This chapter provides an assessment of Brazil. It begins with an overview of Brazil’s context and subsequently analyses Brazil’s progress across eight measurable dimensions. The chapter concludes with targeted policy recommendations.
SME Policy Index: Latin America and the Caribbean 2024
Towards an Inclusive, Resilient, and Sustainable Recovery
SME Policy Index
13. Brazil
Abstract
Overview
Figure 13.1. 2024 SME PI Brazil's score
Note: LAC average 2024 refers to the simple average of the 9 countries studied in this 2024 report. There is no data for the Digitalisation dimension in 2019 as the 2019 report did not include this dimension.
Brazil debuts in the SME Policy Index for Latin America and the Caribbean (LAC) with an overall strong performance (see Figure 13.1), ranking above the regional average in four of the eight evaluated dimensions: Institutional Framework (Dimension 1), SME Development Services and Public Procurement (Dimension 4), Innovation and Technology (Dimension 5), and Digitalisation (Dimension 8). It performs at the average level in the Access to Finance dimension (Dimension 3).
However, the country’s commendable performance in productivity enhancement and association measures is offset by significant challenges in global trade integration, which poses a major obstacle to the internationalisation of SMEs. This affects its results in the dimensions of Productive Transformation (Dimension 6) and Access to Market and Internationalisation (Dimension 7). Additionally, despite a long-term commitment to legislative simplification and regulatory reform, the operational environment for SMEs in Brazil remains relatively challenging, marked by complex procedures and high administrative burdens, especially concerning company registration and tax filing and payment processes.
The creation of the new Ministry of Entrepreneurship, Microenterprise, and Small Business underscores the significance attributed by the administration that assumed office on January 1, 2023, to SME development. This presents a valuable opportunity for Brazil to continue advancing its SME development policies.
Context
During 2020, Brazil was significantly impacted by the COVID-19 pandemic. However, it experienced one of the lowest GDP contractions in the region, at 3.6% (OECD, 2024[1]). Levels of poverty and extreme poverty, at 16.3% and 1.4% respectively, though high, were lower than the average for the LAC region (OECD et al., 2021[2]). In 2021, the Brazilian economy displayed a recovery, achieving a growth rate of 5.3%, attributed to the successful vaccination campaign and a boost in domestic consumption. By 2022, growth decelerated to 3%, influenced by restrictive monetary policies and adverse weather effects that limited agricultural production and productivity (OECD, 2023[3]). The Brazilian economy grew 3% in 2023, driven by sectors such as agriculture, industry, and services, along with increased household consumption. However, a slowdown is anticipated in 2024, with a growth rate forecast of 1.8%, attributed to reduced private consumption and investment due to tighter credit conditions (OECD, 2024[1]).
In Brazil, the primary indicator of inflation is the Índice Nacional de Preços ao Consumidor Amplo (Broad National Consumer Price Index, IPCA), which recorded a 5.7% increase in 2022, down from the 10.1% peak in 2021. The relatively high inflation rate, coupled with tightening credit conditions, contributed to a weakening of household consumption in 2022. In response to inflationary pressures observed in 2021, arising from global commodity and energy price pressures, the Monetary Policy Committee of the Central Bank of Brazil pursued a tightening path, concluding with a benchmark interest rate of 13.75% at the end of 2022. In 2023, inflation moderated to 4.6% amid a more restrictive monetary policy implemented since 2022, with the policy rate reaching 11.7% in December of that year (COPOM, 2023[4]). A further decline in inflation is anticipated, which will likely give rise to further reductions in the interest rate, supporting investment and household consumption.
In 2022, Brazil's unemployment rate peaked at 9.3%, showing a notable decrease from the 13.2% recorded in 2021, signaling post-pandemic recovery (IBGE, 2023[5]). However, a considerable portion of the workforce, remains engaged in informal work. By 2023, the unemployment rate further decreased to 7.7%, while the informal sector accounted for 39.2% of the active population. Micro and small enterprises make a good contribution to job creation, creating an estimated 12.4 million jobs between 2007 and 2019 (OECD, 2022[6]).
Dimension 1. Institutional Framework
Brazil has established an advanced institutional framework for SME policy, marked by the presence of a well-funded and well-structured national SME development agency: Serviço Brasileiro de Apoio às Micro e Pequenas Empresas (Brazilian Micro and Small Business Support Service, SEBRAE) and several dedicated institutions, some of which operate in collaboration with the private sector. This is evident in Brazil's overall score of 4.26 in the dimension related to the SME institutional framework. The significance accorded to SME policy is underscored by the recent creation of the Ministry of Entrepreneurship, Microenterprise, and Small Business.
Brazil lacks a unified SME definition. On one side, the federal government broadly uses the definition established by Law 123/2006 based on annual gross revenue. On the other side, various institutions involved in SME policy utilize different criteria. The Instituto Brasileiro de Geografia e Estatística (Brazilian Institute of Geography and Statistics, IBGE) considers the number of employees for research, taking into account the sector of activity in industry, commerce, and services, a method also used by SEBRAE whenever annual gross revenue data is unavailable. According to the SEBRAE definition, a microenterprise has up to 19 employees (Industry) or up to 9 employees (Trade and Services); a small enterprise has from 20 to 99 employees (Industry) or from 10 to 49 employees (Trade and Services); and a medium-sized enterprise has from 100 to 499 employees (Industry) or from 50 to 99 employees (Trade and Services). The Banco Nacional de Desenvolvimento Econômico e Social (National Bank for Economic and Social Development, BNDES) employs its own definition based on annual turnover. As a result, Brazil's score for the SME Definition sub-dimension is 4.
