Brazil's economic outlook and opportunities for Finnish companies

Key takeaways

  • As one of the world’s largest economies, Brazil presents plenty of business opportunities for Finnish companies.
  • Brazil has important advantages as a business destination: large and unified market operating under a democratic regime and with relatively low geopolitical risks.
  • The performance of the Brazilian economy in 2023 will be affected by developments affecting the world economy and priorities to be defined by the new administration that took office on 1 January.
  • Regarding the economy, the most important immediate challenge will be fiscal consolidation. In addition, the tax reform is expected to be one of the top priorities.
  • The bilateral trade between Brazil and Finland is characterised by a high degree of complementarity. Main Finnish exports to Brazil include mechanical appliances, fertilisers, electrical machinery, pharmaceutical products, paper and vehicles (tractors).
  • Finland has been an important source of foreign direct investment to Brazil. Sectors include machinery, telecommunications, paper and forest product manufacturing, metals, packaging and information technology.


This report will seek to provide useful pieces of information for Finnish companies interested in doing business in Brazil. In order to do so, the report will highlight the main economic characteristics of the country and the profile of its international insertion, especially when it comes to bilateral relations with Finland.

Firstly, the report will present general information about Brazil’s major indicators, regarding both the domestic economy and the economic interactions with other countries. Next, the report will analyse Brazil’s recent economic performance and the prospects for the future. This section will explore the most important challenges to be faced by the government that took office on 1 January 2023 and the priorities that may be adopted by the new administration. The following section will analyse the profile of trade and investment relations between Finland and Brazil, presenting information on volumes and sectors of activity. Lastly, the report will conclude that Brazil is a market that presents a great deal of potential for Finnish companies willing to expand internationally.

Country overview and Brazil on the world stage

Brazil is one of the largest countries in the world in terms of economy, population and territory. The country has a complex economic structure, with the services sector accounting for more than two-thirds of gross domestic product (GDP). The industrial and agricultural sectors are also highly relevant and play an important role in leveraging economic growth.

Brazil presents relevant degrees of integration to the world economy. The country is a major source of exports and a leader in important agricultural and mineral commodities, in addition to being a relevant exporter of manufacturing goods, including high added-value ones such as aircraft. Also, Brazil is a significant market for goods produced overseas, and inputs necessary to support the country’s industrial and agricultural activities are among the main imported items.

Regarding foreign investments, Brazil is a leading foreign direct investment (FDI) destination and it is frequently ranked among the top destinations in the world. In 2021, the country was the world’s 6th largest recipient of FDI inflows and in the first half of 2022 Brazil ranked third in the indicator, behind the United States and China. In addition, Brazil has been increasingly a relevant source of international investments made by multinationals operating in various sectors, including financial services, food and beverages, mining, electrical appliances, chemicals and IT services. The items below present information about Brazil’s economic potential and the profile of its international economic insertion.

Economy and Population

GDP (PPP): US$ 3.4 trillion
World rank: 8th

Population: 213 million
World rank: 6th  

GDP per capita (PPP): US$ 16,161
World rank: 90th  

Source: International Monetary Fund (World Economic Outlook Database). Data refers to 2021

Brazil’s GDP breakdown by sector

  • Services:                67.6%
  • Industry:                23.6%
  • Agriculture:            8.8%

Source: Brazilian Institute of Geography and Statistics. Data refers to 2021

Foreign Trade

Merchandise exports: US$ 281 billion
World rank: 25th   

Main products: Oil, soya, ores and metals, meat, machinery, automobiles, sugar, maize, wood pulp, coffee, plastics, aircraft and cotton.

Merchandise imports: US$ 235 billion
World rank: 27th  

Main products: Oil, machinery, auto parts, fertilisers, chemicals, pharmaceutical products and plastics.   

Sources: United Nations Conference on Trade and Development (UNCTADstat) and Brazil’s Ministry of Development, Industry, Trade and Services (Comex Stat). Volume data refers to 2021. For main products traded, data refers to the period between 2018 and 2022.

