This publication presents the OECD country review of small- and medium-sized enterprise (SMEs) and entrepreneurship policy in Brazil. It was prepared at the request of the Brazilian Ministry of Industry, Foreign Trade and Services (MDIC), which was merged into a new and enlarged Ministry of Economy in early 2019. This publication is part of the series of OECD Country Reviews on SME and Entrepreneurship Policy undertaken by the OECD Centre for Entrepreneurship, SMEs, Regions and Cities (CFE). Previous country reviews have covered Canada, Indonesia, Ireland, Israel, Italy, Kazakhstan, Mexico, Poland, the Russian Federation and Thailand.

This report presents the main findings of the OECD review of SME and entrepreneurship policy of Brazil, which was undertaken between the end of 2018 and 2019. This was an important transition period for Brazil, due to the election of a new government in October 2018 and the creation of a new and enlarged Ministry of Economy in January 2019, which merged the functions of four previous ministries.

This chapter summarises the main findings and policy recommendations for the full report. Each section reflects the main messages of each thematic chapter: i) small- and medium-sized enterprise (SME) performance and entrepreneurial dynamics; ii) the business environment for SMEs and entrepreneurship; iii) the governance of SME and entrepreneurship policy; iv) federal programmes for SMEs and entrepreneurship; v) SME export policies; vi) the innovative start-up ecosystem; and vii) The local dimension of SME and entrepreneurship policy.

This chapter presents information on small- and medium-sized enterprise (SME) performance and entrepreneurial dynamics in Brazil from an international comparative perspective. One of the main features of Brazil’s industry composition is the large share of wholesale and retail trade in the total stock of companies and national employment. SMEs account for a significant proportion of total employment and national value added in Brazil, but less than the OECD average. Labour productivity levels between Brazil and the OECD have diverged in the last 15 years. Against this backdrop, the gap in labour productivity between Brazil and the OECD is the largest in industry and trade, while it is narrower in construction and services. From a firm-size perspective, productivity gaps between SMEs and large companies are particularly wide in industry, which is also an outcome of the low innovation and export propensity of Brazilian manufacturing SMEs. As to entrepreneurial dynamics, Brazil shows a high rate of entrepreneurial activity, but growth-oriented entrepreneurship and business scale-up are much less common.

This chapter gives an overview of the main strengths and weaknesses of the business environment for small- and medium-sized enterprises (SMEs) and entrepreneurs in Brazil. Brazil’s participation in global trade is only half the OECD average, which limits opportunities for SME exports and SME participation in global supply chains. Product market regulations, including tax compliance, continue to be burdensome for many companies, including larger SMEs ineligible for one of the two existing preferential tax regimes (Simples Nacional and Micro Empreendedor Individual [MEI]). Credit market conditions are also tight for SMEs, as shown by a high interest-rate spread between SME loans and large-company loans. Nonetheless, the government has introduced some important reforms to remedy these problems. In the area of trade policy, local content requirements are being progressively lifted. MEI and Simples Nacional have simplified considerably the regulatory and tax environment for micro and small companies with gross annual revenues respectively below BRL 81 000 and BRL 4.8 million. And a series of policy reforms have reduced the degree of credit subsidy and banking concentration in the domestic credit market.

This chapter describes and assesses the legal framework underlying small- and medium-sized enterprise (SME) and entrepreneurship policy in Brazil, the main institutional stakeholders involved in SME and entrepreneurship policy, and existing policy co‑ordination arrangements. Preferential treatment for micro and small businesses is enshrined in the 1988 Federal Constitution of Brazil, which provides the legal ground for the main law overseeing the activity of SMEs, i.e.Lei Complementar 123/2006. With the formation of a new government in January 2019, the new Ministry of Economy has become the main institutional player in SME and entrepreneurship policy. However, programme implementation mostly happens in collaboration with organisations in the so-called Sistema S, which are not formally part of the government but work in close consultation with it in sectors and activities of public interest. Policy co‑ordination is strong both at the institutional and operational levels, as shown by many SME programmes being the result of collaborations between different government ministries, agencies and private sector organisations.

This chapter describes and assesses federal programmes in support of small- and medium-sized enterprises (SMEs) and entrepreneurship, notably in the areas of access to finance, innovation, public procurement, entrepreneurship education, managerial and workforce training, and women’s entrepreneurship. Access to finance is mostly promoted in Brazil through loan subsidies, whereas loan guarantees are less widespread. Brazil has a wide range of targeted programmes to support innovation in SMEs, some of which are well-designed and successful. However, spending on targeted SME innovation programmes is dwarfed by spending on research and development (R&D) tax credits, which are overwhelmingly used by large companies. Entrepreneurship education in Brazil has a solid reach and content, on which the government could build to reach more effectively disadvantaged groups and groups underrepresented in the entrepreneurial population. Finally, there is a need to strengthen public policies for women’s entrepreneurship, including through the implementation of more women-specific support programmes.

This chapter describes and assesses Brazil’s federal policies in support of small- and medium-sized enterprise (SME) export, which include, among others, export training, trade facilitation, export financing, and e-commerce promotion. Export training is widely available through the National Plan of Exporting Culture (PNCE), operated by the Ministry of Economy, and the Export Qualification Programme of the National Export and Investment Agency (Apex-Brasil). Both programmes are well-designed, although it is not clear the extent to which they have resulted in an increase in the number of exporting SMEs and/or SME export volumes. Trade facilitation for SMEs has mostly occurred through the Simples Exportação regime, while there is scope for increasing the availability of export finance and for launching new programmes forging closer ties between multinational enterprises and local SMEs.

This chapter describes and assesses the innovative start-up ecosystem of Brazil. This ecosystem includes many public and private sector entities which collaborate well with each other. Brazil also has a sound innovation policy legal framework in which priorities are well outlined. Nonetheless, the patent system is burdened by a heavy backlog, while research and development (R&D) tax credits are virtually not available to either start-ups or innovative small- and medium-sized enterprises (SMEs). There are quite a large number of specific programmes targeted at start-ups in Brazil. Business incubators, technology parks and accelerators are widely available and have generated positive results, while open innovation programmes look promising. On the downside, there are some redundancies among certain programmes and some of them are of a very small scale.

This chapter looks at the local dimension of small- and medium-sized enterprise (SME) and entrepreneurship policy in Brazil. It shows that employment by firm size follows broad regional patterns, with employment in SMEs proportionally more common in the South and Southeast, Brazil’s industrial heartland. These two regions also host the largest number of innovative SMEs and exporting micro and small enterprises. Business environment conditions also tend to vary at the local level, although an important effort of regulatory harmonisation has been ongoing since 2007 through the REDESIM programme. Cluster development has been the main local development policy of Brazil for over two decades. Overall, there is evidence that participation in clusters improves the performance of Brazilian SMEs in terms of employment generation, innovation and productivity growth.