In contrast, Brazil secures one of the highest scores for the Strategic Planning, Policy Design, and Coordination sub-dimension, with 4.32. Since October 2023, the federal mandate for SME policy has been assigned to the Ministry of Entrepreneurship, Microenterprise, and Small Business by splitting the Ministry of Development, Industry, Trade and Services. Prior to this change, between 2015 and 2023, the mandate was under the Ministry of Economy and previously, from 2013 to 2015, it was managed by the Secretariat of Micro and Small Business under the Federal Presidency. The creation of the new ministry underscores the significance attributed by the administration that assumed office on January 1, 2023, to SME development.
The current institutional framework for SME policy in Brazil has been established by Law No. 123 of December 6, 2006. This law introduced the National Microenterprise and Small Businesses Statute, which outlines general rules for supporting SMEs and defines the competencies at the federal, state, and municipal levels, including the Federal District of Brasília, in relation to tax regimes, labour, social security regulations, and access to credit for micro and small enterprises. The law explicitly assigns to the Union (Federal Government) the mandate to formulate the National Policy for the Development of Micro and Small Enterprises.
In 2019, the first national plan for SME development was elaborated. A new multi-year plan for SME development is currently being formulated in Brazil through a process of inter-ministerial and public-private consultations. This plan is designed to encompass six policy dimensions and will include a section on monitoring and evaluation.
Policy implementation in Brazil is carried out through the Sistema S (S System). The organisations within the Sistema S are categorised as "parastatal organisations" with operational autonomy and independent funding sources derived from a levy on salaries. While these agencies work under government direction, they have a degree of autonomy. The Sistema S includes several public agencies with specialised tasks.
On the other hand, SEBRAE functions as the main agency for SME development in the country. SEBRAE has a workforce of over 6,800 and offices throughout the country. The agency is governed by the National Deliberative Council, which includes representatives from public institutions and major private sector organisations.
Other agencies within the Sistema S include Serviço Nacional de Aprendizagem Industrial (National Industrial Apprenticeship Service, SENAI), responsible for providing industrial vocational training, and Serviço Nacional de Aprendizagem Comercial (National Commercial Apprenticeship Service, SENAC), the national training service. The Permanent Forum of Micro and Small Companies, comprising all ministries and public agencies dealing with SME policy, along with representatives of private sector organisations, serves the functions of policy coordination, monitoring, and evaluation.
Furthermore, Brazil has a well-established practice of Public-Private Consultations (PPCs), supported by an advanced legal framework, as indicated by its 4.33 score for this sub-dimension. The legal basis for this practice has been strengthened by art. 29 of Law 13.655 of 2018, which stipulates that the issuance of normative acts may be preceded by Public Consultation to obtain input from interested parties, preferably through electronic means, and this input will be considered in the decision-making process. All government agencies and sectors involved in the formulation of business regulations are required to conduct public consultations, allowing civil society and private entities to express their views and contribute to the process.
The private sector in Brazil demonstrates significant lobbying capacity and actively participates in all phases of policy development, implementation, and coordination. Major private sector and SME associations are part of entities such as the Comitê Gestor do Simples Nacional (Simples Nacional Management Committee), which contributes to formulating tax regimes for SMEs, the Permanent Forum of Micro and Small Companies, and SEBRAE's National Deliberative Council. These platforms provide avenues for private sector involvement and collaboration in the policy-making process.
Additionally, the legal framework for startups, established by Law 182/2021 and sanctioned in the same year, represented a key commitment to fostering innovative entrepreneurship in Brazil. This legislation introduced concepts and criteria for categorising companies as startups, defining them as new or recently established enterprises that incorporate innovation into their business models, products, or services. The law includes measures aimed at enhancing the overall business environment in the country. Notably, it places a strong emphasis on bolstering legal certainty for investments in startup ventures.
On a different aspect, the government's commitment to combating labour and enterprise informality is evident, as reflected in Brazil's score of 4.30 in the Measures to Reduce Informality dimension. The Statute of the Microenterprise and Small Business Enterprise, approved in 2006, had the formalisation of individual micro-entrepreneurs, micro-enterprises, and small businesses as one of its main goals. In order to stimulate the formalisation of companies, the Brazilian government has taken steps to reduce administrative burdens and simplify tax administration procedures.
Examples of these policies include measures to rationalise and simplify the process of starting a business, implemented through initiatives such as National Network for the Simplification of Registration and Legalisation of Companies and Businesses (REDESIM) (see Dimension 2. Operational environment and simplification of procedures) and the One-Stop Shop (OSS). Additionally, the Brazilian government has introduced simplified taxation regimes such as Simples Nacional and Microempreendedor Individual (Individual Microentrepreneurs, MEI) to promote business formalisation in Brazil. The creation of the MEI Institute is expressly aimed at the formalisation and productive inclusion of entrepreneurs. According to available statistics, there are currently 15.5 million actives Individual Microentrepreneurs in the country.
