: August 19, 2019

Note: Graph shows the main Hong Kong imports from/exports to Brazil (by consignment)
Exchange Rate HK$/US$, average
7.75 (2014)
7.75 (2015)
7.76 (2016)
7.79 (2017)
7.83 (2018)
Sources: Hong Kong Census and Statistics Department, Fitch Solutions
Date last reviewed: November 9, 2019

Growth rate (%)
Number of Brazilian residents visiting Hong Kong49,097-1.9
Number of Latin American residents visiting Hong Kong190,316-2.8

Source: Hong Kong Tourism Board
Date last reviewed: November 9, 2019

11.2 Commercial Presence in Hong Kong

Growth rate (%)
Number of Brazilian companies in Hong KongN/A
- Regional headquarters
- Regional offices
- Local offices

Source: Hong Kong Census and Statistics Department

Treaties and agreements between Hong Kong and Brazil

  • In March 2018, Invest Hong Kong (Invest HK) and Apex-Brazil signed a memorandum of understanding (MoU) in São Paulo aimed at enhancing mutual cooperation in generating more direct investment between the two regions. The MoU was signed by the Invest HK Director-General of Investment Promotion Stephen Phillips and President of Apex-Brasil, Government of Brazil Roberto Jaguaribe. The MoU provides a framework to enhance the close relationship of Hong Kong and Brazil by further promoting both inward and outward investment in the two jurisdictions.

  • An avoidance of double taxation agreement between Brazil and Mainland China came into force on January 6, 1993.

Source: China State Taxation Administration

11.4 Chamber of Commerce (or Related Organisations) in Hong Kong

Consulate General of Brazil in Hong Kong
Address: Rooms 2014-2021, 20/F, Sun Hung Kai Centre, 30 Harbour Road, Wan Chai, Hong Kong
Email: consular.hk@itamaraty.gov.br
Tel: (852) 2525 7002 / 2525 7004
Fax: (852) 2877 2813

Source: Consulate General of Brazil in Hong Kong

11.5 Visa Requirements for Hong Kong Residents

A tourist visa is not required for HKSAR passport holders for a stay up to 90 days. All travelers will need a passport valid for at least 90 days following the departure date from Brazil.

Source: Consulate General of Brazil in Hong Kong
Date last reviewed: November 9, 2019

Content provided by Picture: Fitch Solutions – BMI Research