The Interpreneur survey: Understanding mid-market business trends in Brazil

We recently reported on the business trends in Brazil, highlighting economic activity grew by 2.45% in 2023, exceeding early predictions of sluggish progress due to elevated interest rates. Initially, private economists anticipated growth of under 1% for the year. However, the Brazilian central bank projects a 2.9% expansion.

To understand how this landscape affects mid-market businesses, we recently surveyed 1,400 C-suite business leaders in 14 countries, in private sector companies earning up to £300m a year that have expanded internationally. We call these CEOs ‘interpreneurs’.

We have analysed the Brazilian data to better understand what drives Brazilian business owners when expanding abroad.

The report “The Interpreneur survey by Kreston Global” brings very rich insights into the vision of the leaders who boost the Brazilian economic environment and strengthen the country’s competitiveness in the international context through the expansion of their businesses beyond national borders. Among the highlights, it is worth mentioning the fact that the country’s economic growth – above initial market expectations – is reflected, for example, in the optimism of executives and interpreneurs regarding the international expansion of their companies over the next 12 months.

Tatiana Andrade
Partner,
KBW Auditores, Brazil

Business trends in Brazil: Do business leaders believe more businesses will expand overseas in the next 12 months?

Overseas business expansion is widely expected to increase by Brazilian business leaders

At 92%, Brazil is one of the most optimistic countries in the world and believes that global expansion is on the rise. Only 3% think there will be a decrease.

Which countries do Brazilian mid-market businesses prefer to expand into?

North America is Brazil’s number-one choice for global business expansion

It is not surprising that 66% of respondents name North America as their number one location for business expansion, and they are not alone. Globally, almost half the respondents agreed the US was in their sights for expansion.

Only China and Mexico showed a stronger preference to establishing a business in the US than Brazil.

South America is on the radar with a score of 46%, however, Brazilian companies aren’t afraid of truly going global, and strong trading relations with the EU is reflected in the fact 50% are considering expanding into Western Europe.

According to the survey, no less than 92% of leaders expect to grow internationally in the period, with North America being the main destination targeted in this expansion movement. For 64% of executives, the main benefit of international growth is the increase in profitability, which even justifies overcoming challenges, such as the search for the best business partners and the volatility common to the Brazilian market (two of the points most cited by interpreneurs).

Tatiana Andrade
Partner,
KBW Auditores, Brazil

What makes a country more attractive to Brazilian businesses looking to expand globally?

Economic growth prospects primary attractor

When considering what makes a country more attractive to expand into, Brazil’s respondents valued tech infrastructure and digitalisation the most out of all countries and similar culture and language as the least important, which was also the lowest of all the countries.

70% of respondents said their business was primarily motivated to expand internationally by market growth opportunities. This was the highest score by country, with Brazilian business leaders the least interested in supply chain advantages out of all countries, suggesting a high level of confidence in existing resources in Brazil. However, although it was a lower score than market growth, respondents also had the strongest reaction of all countries to accessing digital technologies and innovation, making the argument that the Brazilian market could be missing these resources.

What motivates Brazilian interpreneurs to expand internationally?

It’s clear that despite volatile markets, Brazilian businesses can still see more profits expanding internationally, with 64% of respondents said one of the biggest benefits their business has found following international expansion was increased profitability.

What are the biggest international expansion challenges in 2024 according to Brazilian interpreneurs?

Finding local partners a challenge to doing business internationally say Brazilian CEOs

Half (50%) said that one of the biggest international expansion challenges faced by businesses during was finding the right local partners (e.g. building reliable and trustworthy relationships), highlighting an opportunity for US networks to make distinct services supporting Brazilian businesses to expand into the region.

Risk: What do Brazil CEOs think are the biggest risks to global business expansion in 2024?

How much of a risk do the following pose to your business’s international expansion or planned international expansion?

Market volatility still a concern for Brazilian businesses

When considering the biggest risks to global business expansion, 38% of Brazilian respondents felt financial market and foreign exchange volatility pose a disruptive or significant risk to their business’s international expansion or planned expansion.

37% felt that escalating geopolitical tensions and instability pose a disruptive or significant risk and an additional 36% felt this risk from cybersecurity threats and data breaches.

Brazilian business leaders are the least concerned with talent shortages and skilled labour gaps, despite suggestions in recent years that Brazil is facing critical labour shortages in key sectors and services such as health, and ICT, as outlined by the 2018 OECD Skills for Jobs database.

Private Equity vs Venture Capital: What is the preferred funding source for international expansion named by Brazilian businesses?

Private investors offering Brazilian businesses a quicker and more flexible way to fund international expansion

Like other fast-growing, new economies we surveyed, the preferred funding source for international expansion named by Brazilian businesses was private investors, which offers young and expanding businesses a flexible way of growing quickly.

Tax: Does the C-suite understand global tax rules?

Brazilian business leaders highly confident about global taxation rules

At 97% confidence in understanding global tax rules, but with a perceived significant challenge in finding the right partners to support global expansion, Brazilian business owners should be developing the relationships they need to help them navigate what is a complex landscape for international businesses.

The importance of ESG for Brazilian investors and interpreneurs

Brazil in the middle of the field placing ESG as a priority

The importance of ESG for Brazilian investors and interpreneurs was somewhere in the middle of the countries surveyed. Only just over a third of Brazilian businesses consider the impact of ESG on their business expansion, almost half that of fellow BRICS member China, which had 64% of respondents prioritising ESG, but more than twice that of Spain, at only 14%. Perhaps as Brazil’s emerging ESG legislation and EU partner sanctions increase to meet net zero targets in 2050, this will continue to improve.

Brazil business trends: The benefits of AI in international business operations

Brazil businesses confident about the use of AI in global operations

The Brazilian market feels that the benefits of AI in international business operations are key element of global expansion. No respondents from the US, Brazil, China, Mexico or Nigeria said they felt unprepared and Brazil was in the top 5 most confident countries.

It is worth highlighting the fact that almost 60% of executives stated that they were prepared to use artificial intelligence during their expansion processes – which shows the country’s greater openness to digital transformation process. As a warning, it is clear there is a need to advance the prioritisation of ESG policies, a step that can be decisive for leaders seeking to embark on a successful journey in international markets.

Tatiana Andrade
Partner,
KBW Auditores, Brazil