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Investing in Brazil 'different from other BRICs'
21/02/2012
Developing countries are big news for investors and businesses at the moment, with the BRIC (Brazil, Russia, India and China) countries taking much of the limelight.
However, investing in Brazil can be a little different, especially for those who have experience with the other countries on the list where costs are low and profit margins are wide.
A recent article from the Financial Times highlighted the fact that it is now more expensive to have a shoe shine in Sao Paulo than in New York. This is due to wages and material costs in the former; something known as the Custo Brasil – the Brazil cost.
This applies to businesses on a much larger scale as well and it is worth keeping in mind when investing in the South American country. As the FT article stated: “Brazil is a high-growth market in terms of opportunities for revenue expansion but it is on average a low-margin market in terms of profitability, particularly for companies in the start-up phase.”
According to estimates from Frontier Strategy, the average net margin for businesses in Latin America is 10.5 per cent. Meanwhile, in Brazil, net margins are just 5.4 per cent, showing a clear difference in business conditions.
However, the region is experiencing strong levels of growth and its burgeoning consumer market suggests that it still has further expansion to deliver making it an excellent option for investors.
However, investing in Brazil can be a little different, especially for those who have experience with the other countries on the list where costs are low and profit margins are wide.
A recent article from the Financial Times highlighted the fact that it is now more expensive to have a shoe shine in Sao Paulo than in New York. This is due to wages and material costs in the former; something known as the Custo Brasil – the Brazil cost.
This applies to businesses on a much larger scale as well and it is worth keeping in mind when investing in the South American country. As the FT article stated: “Brazil is a high-growth market in terms of opportunities for revenue expansion but it is on average a low-margin market in terms of profitability, particularly for companies in the start-up phase.”
According to estimates from Frontier Strategy, the average net margin for businesses in Latin America is 10.5 per cent. Meanwhile, in Brazil, net margins are just 5.4 per cent, showing a clear difference in business conditions.
However, the region is experiencing strong levels of growth and its burgeoning consumer market suggests that it still has further expansion to deliver making it an excellent option for investors.
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