Brazil’s rollout of a dual VAT system took another step forward on 1 January, when it moved into its pilot phase. While the new scheme, which puts a big emphasis on digitalisation, won’t be fully operational until the 2030s, the fact that reforms are underway is significant, not least because Brazil can be a notoriously complex place to do business.
Brazilian companies will obviously be impacted by these changes, but if you’re an international SME, a simplification of tax policy means that the next few years should see barriers to entry lowered.
There’s no single solution that will transform the prospects of SMEs looking to establish a presence in Latin America’s largest economy, but these kinds of reforms, aligned with major strategies such as Nova Indústria Brasil (NIB), are going to be of huge importance in the years ahead as the country looks to modernise its industrial capabilities.
Backed by billions of dollars in financing, NIB is focused on multiple areas, including urban wellbeing, health, agro-industrial chains and decarbonisation.
Although it’s aiming to attract investment from big multinational players, NIB is also likely to create opportunities in subcontracting for SMEs with solutions in areas like green mobility, battery storage, semiconductors and components, as expertise in these fields isn’t always readily available in Brazil.
The desire to become a business-friendly destination for international firms is not limited to Brazil. Across the border, Argentina has its Incentive Regime for Large Investments, or RIGI. Established in 2024, RIGI’s goal is to make Argentina an attractive destination for major investments, highlighting the current government’s efforts to open up the economy and move away from years of protectionism.
Concerned with sectors including mining, infrastructure, steel, energy and technology, the minimum investment requirements for RIGI – which provides businesses with tax incentives among other initiatives – are steep, starting at US$200mn, with the requirements for oil and gas-related projects even higher.
This might put it out of the reach of SMEs but, again, big businesses don’t have all the answers. There are going to be opportunities throughout the supply chain for smaller international companies to add value with their knowledge and expertise – everything from lab testing and environmental impact monitoring to robotics.