The Way Forward
Formulate a working group comprising relevant institutions, private sector representatives, statisticians, and SME policy experts to develop a unified SME definition adopted by all public institutions and local authorities.
Establish mechanisms for monitoring the new medium-term SME development plan implementation and collecting necessary data and information to evaluate the plan's impact on SME sector development.
Ensure active participation of private sector representatives, including those from young entrepreneurs, women entrepreneurs, start-ups, and micro-enterprises, throughout all phases of SME policy – from design and elaboration to implementation, monitoring, and evaluation.
Establish a comprehensive consultative council to bring together and coordinate policy inputs from various consultation tables, such as Simples Nacional, the Permanent Forum of Micro and Small Companies, and the SEBRAE’s National Deliberative Council.
Dimension 2. Operational environment and simplification of procedures
The operational environment for SMEs in Brazil is relatively challenging, marked by complex procedures and high administrative burdens, especially concerning the company registration process and filing and paying taxes. Despite a long-term commitment to legislative simplification and regulatory reform, the overlapping of federal and state legal and regulatory regimes adds complexity to the system, creating barriers to the introduction and implementation of effective reforms. Brazil obtains an overall score of 3.03 in this dimension, slightly below the regional average (3.15).
The establishment of the REDESIM by the Federal Government in 2007 initiated a systematic process of legislative simplification and regulatory reform. Focused initially on company registration and incorporation processes, REDESIM aimed to reduce time and costs, automate and streamline procedures, and eliminate unnecessary visits to public agencies. Over time, the government extended legislative simplification and regulatory reform to other areas, albeit at a relatively slow pace. Currently, only 25% of business legislation has been revised, and the outcomes of these reforms have been uneven. Presently, there is no comprehensive national plan for legislative simplification and regulatory reform, and reforms are conducted on an ad hoc basis.
Regulatory Impact Analysis (RIA) is applied only to major pieces of legislation, and RIA reports are not consistently published. Guidelines for RIA were formalised with Decree No. 10,411 in June 2020, assigning oversight to the Secretariat for Competition and Competitiveness Advocacy of the Special Secretariat for Productivity, Employment, and Competitiveness of the Ministry of Economy. Brazil scores 3.08 in the Legislative Simplification and Regulatory Impact Analysis sub-dimension.
Despite the initiatives undertaken by REDESIM and the Normative Instructions of the Departamento Nacional de Registro Empresarial e Integração (National Department of Business Registration and Integration, DREI), company registration procedures in Brazil remain relatively complex, reflected in the 3.06 score for the Company registration sub-dimension, slightly below the LAC average (3.24). Efforts have been made since 2020 to streamline company registration procedures with different entities leading to some progress. These procedures are now, on average, completed in less than one day.
As of now, there is no operational OSS, but new entrepreneurs can interact with different administrations in a single location (multi-windows). Upon registration, the new enterprise receives a unique identification number that can be used across the public administration. Online registration is currently available only for single entrepreneurs and micro-enterprises.
The federal government has introduced a monitoring tool called Company Map to track company registration and closure processes nationwide. The tool provides monthly data on company registration procedures, including average time to open a company, the number of open and closed enterprises, and details on location and activities.
On a different aspect, Brazil's performance in the Ease of filing taxes is 2.50, indicating significant areas for improvement in this area. The Brazilian tax system is characterised by a high level of complexity, imposing a heavy administrative burden on private enterprises. This complexity results from the combination of federal and state-run tax regimes and administrative procedures.
While the Brazilian government has implemented measures to simplify tax payments, such as the creation of the Simples Nacional and MEI schemes, challenges persist for Brazilian SMEs. These challenges include the high cost of compliance, a high number of taxes, and the complexity of tax rules at both the federal and state levels. Two permanent committees have been established to work on tax reform, with SEBRAE being a member of both committees.
In the realm of e-government services, Brazil scores 3.60. The digital transformation of the Federal Government is guided by two strategic documents: the Estratégia de Governo Digital (Digital Government Strategy, EGD) 2020-2023, which is updated every three years, and the Brazilian Strategy for Digital Transformation.
Actions related to the provision of e-government services to the private sector are carried out by the Secretaria de Governo Digital (Secretary of Digital Government, SGD) and the Ministério da Gestão e Inovação em Serviços Públicos (Ministry of Management and Innovation in Public Services). The Secretaria Extraordinária para Transformação do Estado (Extraordinary Secretariat for State Transformation, SETE) and the Ministério da Gestão e da Inovação em Serviços Públicos (Ministry of Management and Innovation in Public Services, MGI) are also active in this area.
The mandates of these entities are defined by Decree 10,332, approved in April 2020. The current range of e-government services is relatively extensive, covering areas such as tax-filing, filing of social security contributions, and completing enterprise statistical surveys.
The EGD foresees the provision of some services that will benefit SMEs, including online services to simplify and expedite the opening, modification, and closure of companies in Brazil, with the aim of completing these procedures in one day. One of the objectives of the EGD was to introduce at least twenty new interoperable services of interest to companies and organisations by 2022.
The Way Forward
The Federal Government of Brazil could reinvigorate the programme of regulatory reform and legislative simplification, drawing on the experience accumulated by REDESIM in company registration. It could begin by identifying major regulatory obstacles faced by private enterprises, conducting a thorough analysis of current barriers to private enterprise growth, and formulating a medium-term plan for a regulatory reform programme with clearly defined objectives selected in cooperation with representatives of the private sector.