Brazil’s rank in world exports – selected products

1st – Chicken, soya beans, sugar, coffee and orange juice
2nd – Iron ore and cotton
3rd – Beef, maize and ethanol
7th – Paper and paper products and pork
8th – Air and spacecraft
12th – Crude oil

Sources: Food and Agriculture Organisation, World Bank (World Integrated Trade Solution), Organisation of the Petroleum Exporting Countries and United Nations Industrial Development Organisation. All rankings refer to accumulated values for the most recent 5-year period with data available. For all variables, rankings refer to traded values, except for crude oil.

Foreign Investment

Inward FDI – stock: US$ 593 billion
World rank: 17th  

Main sectors: Financial services, commerce, oil and gas, utilities, food and beverages, metallurgy, chemical products, telecommunications, professional services and automobiles.

Outward FDI – stock: US$ 296 billion
World rank: 24th  

Main sectors: Financial services, oil and gas, mining, commerce, real estate, food and beverages, chemical products, metallurgy and professional services.

Sources: United Nations Conference on Trade and Development (UNCTADstat) and Central Bank of Brazil. Data refers to 2021.

10 most internationalised Brazilian companies

  1. Fitesa (Plastics Manufacturing)
  2. Artecola (Chemical Manufacturing)
  3. Metalfrio (Appliances, Electrical and Electronics Manufacturing)
  4. CZM (Civil Engineering)
  5. Stefanini (IT Services and IT Consulting)
  6. Suzano (Paper and Forest Product Manufacturing)
  7. Iochpe Maxion (Motor Vehicle Manufacturing)
  8. WEG (Appliances, Electrical, and Electronics Manufacturing)
  9. Tigre (Construction)
  10. Braskem (Plastics Manufacturing)

Source: Fundação Dom Cabral, 2021. The internationalisation level takes into account the overseas shares of assets, revenues and employees.

Recent performance of the economy and outlook for the future

In 2022, the performance of the Brazilian economy positively surprised analysts. Economic activity in Brazil accelerated in the first and second quarters of the year, with higher-than-expected growth. Among the reasons for the positive results in the period analysts mention the improvement of prices administered by the government, greater consumer confidence, higher volumes of rain in relation to 2021 (which eliminated the probability of energy rationing, a meaningful risk until 2021) and the increase of Brazilian terms of trade as a result of the military conflict in Ukraine. Another relevant factor was the highly expansionist fiscal stimulus adopted by the government in 2022. GDP growth forecasts were raised during 2022 and according to the International Monetary Fund the economy is estimated to have expanded by 3.1% in the year (World Economic Outlook Update, January 2023).

Nevertheless, although economic growth was maintained in the third quarter, recently the level of economic activity in Brazil expanded more slowly. Distancing from a lower comparison base caused by the pandemic and the impact of measures to control inflation have been mentioned as the major causes for the lower growth rate. Data available for 2022 on the growth rates of the Brazilian economy by quarter are shown below. 

GDP growth in Brazil in 2022

  • Q1: +1.3%
  • Q2: +1.0%
  • Q3: +0.4%

Source: Brazilian Institute of Geography and Statistics

The performance of the Brazilian economy in 2023 will be affected by developments affecting the world economy and priorities to be defined by the new administration that took office on 1 January. Regarding the international conditions, both recent data and expectations indicate that Brazil is expected to face an adverse environment, with lower commodity prices and reduced demand in major trading partners. Factors negatively affecting the world economy include cycles of monetary tightening in the United States and Europe to curb inflation, the economic consequences of the conflict in Ukraine and the impacts of the difficulties encountered by China in tackling Covid-19.

Domestically, the economic agenda will be influenced by the strategy to be adopted by the new administration led by the left-wing politician Luiz Inácio Lula da Silva, who took office for a third term as Brazil’s president (he was previously president between 2003 and 2010). It is worth noting that Lula’s government will need to deal with a polarised country, a divided Congress and a right-wing movement that has become more powerful.

In the political realm, instability reached unprecedented levels when rioters invaded and vandalised major government buildings in the capital Brasília on 8 January. Although the events caused appal, economic impacts have been limited due to a firm and concerted response by the three branches of government and lack of substantial political and societal support to anti-democratic protests.

