The total number of formal employees in Brazil has grown 65,7% from 2002 to 2012 and has increased from 28.6 million to 47.4 million during this period. This demonstrates the potential for even further growth in the business sector in Brazil.

Brazil’s vigorous, yet unstable, economic growth during the past years did not affect the increasing number of companies. The numbers shown in the following article demonstrate the strength of the Brazilian business sector.

SEBRAE

SEBRAE, Serviço Brasileiro de Apoio às Micro e Pequenas Empresas, which is Portuguese for Brazilian Micro and Small Business Support Service, is a non-profit autonomous institution whose mission is to promote competitiveness and sustainable development of Micro and Small enterprises.

Due to the importance of Micro and Small businesses in Brazil, Sebrae is one of the few institutions trying to estimate the total number of companies in Brazil, independent of the company’s size.

It is also up to SEBRAE to define what characterizes the different classifications of companies in Brazil.

Classification of Companies

To be classified as a Micro or Small business, the business’ annual gross revenue should not exceed BRL 360.000 for Micro business, and BRL 3.600.000 for Small ones. The number of employees is also taken into account, as outlined in the chart below:

Importance of Micro and Small businesses in Brazil

The Brazilian economy is mostly composed of Micro and Small businesses. According to SEBRAE, 99.1% of all Brazilian companies are Micro or Small businesses, amounting to almost 6 million entities in 2012.

These numbers conceal a different reality: despite the high number of Micro businesses, almost 60% of them do not have employees. That means the entrepreneur is the sole employee of the business in almost 4 million cases.

As many of the businesses have a sole employee the number of addressable business customers in Brazil is estimated to be around 2.4 million entities.

Micro and Small businesses employ around 16 million people, accounting for 51.7% of private jobs created by entities. Studies show that for every BRL 100,00 in wages, BRL 40,00 is paid by Micro and Small entrepreneurs. In 2012, the average wage in Micro and Small businesses was BRL 1.334,00.

Micro and Small businesses have a participation of around 25% in Brazil’s Gross Domestic Product.

Distribution of Micro and Small businesses by each region:

• Southeast: 51%
• South: 24%
• Northeast: 14,5%
• Midwest: 7%
• North: 3,5%

The Brazilian government welcomes these growing numbers, stating that Micro and Small businesses are essential for promoting economic growth, creating jobs and improving the quality of life for the population.

As an incentive to Small and Medium businesses, the Brazilian government has declared that profits originating from investment in these businesses will be exempt from Income Tax from July 2014 to 2023.

Medium and Large businesses in Brazil

On the other hand Medium and Large businesses account for a much lower percentage of Brazilian business entities. According to SEBRAE, they only represent 0.9% of all businesses, nearly 54.000 entities.

Yet, according to their definition, they generate a large number of jobs, totalling more than 15 million employees, representing 48.3% of the total private jobs created by entities. In 2012, the average wage in Medium and Large businesses was BRL 2.161,00.

Today, Medium and Large businesses play a large role in Brazil’s thriving economy. Bearing in mind that the Brazilian government issues various tax and credit incentives in order for them to maintain their growth.

The incentives granted to Medium and Large businesses refer mostly to innovation and technological research, as seen in the selection of startup accelerators from the program Startup Brasil.