Thought Leadership

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Understanding the Brazilian business environment

Brazil represents Latin America's largest economy, with a GDP of over $2.1 trillion and a consumer base exceeding 210 million people. The country boasts strong sectors in infrastructure, energy, agribusiness, and technology, making it an attractive destination for foreign investment.

However, doing business in Brazil requires significant adaptability. Alexandre Bragança, Transaction Services Partner at MCS Markup, emphasized that successful investors must balance formal and informal procedures while navigating highly bureaucratic governmental processes and a complex tax environment. The country's entrepreneurial spirit is remarkable, with 60% of employment generated by small and medium-sized companies, yet this comes alongside challenges that demand experienced local professionals.

Cultural factors play a crucial role in Brazilian business practices. While English is widely used in multinational companies, Portuguese remains critical for local engagement, with only 5% of Brazilians speaking English fluently. In-person meetings are prioritized to demonstrate long-term commitment, and strategic relationships with public agencies and industry associations are essential for market navigation.

Expanding sectors and infrastructure opportunities

Marcelo Salles, Corporate Finance Partner at MCS Markup, highlighted infrastructure as a particularly attractive sector for Asian investors. The federal government's Novo PAC program has allocated approximately $350 billion for infrastructure investments, combining public and private funding with significant opportunities for foreign participation.

Priority areas include renewable energy, electricity transmission, sanitation, and digital infrastructure. Brazil faces a critical gap between energy production from hydro, wind, and solar plants and the transmission capacity to urban areas, creating urgent demand for transmission lines. The country maintains one of the world's largest privatization programs, continuing regardless of which political party holds power. Accountancy firms are well positioned to support due diligence, valuations, feasibility studies, and investment structuring for cross-border transactions.

Other sectors showing accelerated expansion include agribusiness, fintech, and logistics, all driven by digitalization and global demand for sustainable solutions. Despite current high interest rates at 15%, inflation has been brought under control, with the central bank signalling potential cuts in 2026 as economic stability consolidates.

Accounting standards and ESG developments

Brazil has formally converged its accounting standards with IFRS since 2007 through a national standard-setter ((Comitê de Pronunciamentos Contábeis or CPC) that translates and aligns IFRS principles for local application. This convergence improved the comparison of financial information with other countries and enhanced access for international investors.

Daniele Scrivani, audit partner at MCS Markup, explained that while Brazil has fully adopted IFRS through the CPC framework, some practical challenges remain. Standards change frequently, and local update processes can be slower. Additionally, differences exist between IFRS accounting and tax treatment, particularly for smaller companies.

On the ESG front, Brazil has made significant progress in the past two years. The country created the CBPS (Comitê Brasileiro de Pronunciamentos de Sustentabilidade) to coordinate convergence with international standards from the ISSB. New technical standards NBC TDS1 and TDS2 are currently under public consultation, with voluntary adoption in 2025 and mandatory adoption planned for listed and large companies beginning in 2026-2027.

Navigating Brazil's complex tax system

Cristiane Pacheco, Tax Partner at MCS Markup, addressed what Brazil is unfortunately known for worldwide: a highly complex tax system. Companies face different taxes at federal, state, and municipal levels, with more than 5,000 municipalities each potentially having different legislation and tax rates.

Brazilian companies spend an average of 1,500 hours annually on tax and accounting reporting - triple the global average of 500 hours. This complexity was the primary driver behind Brazil's comprehensive tax reform, which represents the most significant change to the system in 30 years.

The 2026–2033 tax reform: a historic transformation

The reform will replace current consumption taxes (IPI, PIS, COFINS, ICMS, and ISS) with three new taxes:

• CBS – Federal VAT-style tax
• IBS – State and municipal VAT-style tax
• IS – A new selective tax for goods harmful to health or the environment

The implementation follows an eight-year transitional period, with 2026 serving as a test year where companies must comply with new invoicing requirements without paying the new taxes.

Full implementation will occur gradually, with CBS replacing PIS and COFINS in 2027, and IBS replacing ICMS and ISS between 2029 and 2033. This transitional period will be particularly challenging for Brazilian companies, requiring dual compliance with both old and new systems simultaneously.

ESG reporting

Brazil has recently established a national structure (CBPS) to align sustainability reporting with the ISSB’s global standards. New sustainability disclosure standards—based on IFRS S1 and S2 equivalents— became voluntary in 2025 and will become mandatory for listed companies by 2026–2027, including independent assurance requirements.

This places Brazil on a similar trajectory to Europe and other leading markets, creating new demand for ESG reporting, assurance, and data governance services.

Technology and digital transformation

Felipe Rosa, Innovation and Technology Partner at MCS Markup, showcased Brazil's powerful digital infrastructure. Three major systems have transformed financial operations:

PIX: an instant-payments system processing more than 2 trillion BRL per month, reducing DSO and enabling real-time reconciliation.

Open Finance: more than 62 million active accounts with secure data-sharing APIs for automated cash and audit processes.

SPED: fully digital bookkeeping, tax reporting, and e-invoicing, enabling machine-readable financial data and advanced automation.

These systems reduce operational costs, speed up reconciliation, and enable real-time auditability. MCS Markup has developed software-as-a-service solutions leveraging this infrastructure, including tools for IFRS 16 leasing compliance, government file conversions, and tax data centralization.

Brazil offers growth, but requires skilled navigation

As Brazil modernises its regulatory, technological, and tax systems, the market is becoming more accessible, but also more complex. PrimeGlobal members who leverage local partnerships with firms such as MCS Markup to navigate regulatory complexities, while maintaining international standards, will be well positioned for the next decade of growth.

For more information, watch the webinar on the past events page.

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