Brazil remains an attractive market for foreign investment, especially for companies seeking to expand their customer base in the country and the surrounding region, according to a survey from KPMG LLP, the U.S. audit, tax and advisory firm.

Brazil has broken free the shackles of the recent global crisis and has emerged much stronger, both on financial strength and outlook. The World Bank is estimating that Brazil's economy will be the fifth largest in the world by 2016. Analysts at Credit Suisse are predicting that the nation's economy will be flat at 0.2% this year (2009) and will expand at a 5% rate in 2010. In addition, bond ratings agency Moody's (NYSE: MCO) upgraded Brazil's credit rating to investment grade status, after the nation built up its foreign reserves and increased its GDP growth rate for the first quarter by 1.9%. 

Also, Brazil has been selected to host the 2016 Summer Olympics and 2014 World Cup Soccer Championship. A combination of these two major international sporting events will spark an infrastructure spending spree. Brazil already has plans in place to invest $11 billion to host the 2016 Olympics. In a study by Brazil's Ministry of Sports, these two sporting events could bring in nearly $51 billion into Brazil's economy through 2027 and add approximately 120,000 jobs annually through 2016.

In the KPMG survey, 41 percent of more than 185 business executives with current investments in Brazil said they were interested in expanding in the country.  Separately, when asked to identify the primary driver for their company to invest in Brazil, 66 percent said expanding their customer base through access to local and regional markets.

"Brazil's economy is rebounding more quickly than most after the economic downturn, and long-term growth also has been forecasted, as the country has been a hotbed for companies looking to acquire commodities and natural resources," said Mark Barnes, principal-in-charge of KPMG LLP's U.S.-High Growth Markets practice.  "Brazil's strong, growing middle class with disposable income and an appetite for new goods and services also makes it an appealing market for companies looking to expand their customer base.

"In addition to providing access to the local market, Brazil can serve as a gateway to the Latin American and Caribbean region for companies setting up operations in the country," added Barnes.

According to the KPMG survey, 53 percent of respondents said their current or intended business model for Brazil is foreign direct investment, while trade (25 percent), financial (12 percent) and capital (10 percent) markets also were cited.

However, some factors were noted as potential barriers to investment in Brazil such as complex and high taxation, cited by 52 percent of respondents.

"The challenges presented by Brazil's tax regime can require assistance from professionals who can help navigate this area," said Barnes.  "Risk, governance and compliance-related issues also are important considerations for any organization looking to establish a presence in a high-growth market such as Brazil and working with the right professionals can help here as well.

"While every market has its shortcomings, Brazil is still one of the fastest growing economies in the world and its upside and positives make it an attractive market," he added.

The survey was conducted in November 2010 during a KPMG U.S.-High Growth Markets practice-sponsored event focused on investing in Brazil.

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