Economy

Why You Need to Consider Brazil

The major opportunities for SMEs to export goods and services to South America's largest economy—and the potential pitfalls

Written by Bronwen Jervis

In less than a year, Brazil will play host to the first of two prestigious global events: the FIFA World Cup followed by the 2016 summer Olympics. The stage is set for Brazil’s debut as a global economic powerhouse. With the world soon to be on its doorstep, coupled with a rapidly growing middle class, Canadian companies would be wise to turn their attention to this expanding market.

As the largest economy in South America (and the sixth largest in the world), the Canadian government has identified Brazil as a priority trading partner. Last year, Canadian companies exported $2.8 billion worth of goods to Brazil, which boasts a population of 200 million people, almost half of whom make up the middle class.

All of this is good news for SMEs that have goods and services to export: financial stability breeds an appetite for new products. In addition, the country is suffering from a massive infrastructure deficit—less than 10% of the roads in Brazil are paved—which the government hopes to rectify, or at least relieve, through massive investment—$75 billion has been earmarked to accommodate the crowds at sporting events, including transit in host cities. (The Olympics will be held in Rio de Janeiro; World Cup games will be spread across 12 cities.)

As Brazil continues to move into economic overdrive, the country’s dominant needs are for telecommunications, infrastructure, and transit—lots of machinery and equipment. But truly, numerous export opportunities exist for Canadian SMEs. As Lissa Bjerkelund, EDC’s senior chief representative for South America points out, “Brazil is looking to import a broad range of goods and services—even luxury dog food. It’s a much shorter list of where the opportunities aren’t.”

Read: Why Brazil is the Most Promising BRIC Market

Beware, however, of Brazil’s protectionist policies.

Brazil has notably high tariffs—goods are likely to see a markup of up to 50%. So entrepreneurs will need to be very strategic about what to sell. “Don’t compete with what’s already there,” Bjerkelund advises. “Unless you are globally unique, you have to strip out your product’s value add and export that. Partner with a Brazilian company and help them grow too. It’s a win-win.”

While recent protests make some exporters nervous, both the EDC and Canada’s ambassador are confident in the country’s overall stability.

Bjerkelund is bullish on the matter: “It’s a market of 200 million people with generally high education levels. It’s close. There is money being spent on infrastructure projects. That means that projects are moving forward. And when projects are moving forward, they need supplies.”

Read: Export Opportunities in Brazil

Originally appeared on PROFITguide.com