Knowledge


Tatiana Andrade, Kreston KBW Brazil

Investing in Brazil: Beating analyst’s expectations

March 13, 2024

Sector: ESG

Tatiana Andrade, Partner of Kreston KBW Auditores, shares that investing in Brazil will see economic growth, driven by market reform and ESG, attracting international and local business optimism.

Brazil’s economic growth outlook

Brazil’s economic activity expanded by 2.45% in 2023, surpassing initial forecasts that growth would be tepid in the face of high interest rates. At the beginning of last year, private economists estimated that the economy would grow by less than 1%, whereas current forecasts indicate an expansion of 2.9%, according to a weekly survey conducted by the Brazilian central bank.

Investing in Brazil opportunities

This makes Brazil the most successful Latin American economy. With a new government focus on market and tax reform and a strong emphasis on ESG, local firms are predicting a boom year, as international clients flock to its shores.

“Particularly in the second half of 2023 and in the first two months of 2024, we saw a significant increase in the demand for foreign companies wanting some
type of assistance to set up or increase their business volumes in Brazil,” said
Tatiana Andrade, Partner of Kreston KBW Auditores. “This shows an excellent medium and long-term scenario. As an example, the search for new international clients in our office increased by around 40% compared to the
same period of the previous year, a significant increase for our international area.”

Within Kreston KBW Auditores, Andrade has noticed that the
services sector is the one with the most demand for consultancy skills, particularly technology and digital marketing.

Complexities of Brazilian tax reform

The Brazilian tax system has long been complicated and frustrating, and while reform has been promised, it is still a long way away. In 2023, the Brazilian congress approved a major tax reform that had been held up for voting for many years. However, the approved proposal will take around 10 years to be fully implemented and divides opinion among tax experts as to how much benefit it will bring to businesses.

Andrade believes that when reform does come, it will not bring much in the way of simplification and that the increase in the tax burden will go from the current 20% to approximately 28%. But that is good news for the local office.

“We have been fielding a lot of enquiries, from national and especially international clients, who are very eager to see how much this will impact their operations,” said Andrade.

The international market is an important one for Kreston KBW Auditores, as this is where it can add the most value. International clients count on complete assistance from the opening of the company and the geographic location strategy, to assistance with tax planning. The founding partners have extensive experience in the national and international market and all came from auditing multinationals, including the Big Four.

Consulting services and ESG focus

With a new left-wing government in power that is keen to work with foreign
investors, a maturing business environment and an aggressive push for corporate transparency to aid ESG reporting, Andrade is expecting 2024 to be a successful year.

“Our strategy is to grow by 20% in relation to revenue,” she said. “We have been strengthening our team with some major hires in 2023 and now we are feeling the effects of these new hires. An interesting moment for our office is the increase in demand for ESG, our partner in the sustainability area will have a great challenge ahead. We believe that the ESG area will grow by more than 100% compared to previous years.”

ESG is an important driver for Brazilian companies as they seek corporate transparency. It means skills such as auditing will become even more important, as auditors will be key to ensuring the quality of ESG information from audited companies to investors, stakeholders and regulators.

“In Brazil, companies listed on the stock exchange must disclose in their financial statements the effects of ESG on their operations,” said Andrade. “Although it is not mandatory for all Brazilian companies, many funds only invest in those who have a well-defined ESG policy, so companies, even if they are not obliged, have sought us out to help implement ESG in Brazil.”

Technology and R&D investment

Technology has had a huge impact on the way accountancy firms do business and the Brazilian office now sets aside a portion of revenue to be spent keeping abreast of new development.

“A minimum of 3% of revenue must be for investment in technology and R&D,” said Andrade. “In previous years we have surpassed the 5% mark of our revenue, but I think that has had a direct result on our annual growth, which always exceeds two digits.”

As Brazil blossoms under a new government, there is no reason why new entrants to the market cannot ride this wave of optimsim.

For more information on doing business in Brazil, click here.