Regarding economic policy, the most important immediate challenge will be fiscal consolidation. In 2022, the fiscal policy was expansionary, stimulated by tax exemptions to tackle higher energy prices and an increase in the payment value of the social transfer programme Auxílio Brasil (in the new administration, the programme’s name returned to the original Bolsa Família). Both measures were originally set to expire in December 2022, but the new government will not undo the expansion of the social transfer programme and exemptions of federal taxes on fuels have been extended. The expansionary fiscal policy has been contributing to inflationary pressures and to the necessity of a consolidation strategy to reduce government deficit and restore credibility of the fiscal policy.

So as to fund campaign promises, the new government will have to adopt a new framework that will replace the constitutional spending cap adopted in 2017 to constrain public expenditure. The new framework is expected to be sent to Congress in the first half of 2023. In the meantime, in order to fund the increased social transfer programme Lula opted to negotiate with Congress a constitutional amendment that authorised Brazil's spending ceiling to be raised for one year. This strategy involved relevant political compromises. And concerns about Lula’s commitment to fiscal responsibility have been leading to unease among investors.

Developments of the monetary policy are also worth monitoring, as Brazil has been struggling with higher rates of inflation, as it is the case for many countries. In response to inflationary pressures, Brazil’s central bank has adopted an aggressive monetary policy. Between March 2021 and August 2022, the Brazilian central bank applied 12 hikes in the benchmark interest rate, raising it from 2% to 13.75%. In 2021 and 2022, the official inflation rate reached 10.06% and 5.79%, respectively.

Monetary policy is expected to remain restrictive amid concerns with the fiscal policy to be adopted going forward. A deterioration of fiscal conditions in Brazil could unsettle financial markets and result in high interest rates for a long period and lower GDP growth rates. In addition, difficulties to control inflation may arise from the fact that the inflation decline seen in the second half of 2022 resulted largely from fiscal policy interventions which led to decreases in administered prices such as the price of fuel.

The new administration will also have to deal with other relevant topics of the economic agenda, and the tax reform is expected to be one of the top priorities. Some of the elements proposed by the team led by former president Jair Bolsonaro are expected to be maintained, but the legislation to be put forward by Lula will give greater priority to inequality and income distribution. Several existing taxes should be substituted by a single value-added tax, the focus of tax collection may be diverted from consumption to income and people at the bottom of the pyramid are likely to be exempted from income tax while earners of the highest incomes should be taxed more heavily.

Regarding privatisations, the new government is expected to block any efforts to privatise Petrobras (the state-controlled oil and gas company) and Correios (the state-owned postal service). In relation to Eletrobras (the recently privatised electricity company), initially there were no expectations that Lula would attempt to renationalise it, as this would involve high political and financial costs. Nevertheless, recently the President questioned the terms of the legislation that allowed the government to sell shares of the company. Concerning concessions and partnerships with the private sector, the concession of the Port of Santos (South America’s largest port) should be delayed or stopped, while the development of public-private partnerships in the infrastructure sector are likely to be maintained.

For 2023, the agriculture sector is expected to present the highest rate of growth among the sectors of the economy, following a contraction in 2022. On the other hand, the manufacturing and services sectors are forecast to expand modestly. In the longer term, downward revisions of the potential growth of the Brazilian economy indicate that the country is not expected to advance in converging to the levels of income per capita attained by developed economies.

Forecasts by market economists for major indicators of the Brazilian economy are found below.

GDP growth

  • 2023: 0.80%
  • 2024: 1.50%
  • 2025: 1.89%
  • 2026: 2.00%

Source: Central Bank of Brazil (Focus – Market Readout as of 27 January 2023)

Inflation rate

  • 2023: 5.74%
  • 2024: 3.90%
  • 2025: 3.50%
  • 2026: 3.50%

Source: Central Bank of Brazil (Focus – Market Readout as of 27 January 2023)

Benchmark interest rate (end of period)

  • 2023: 12.50%
  • 2024: 9.50%
  • 2025: 8.50%
  • 2026: 8.50%

Source: Central Bank of Brazil (Focus – Market Readout as of 27 January 2023)

Profile of economic relations between Brazil and Finland

Brazil is Finland’s main trading partner in Latin America, and values of the merchandise exchanged between the countries have been increasing recently. The bilateral trade between Brazil and Finland is characterised by a high degree of complementarity. While mineral and agricultural commodities predominate among the main products exported from Brazil, capital goods and fertilisers are the most relevant items supplied by Finland.

