The Brazilian economy is expected to recover faster than expected, and sectoral business innovations stand in contrast to the country’s recent negative references in international press. Investments and technological change in traditional industries such as the agricultural and energy sectors, as well as favorable growth conditions for startups in new markets move the Latin American country towards a more positive spotlight.

It is no secret that Brazil’s political and economical development had the world watching the country’s ups and downs as if in a rollercoaster ride. After the Brazilians’ peak of optimism during its selection as host of the World Cup and the Olympic Games (in 2014 and 2016 respectively), political turmoil and corruption scandals have hurt the country’s perception as a rapidly emerging economy. In the latest episode, accusations of environmental damage and mismanagement of the Covid-19 sanitary crisis have contributed to its harmed reputation. Despite these latest developments, the economy had recovered strongly by the end of 2020, according to an OECD report of May 2021. The OECD projects a GDP growth of 3,7% in 2021 and 2,5% in 2022, while stressing the need for structural reforms to create fiscal space to spur investments, and enhance the business climate. At the beginning of July this prediction turned out to be too pessimistic and Brazil’s growth rate is expected to reach 4,9%. This momentum would carry the country to its highest growth rate since 2010 (7,5%). 

Brazil is only slightly smaller than the USA, however 206 times larger than Switzerland, and has over 24 times more inhabitants than the small central European state. It’s almost the size of a continent, and with more than 210 millions relatively young inhabitants and newly improved infrastructures, Brazil offers great expansion opportunities for Swiss startups and incentives for international investments. The world’s 12th largest economy’s diverse industries is expected to achieve a GDP of slightly more than USD 1,6 trillion by December 2021, a clear recovery from historical 2020 (USD 1,44 trillion), but still beneath the 2019 level of USD 1,84 trillion. In the end, Brazil’s size and diversity continue to make it a compelling case for trade and investment partners, and international collaborations.

Brazil also has the largest startup ecosystem in Latin America, and VC investments as of May 2021 have already amounted to USD 3,2 billion. This number already represents 90% of all investments made in the year 2020 and already outpaced the total VC investments of 2019, which has been USD 2.7 billion. The current year is on a good track to beat all former records with a significant lead. So have shown the most recent numbers from June 2021, the month with all-time most Series C and Series A rounds. Only in June, USD 4 billion have been raised over 80 rounds, representing 2/3 of all this year’s invested money so far. The hotspot of this money flow is regionally restricted in Brazil, due to high economic gaps between the states. The major innovation hubs are in the South-East (São Paulo, Rio de Janeiro, Belo Horizonte) and the South (Florianopolis, Curitiba) regions.

In fact, São Paulo has just been named by the 2021 Global Fintech Rankings the city with the fourth largest fintech market in the world. The entire ICT sector is striving remarkably in Brazil and young companies working with innovations in areas such as HealthTech, HRTech, RetailTech and EdTech experienced accelerated growth caused by the pandemic and its implications. Brazil’s health market counts a total of 747 health startups, according to the most recent report from February 2021, and more than $90 million have been invested in start-ups in only the first two months of 2021, which is already 85% of all investments in 2020. RetailTechs are also booming, with around 748 startups in the sector, over four times as many as two years ago, and tripled investments in the first months of 2021, compared to the previous year. The retail industry in Brazil was always strong, as Brazilians like consumer goods a lot. However, the arrival of the pandemic has raised the retail industry on a new level. It has brought the idea of online shopping closer to the Brazilian households and the postage infrastructure has been improving already since 2019, leading to an increase of e-commerce by 75% in 2020.

However, Brazil can be especially proud of itself regarding the recent developments in its AgTech and FinTech sectors. Benefitting from a connected population and low costs for users, fintechs have been thriving. Nubank, a digital bank and credit card operator, became Brazil’s third unicorn in 2018.With 40 millions customers and a value of USD 30 billion it is the world’s third largest fintech company. In 2021 the digital bank continued to astonish the world. It has received USD 500 million from Warren Buffet’s investment firm Berkshire Hathaway as its value has already surpassed Brazil’s national bank “Banco do Brasil”. Together with other major digital banks, such as C6, this makes Brazil, and especially São Paulo, a region to be on the lookout for. And speaking about the digitization of payments, the Brazilian central bank’s instant payment system named PIX, launched in November 2020, already accounts for 30% of all payment operations in the country. Showing the Brazilians’ willingness to quickly adapt innovative technologies, PIX also won the Fintech & Regtech Global Awards 2021 in the Payment Innovation Category.

Agribusiness, a sector that accounts for a big share of GDP, is also expected to grow further with digitalization of the industry and therefore opening opportunities for Swiss solutions. Agricultural commodities account for a large part of the exports to its main partners China, the US, Argentina, and the European Union. Its local AgTech sector is experiencing a record year in investments, having surpassed USD 160 million.

Thanks to favorable meteorological and geological conditions and the size of the country, opportunities in the energy sector are also growing. The Brazilian energy sector has the characteristic of being predominantly renewable, with the water matrix being the main source. The Brazilian energy matrix has varied generation sources, but is still very dependent on hydroelectric power plants. The demand for electricity is mainly driven by domestic consumption and by the manufacturing sector. Lately the country is experiencing a shift towards solar energy, which could lead to a solar power boom. Asset management firm Brookfield has been pumping billions into the solar energy sector in Brazil, betting on its high potential.

Supporting this trend, Brazilian startups also started tapping into the solar business and experts say that Brazil is one of the world’s best countries for distributed solar energy distribution.

It is worth bearing in mind that opportunities never come without challenges. Bureaucracy and the difficulty to find clear information about regulatory aspects can be time consuming for those navigating this market for the first time. The language may represent an additional barrier and the cultural aspect may differ sometimes: in Brazil, relationships come first and networking is important to get things done.