Streamline company registration procedures, encompassing simultaneous registration with Federal and State authorities, establishing a network of OSS, and expanding online registration procedures to all categories of enterprises.
Consider establishing a task force to formulate a reform of the tax regime applied to SMEs, evaluating the effective tax rate for different types of SMEs, and minimising the number of tax declarations and payments required by federal and local tax authorities.
Implement programmes to encourage the adoption of e-government services by SMEs as part of the post-2023 Digital Government Strategy.
Dimension 3. Access to finance
Brazil performs at the average level in the Access to Finance dimension with a score of 3.25. In the Legal, Regulatory, and Institutional Framework on Access to Finance sub-dimension, Brazil scores 3.08, which is below the LA9 average of 3.46. This lower score is primarily due to its limited regulation of the securities market. However, Brazil excels in asset registration and collateral weighting. The country has highly developed regulations and institutions for registering both tangible and intangible assets. Movable assets are widely accepted as collateral, supported by an accessible, albeit partially online, cadastre, and a public registry of security interests in movable assets. Additionally, the regulation regarding the percentage of collateral required for medium-term SME loans is minimal. Despite these strengths, Brazil faces significant challenges due to the lack of a legal framework for the SME capital market, minimal support for meeting listing requirements, and the absence of a separate market for low-capitalisation SMEs.
On the other hand, Brazil achieves the highest score among the LA9 countries in the Diversified sources of enterprise finance sub-dimension, with 4.62, thanks to its wide range of financial products available for SMEs. Notable programmes include export financing by Banco do Brazil and BNDES, which provide resources to exporters for production and commercialisation abroad. Additionally, the Complementary Law No. 123/2006 (National Statute of Micro and Small Enterprises) in its article 60-A provides for the establishment of the National Credit Guarantee System (NCGS), which will integrate the National Financial System. To facilitate this, Decree No. 10.780/2021 was published, outlining the proposal and implementation of actions aimed at establishing and consolidating the NCGS, regulating the acceptance and provision of guarantees by financial institutions within the NCGS, and establishing prudential and supervisory criteria, among other measures. However, this regulation is still under discussion within the working group officially created in 2021 by Interministerial Ordinance SEPEC-SETO-ME-BCB No. 11.591/2021.
Furthermore, Brazil has state-funded microfinance schemes and regulation on mechanisms like crowdfunding through CVM Resolution 88, which has introduced significant innovations to increase financing volumes and investor security in the country.
In the Financial education sub-dimension, Brazil scores 3.30, one of the highest scores in the region. This high score is the result of efforts to design and implement a National Financial Education Strategy that includes SMEs as a key target group. SEBRAE in Brazil offers a wide range of free financial education programmes and courses on its website aimed at SMEs and entrepreneurs. Additionally, efforts have been made to gather information on the financial capabilities of the population, though most measurements have not specifically focused on micro-entrepreneurs' knowledge. For example, in 2020, the Securities and Exchange Commission, with the support of CAF, conducted financial capability surveys for individuals using OECD methodology. However, these surveys focus on measuring individuals' financial education, not SMEs. The OECD developed a specific methodology in which Brazil participated in a measurement exercise, and the results were published in 2021. Furthermore, as part of the OECD's PISA assessments, financial literacy among young people (15 years old) in Brazil has been measured.
Lastly, Brazil faces challenges in the sub-dimension of Efficient procedures for dealing with bankruptcy, scoring 2.02. While it has universally applicable laws based on internationally accepted principles, these laws do not apply to state-owned enterprises, and the country lacks early warning systems for insolvency situations. Although the Insolvency Law provides for conciliation mechanisms before bankruptcy, there are no early warning systems or less burdensome out-of-court agreements. Additionally, details of insolvent companies are not accessible to the public, and once the debt is paid, the case is almost automatically removed from the register.
In terms of offering new opportunities to entrepreneurs whose initial ideas have not succeeded, Brazil has yet to develop public policies in this regard, representing an area for improvement that could be complemented by additional financial education efforts aimed at SMEs. The lack of regulation for secured transactions, which does not consider asset recovery after business reorganisation or prioritise payment for taxes or other debts, is also notable. Finally, the differentiated treatment of micro and small enterprises in insolvency processes, with extended payment terms, is another relevant issue in Brazil's regulatory framework.
The way forward
Strengthen the accessibility and availability of the cadastre and registries of collateral.
Promote a capital market legal framework for SMEs.
Develop a strategy to support SMEs in complying with listing requirements and promote the creation of a separate section or market for thinly capitalised SMEs.
Brazil could continue to strengthen co-ordination among the different public and private institutions working to promote financial education for SMEs in order to improve the effectiveness of programmes and avoid duplication.
Design and implement early warning mechanisms to identify potential bankruptcy situations in order to be able to take the necessary corrective actions.
Develop a legal framework for secured transactions.
Design and implement training programmes for second chances, targeting individuals who have had their businesses go bankrupt.
Dimension 4. SME development services and public procurement
Brazil displays a strong performance in this dimension, with an overall score of 4.57, behind only two other countries in the region. Performance is particularly solid in entrepreneurial development services (4.67) and business development services (4.60), with a relatively lower performance in public procurement (4.40).