Brazilian exports to Finland

  • 2022:                                   USD 637 million
  • 2021:                                   USD 392 million
  • 2020:                                  USD 294 million

Main products: ores (copper and nickel), coffee, ferroalloys, mechanical appliances, wood and sugar.

Main states of origin: Pará, Bahia, Goiás, Minas Gerais, Alagoas and São Paulo.

Source: Ministry of Development, Industry, Trade and Services (Comex Stat). For products and states of origin, data refers to the period between January 2020 and December 2022

Brazilian imports from Finland

  • 2022:                                   USD 1,142 million
  • 2021:                                   USD  639 million
  • 2020:                                  USD  500 million

Main products: mechanical appliances, fertilisers, electrical machinery, pharmaceutical products, paper and vehicles (tractors).

Main states of origin: São Paulo, Paraná, Rio Grande do Sul, Santa Catarina, Minas Gerais and Espírito Santo.

Source: Ministry of Development, Industry, Trade and Services (Comex Stat). For products and states of origin, data refers to the period between January 2020 and November 2022

Regarding investments, Finland has been an important supplier of foreign capital to Brazil. As a result of Brazil’s potential as a business destination, there are Finnish companies from various sectors operating in the country, including machinery (Metso Outotec, Konecranes, Normet, Pemamek, Ponsse), telecommunications (Nokia, Tecnotree), paper and forest product manufacturing (Stora Enso), metals (Outokumpu), packaging (Huhtamaki) and information technology (WithSecure). On the other hand, the presence of Brazilian companies in Finland is more restricted. The next topics present information on the profile of investment relations between Brazil and Finland.

Finnish FDI in Brazil by sector – stock

  • Manufacturing:                                US$ 694 million
  • Information and communication:    US$ 594 million
  • Wholesale and retail trade:              US$ 19 million
  • Real estate activities:                      US$ 1 million
  • Other sectors:                                  US$ 13 million

Source: Central Bank of Brazil. Data refers to 2021

Brazilian FDI in Finland by sector – stock

  • Manufacturing: US$ 156 million

Source: Central Bank of Brazil. Data refers to 2021

Conculsion and summary of opportunities

Brazil presents plenty of opportunities for Finnish companies willing to do business in the country. With a complex economic structure, Brazil is an important producer of agricultural and mineral commodities and also home to a strong industrial base. Brazil has also a well-developed services sector which creates substantial added value and accounts for most of the income generated in the country.  

As a large, unified market operating under a democratic regime and with relatively low geopolitical risks, Brazil presents important advantages as a business destination. Since adoption of the Plano Real in 1994, Brazil managed to tame inflation after decades of intense monetary instability. The concession of autonomy to the central bank in 2021 is also providing a significant contribution to the monetary policy. The successful implementation of a tax reform would enhance Brazil’s business environment, as the current system’s high degree of complexity results in large inefficiencies and excessive hassle for companies operating in the country.

Concerning Brazil’s international insertion, the country is substantially integrated into the world economy through international trade and investment. The country is an important source of relevant goods demanded by the world and a relevant importer of several products, especially the inputs necessary to support its industrial and agricultural activities. Regarding investments, in addition to being one of the main destinations of FDI in the world, Brazil has been an important source of foreign investments made by relevant multinational companies originating from the country.

All in all, Brazil presents plenty of opportunities for Finnish companies willing to access the market through exports and investments. Given its relevance in the world economy, the country is a destination that should be in mind for companies willing to expand and increase the range of markets in which they generate revenue. In addition to being a relevant market for companies willing to serve Brazilian consumers, there are certainly a good number of opportunities for suppliers of companies operating in the leading sectors of Brazil’s economy.


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