SEBRAE has a mandate to plan, coordinate and orient the technical programmes to support SMEs, in line with national development policy and specifically the policies related to industry, trade and technology. The elaboration of the policy for business development services (BDS) is underpinned by studies on the demand for such services, in particular the Global Entrepreneurship Monitor, and research by the Unidade de Gestão Estratégica (Strategic Management Unit) of SEBRAE.
SEBRAE’s operations are funded by taxes or income of tax-like nature, according to the information provided by the government. This represents an advantage over other less sustainable models funded by loans or by international assistance financing. Some of the flagship BDS programmes include the Programa Brasil Mais Produtivo (Brazil More Productive, BMP), which aims to improve management quality in SMEs and the adoption of digital technologies and innovative processes and has been recently updated (see Dimension 6. Productive transformation). Support is provided in the form of trainings, technical support and specialised consulting fully funded by SEBRAE for eligible firms, as well as co-financing schemes with business associations and municipalities. An example is the EMPRETEC programme for the formation of entrepreneurial skills in which SEBRAE finances 70% of the program and the entrepreneur the other 30%. The budget for BDS in Brazil is approximately R$5.5 billion (US$1.28 billion), primarily funded by SEBRAE and representing 0.11% of the total government budget.
In addition, SEBRAE’s actions also aim to promote the development of a private market for BDS through the Sistema de Gestão de Fornecedores do SEBRAE (Supplier Management System), which provides open tenders for the accreditation of private sector consultants in areas such as human resources, entrepreneurship, education, financial and accounting services, marketing and sales, international business, business planning, etc.
Another important initiative to support emerging entrepreneurs is the so-called Sistema S (see Dimension 1. Institutional Framework), which aims to promote the development of Brazilian businesses through services administered by private entities providing training and assistance to entrepreneurs.
Brazil also benefits from a system of laws, regulations and measures to promote the participation of SMEs in public procurement opportunities including by breaking tenders above a certain size into lots, the possibility to form consortia of SMEs and participate in joint biddings, participation quotas for SMEs and timely payments.
Brazil has a well-established system for electronic procurement (e-procurement), which is known as Comprasnet. Comprasnet is a government-wide e-procurement platform that is used by federal agencies, state governments, municipalities, and public enterprises. The platform is used for a wide range of procurement activities, including the publication of tenders, the submission of bids, and the award of contracts. Some measures have been introduced to facilitate the participation of SMEs in Comprasnet, including a simplified registration process and special regimes for SMEs to participate in public procurement. In addition, Brazil implements a Sistema de Cadastramento Unificado de Fornecedores (Unified Supplier Registration System) that helps to facilitate the participation of SMEs in public procurement by providing a list of suppliers that are eligible to participate in public procurement in Brazil and facilitates the verification of the qualifications of suppliers.
In general, Brazil has a solid policy framework for the provision of business development services for SMEs and entrepreneurs and a full-fledged public procurement framework that facilitates the participation of small firms in public markets.
The Way Forward
To move forward, Brazil could further:
Explicitly clarify how the BDS system implemented by SEBRAE helps to advance the national SME strategy and the national development plan’s objectives.
Elaborate on the measures to support entrepreneurs and start-ups, in particular the existence and operation of national systems of business incubators and accelerators, beyond the existence of the Sistema S.
Clarify how SMEs take advantage of the national electronic procurement system and establish programmes or BDS to support SMEs to better participate in public markets.
Dimension 5. Innovation and technology
Brazil has an impressive array of public supports available to SMEs to facilitate and incentivise innovation, which form part of a robust framework for innovation policy. However, weaknesses in monitoring and evaluation practices weigh on Brazil’s score in the Innovation and Technology dimension which, at 4.11, is above the regional average (3.98).
The National Innovation Policy was established by Decree No. 10 534 in October 2020. This provides the framework for Brazil’s innovation policy. The Innovation Chamber was created as an instrument for overseeing the implementation of the National Innovation Policy. The Ministry of Science, Technology and Innovation serves as the secretariat of the chamber, which is chaired by the Civil House and has the participation of nine other ministries. In 2021, the Innovation Chamber approved the National Innovation Strategy and the Action Plans, which set out initiatives to be taken in this area over the subsequent 4-year period. The strategy contains a number of actions targeting SMEs, including through training and consultancy supports in specific sectors as well as technological development grants. Overall, Brazil’s framework for innovation policy is well organised, has a strong focus on SMEs, and has mechanisms in place to foster inter-governmental co-ordination. These factors contribute to a score of 4.35 in the Institutional Framework sub-dimension.
The availability of support services for SME innovation is relatively strong in Brazil. These supports include a network of 363 incubators (61% of which are based in universities), an online portal to connect businesses with researchers, and a range of technology parks, for example the Science and Technology Park of the State University of Campinas-São Paulo. More could be done, however, to analyse the needs of SMEs and the barriers they face in conducting innovative activities. This could facilitate the development of policies that more precisely address the challenges and opportunities for SME innovation in Brazil. As is the case in most Latin American countries covered in the study, Brazil’s score of 3.95 in the Support Services sub-dimension is lowered by a weak performance in the monitoring and evaluation component.
Brazil has a score of 4.02 in the Financing for Innovation sub-dimension. Direct financing supports for SME innovation include the provision of subsidies for SMEs to cover the costs of research infrastructure, technology transfer or the contracting of technological services. Furthermore, in November 2022, the now Secretaria de Desenvolvimento Industrial, Inovação, Comércio e Serviços (Secretariat for Industrial Development, Innovation, Trade and Services, SDIC) of the Ministério do Desenvolvimento, Indústria, Comércio e Serviços (Ministry of Development, Industry, Trade and Services, MDIC) launched a public procurement for innovation platform. R&D tax incentives are also in place through Law No. 11 196 of 2005. The Brazilian Micro and Small Business Support Service (SEBRAE) consolidates and publicises information on financial support for SME innovation, although there are apparent gaps in the coverage of information provided. Moreover, despite the varying channels of support available, SMEs’ uptake is relatively low.
The Way Forward
In the future, the government of Brazil could consider:
Introducing period impact evaluations of major innovation programmes, adopting reliable methodologies with control groups of firms that did not participate in the programmes.
Establishing a digital OSS for information on innovation supports available to SMEs.
Identifying and addressing barriers to SMEs’ uptake of financing supports for innovation.
Dimension 6. Productive transformation
Brazil's well-coordinated efforts to enhance SME productivity are evident in its notable score of 3.64 for the Productive Transformation dimension. The country attains the highest score in the region for the first two sub-dimensions. However, its overall score is notably impacted negatively by the score in sub-dimension 3, Integration into Global Value Chains, reflecting areas of opportunity in this domain.
The sub-dimension of Strategies to Increase Productivity in Brazil receives a score of 4.85, the highest among the LA9 countries, primarily guided by the BMP programme. This noteworthy federal government initiative began in 2016 and was significantly enhanced in 2023 as part of the Nova Indústria Brasil – the new Brazilian Industrial Policy. Coordinated by the MDIC in collaboration with the Brazilian Industrial Development Agency (ABDI), SEBRAE, SENAI, Financiadora de Estudos e Projetos (Financing Agency for Studies and Projects, FINEP), Empresa Brasileira de Pesquisa e Inovação Industrial (Brazilian Company for Industrial Research and Innovation, EMBRAPII) and the BNDES.
The new BMP is set to reach over 200.000 through its new digital platforms and to directly support over 90.000 industrial SMEs until 2027. Since its first iterations, in 2016, the programme has impacted over 170,000 SMEs, including approximately 30.000 industrial firms. The programme unfolds in phases, according to the firm’s necessity and readiness, involving the improvement of management practices and production line optimisation, the implementation of digital solutions, and the development and adoption of Industry 4.0 solutions in SMEs. BMP stands out not only for its well-designed structure but also for its clear implementation and robust monitoring and evaluation mechanisms, paving the way for expansion.
Since 2004, Brazil has implemented the Grupo de Trabalho Permanente para Arranjos Produtivos Locais (Permanent Working Group for Local Productive Arrangements, GTP-APL) as the primary federal and state-level policy for promoting productive agglomerations and local business development. Over the years, the APL policy has evolved, expanding its scope beyond technical assistance to encompass support for SME exports and technology transfer between SMEs and research organisations.
Performance in this area is measured through established Key Performance Indicators (KPIs), effectively tracking the positive progress of this policy. Additionally, the SEBRAE conducts various initiatives for productive integration through Agreements of Technical Cooperation (ACTs) with the federal government, actively considering feedback from the private sector within the scope of the Permanent Forum for Micro and Small Enterprises. Brazil's strong performance in this area is reflected in its robust score of in the 4.93 sub-dimension of Measures to Improve Productive Associations, the highest among LA9.
Brazil's overall score is hindered by its performance in the Global Value Chain Integration sub-dimension (1.26). The country faces a significant challenge in terms of global trade integration, which poses a major obstacle to the internationalisation of SMEs. Presently, there is no specific policy addressing this aspect. SEBRAE's National Productive Chain programme stands out as a key initiative for supplier development, primarily focusing on micro and small enterprises (MPEs). While the programme aids MPEs in meeting the demands of large anchor firms and establishing buyer-supplier relationships, there is currently no effort to integrate domestic SMEs into the supply chains of multinational enterprises (MNEs) based in Brazil (OECD, 2020[7]).
The Way Forward
Enhance the participation of Brazilian SMEs in global supply chains, Brazil could refer to the policy recommendations outlined in the OECD report on SME and Entrepreneurship Policy in Brazil (OECD, 2020[7]). One key strategy could involve the implementation of supplier development programmes, leveraging business linkages between local SMEs and MNEs. Drawing inspiration from successful initiatives in peer countries within LA9 countries, Brazil can tailor its programmes to foster collaboration, improve competitiveness, and facilitate the integration of Brazilian SMEs into global supply chains.
Dimension 7. Access to market and internationalisation of SMEs
Brazil has achieved a remarkable score of 3.89 in the Access to market and internationalization dimension, showcasing strong performance in various sub-dimensions and highlighting opportunities for improvement in terms of integration benefits.
In the area of Support programmes for internationalisation, Brazil scored 4.38. In July 2023, Decree 11.593 introduced the National Export Culture Policy, aiming to foster an export-oriented mindset and increase the number of Brazilian exporters, particularly among SMEs. This decree also established the National Committee for the Promotion of Export Culture, a collegiate body tasked with implementing and monitoring the policy. In addition, other key initiatives include the Multi-Year Plan 2024-2027, aimed at expanding the country's role in the international trade of goods and services. Additionally, the National Export Culture Plan (PNCE) and the Agência Brasileira de Promoção de Exportações e Investimentos (Brazilian Trade and Investment Promotion Agency, ApexBrasil) play crucial roles. ApexBrasil, under the supervision of the MDIC, conducts activities to promote exports, attract foreign investments, and support the internationalisation of national companies. ApexBrasil’s 2020-2023 Strategic Plan sets clear objectives to strengthen Brazil's positioning as a global trade partner, generate business intelligence, and enhance international competitiveness. The agency offers various support programmes such as "Exporta Mais Brasil," which facilitates meetings between Brazilian companies and international buyers, and the Programa de Qualificação para Exportação (Export Qualification Programme, PEIEX). In 2022, ApexBrasil supported over 14,000 companies, underscoring its commitment to SMEs. Furthermore, the PEIEX and SEBRAE play fundamental roles in training and guiding companies to operate in the international market. Furthermore, since the beginning of 2023, the Brazilian government has been seeking to increase the participation of women in foreign trade.
In the Trade facilitation sub-dimension, Brazil achieved an outstanding score of 4.36, reflecting its commitment to supporting companies in their internationalisation process. The Learning to Export programme offers an online platform with content oriented towards export education, covering a wide range of relevant topics, and adapting to the user's knowledge level. Furthermore, the "Acesse o Mundo" platform allows any enterprise, including SMEs from any region or sector, to receive a free, automated export maturity assessment and a personalised list of actions for internationalisation. This tool helps identify the export services needed to access or expand sales in international markets.
The platform Brasil Exportação, funded by the UK government, aims to promote inclusive and sustainable economic growth, focusing on micro and small enterprises. ApexBrasil offers tools and programmes that facilitate companies' access to international markets, with a strong focus on SMEs. Additionally, the Single Foreign Trade Portal (SISCOMEX), co-administered by the Foreign Trade Secretariat of the MDIC and the Special Secretariat of the Receita Federal do Brasil (Federal Revenue of Brazil, RFB) of the Ministry of Finance, is an integrated system that simplifies the registration, monitoring, and control of foreign trade operations. Since July 2023, the new RFB Normative Instruction No. 2154/2023 updates the Brazilian AEO (Authorised Economic Operator) Programme, promoting greater security and agility in foreign trade flows, facilitating the inclusion of new actors, and reducing administrative costs for both companies and authorities. This update includes new features such as the incorporation of the Maritime Agency into the AEO Programme, aiming to strengthen efficiency and security in international trade.
In the e-commerce sub-dimension, Brazil stands out with a score of 4.30. The country has established significant regulations to protect online consumers, such as Decree No. 7.962 of 2013, which complements the Consumer Protection Code and sets clear standards for electronic transactions. This measure ensures transparency in product information, complete identification of the provider, efficient customer service, and respect for the consumer's right of withdrawal. Additionally, Brazil’s General Data Protection Law (LGPD) of 2018 provides a comprehensive legal framework for the protection of personal data. The Brazilian government is also committed to digital transformation through the Brazilian Digital Transformation Strategy (E-Digital). This initiative seeks to sign international agreements to ensure the security of cross-border e-commerce and support the expansion of exports through e-commerce. Domestically, ApexBrasil's E-xport programme promotes the internationalisation of Brazilian companies through e-commerce, offering resources such as readiness diagnostics, international marketing training, and technical advice for creating online stores. The National Programme for Supporting Micro and Small Enterprises (PRONAMPE) provides financial support to micro and small businesses, including access to special credit lines for investing in technology and developing e-commerce platforms. SEBRAE, in turn, offers comprehensive training and advice on e-commerce, as well as events and trade fairs focused on this area, promoting the development and competitiveness of micro and small enterprises in the e-commerce sector in Brazil. This robust infrastructure and government support position Brazil as a regional leader in e-commerce, offering significant opportunities for economic growth and business expansion.
On the other hand, the country has achieved an outstanding score of 4.53 in the Quality standards sub-dimension, supported by the National System of Metrology, Standardisation, and Industrial Quality Law (Law No. 5.966/1973). This law establishes the structure and competencies of the Instituto Nacional de Metrologia, Qualidade e Tecnologia (National Institute of Metrology, Quality and Technology, INMETRO), which is responsible for promoting the quality of products and services, ensuring the reliability of measurements, and guaranteeing product safety for consumers. INMETRO, linked to the Ministry of Economy, regulates technical standards, conformity assessment, laboratory accreditation, and product certification. Additionally, it organises seminars, conferences, and educational events on relevant topics in metrology and quality. INMETRO is active in cooperation projects, disseminating metrological knowledge in LAC, and Portuguese-speaking countries in Africa.
Finally, in the sub-dimension of the benefits of regional integration, Brazil scored 1.09, indicating a low perception of the benefits derived from integration in LAC. However, the Multi-Year Plan 2024-2027 highlights the need for Brazil to reclaim its foreign policy through active participation in multilateral and regional integration organisations, both in the economic-trade sphere and in the social, political, and environmental areas. The ApexBrasil Strategic Plan 2024-2027 also aims to expand the participation of Brazilian companies abroad, diversifying both the origins and destinations of exports, and promoting sustainability. The goal is qualitative and quantitative growth in the international presence of Brazilian companies, emphasising the balance among Brazilian states in exports, regional development, and the expansion of emerging markets. Notable are the trade agreements signed by Mercosur, of which Brazil is a full member, with countries such as Bolivia, Chile, Colombia, Cuba, Egypt, India, Israel, Mexico, and Peru, as well as agreements with other regional blocs such as the Andean Community (CAN) and the Southern African Customs Union (SACU).
The way forward
The following actions could be considered in order to improve Brazil's performance in this dimension:
Strengthen programmes to support the internationalisation of SMEs, increasing the inclusion of this segment in the initiatives implemented. This will improve the country's integration into international markets. Likewise, mechanisms to benefit sub-regional integration should be strengthened, through standardised and collaborative programmes, with adequate follow-up.
Improve information channels with SMEs on export procedures, including special programmes, simplified provisions and regulations, export training, export financing mechanisms, among others.
Improve monitoring and evaluation mechanisms for programmes implemented by different agencies, with a focus on those aimed at enhancing e-commerce and quality standards, through measurable indicators and regular publication.
Improve access and information for SMEs on certification as an AEO, establishing defined communication channels and differentiated benefits.
Dimension 8. Digitalisation
Brazil boasts an impressive array of public supports designed to facilitate SMEs' access to broadband connection, a crucial prerequisite for a robust digitalisation policy framework. However, weaknesses in monitoring and evaluation practices impact Brazil's Digitalisation dimension score, which, at 4.44, is above the regional average.
The nation has made significant strides in advancing its National Digitalisation Strategy (NDS), with a strategic focus on ensuring inclusive digital transformation, enhancing cybersecurity, and fostering a thriving digital economy. Spearheaded by the National Digital Transformation Secretariat, the strategy emphasises key pillars such as e-governance, digital infrastructure, and data-driven innovation. Brazil's forward-looking approach aims to leverage digital technologies for improving public services, enhancing government efficiency, and fostering economic growth. The strategy's holistic vision spans diverse sectors, aiming to create a digitally empowered society, contributing to a score of 4.33 in the National Digitalisation Strategy sub-dimension.
In the Broadband Connectivity sub-dimension, Brazil attains an impressive score of 5. The country has implemented ambitious initiatives to expand internet access, particularly in remote and underserved regions. Notable projects include the National Broadband Plan, which seeks to enhance internet infrastructure and affordability. Brazil's collaboration with International Organisations facilitates knowledge exchange, enabling the adoption of best practices in digital connectivity. Through partnerships with both public and private sectors, Brazil continues to enhance its connectivity landscape, ensuring citizens, regardless of their location, can fully participate in the digital era.
Similar to many Latin American countries covered in the study, Brazil's score of 4.00 in the Digital Skills sub-dimension is diminished by weak performance in the monitoring and evaluation component. Despite this, Brazil has implemented comprehensive programmes to enhance digital literacy, targeting diverse demographic groups. Initiatives such as the National Digital Inclusion Programme focus on equipping individuals with essential digital skills, fostering a digitally literate population. Moreover, Brazil's emphasis on education and training underscores its dedication to nurturing talent in emerging technologies. By integrating digital skills into formal education and vocational training, Brazil is laying the foundation for a skilled workforce capable of driving innovation and sustainable economic growth.
The Way Forward
In the future, the government of Brazil could consider:
Strengthen monitoring and evaluation mechanisms for digitalisation policies, to for example, ensure the strategic impact of initiatives aimed at enhancing digital literacy among SMEs.
Enriching its NDS by incorporating measurable targets, action plans, responsible entities, budgets, and timelines, fostering comprehensive implementation and dedicated SME Digitalisation Strategies within overarching plans.
References
[4] COPOM (2023), COPOM Statements, https://www.bcb.gov.br/en/monetarypolicy/copomstatements.
[5] IBGE (2023), Taxa média de desemprego cai a 9,3% em 2022, menor patamar desde 2015, https://agenciadenoticias.ibge.gov.br/agencia-noticias/2012-agencia-de-noticias/noticias/36351-taxa-media-de-desemprego-cai-a-9-3-em-2022-menor-patamar-desde-2015.
[1] OECD (2024), Real GDP forecast (indicator), https://doi.org/10.1787/1f84150b-en (accessed on 13 March 2024).
[3] OECD (2023), OECD Economic Surveys: Brazil 2023, OECD Publishing, https://doi.org/10.1787/a2d6acac-en.
[6] OECD (2022), Financing SMEs and Entrepreneurs 2022: An OECD Scoreboard, OECD Publishing, Paris, https://doi.org/10.1787/e9073a0f-en.
[7] OECD (2020), SME and Entrepreneurship Policy in Brazil 2020, OECD Studies on SMEs and Entrepreneurship, OECD Publishing, https://doi.org/10.1787/cc5feb81-en.
[2] OECD et al. (2021), Latin American Economic Outlook 2021: Working Together for a Better Recovery, OECD Publishing, https://doi.org/10.1787/5fedabe5-en.