Business in Brazil: The maturing Latin American market

Over the past decade, Brazil’s venture capital and private equity landscape has been transformed from a relatively fragmented and undercapitalized market into one of Latin America’s most dynamic innovation engines. This transformation—still unfolding, and not without volatility—reflects an ongoing entrepreneurial undercurrent in the country.

The Brazilian startup ecosystem is still young by global standards but is maturing quickly. It has weathered the excesses of early-stage exuberance, adjusted to tighter financial conditions and emerged with a new emphasis on capital efficiency, scalable business models and regional relevance. For those watching from abroad—particularly investors and entrepreneurs in Asia—Brazil presents not only a compelling growth story but also a potential soft landing into Latin America’s 650 million-person market.

Coming of age

Until mid-2021, Brazil’s startup landscape was, akin to many places around the world, awash with venture capital. Interest rates were historically low, capital was relatively abundant and valuations soared—part of a global trend where growth took precedence over profitability. This era produced a significant crop of unicorns in Brazil, including Nubank, iFood and 99 Taxi, companies that not only defined their respective verticals but also validated the potential of Latin America’s consumer base.

That wave of investment has since receded. Today, with interest rates north of 14%, Brazil is experiencing what could be described as a healthy recalibration. Investors are more focused on fundamentals, with unit economics, not user growth, now determining valuation multiples. And yet, despite this contraction in available capital, the pipeline of emerging unicorns remains robust, and by some estimates, more than half of Latin America’s next group of unicorns are Brazilian.

This shift is not merely cyclical—it is structural. Founders are returning to the ecosystem with second ventures, armed with lessons from previous cycles and domestic investors are estimated to contribute nearly two-thirds of VC funding. In short, the Brazilian ecosystem is becoming less speculative and more self-sustaining.

Strong sectors

Brazil’s entrepreneurial energy spans a diverse range of sectors, but there are several standouts including agritech and climate-related innovation. As a global agricultural powerhouse, Brazil is central to global food security and sustainability, meaning that technologies that enhance productivity, reduce emissions or improve supply chain resilience are attracting both capital and talent.

Fintech, particularly in relation to financial inclusion and digital payments, is another standout. Brazil’s turbulent monetary history—from chronic inflation to multiple currency reforms—has sensitized consumers to financial tools. The introduction of Pix, a central bank-backed instant payment system, revolutionized payments, and while there are similar sounding fintech approaches around the world, what is truly innovative about Pix is that it is embedded within existing bank accounts and allows real-time transfers, rather than using apps that connect to your bank account. Today, more than 70% of transactions in Brazil are settled through Pix, taking over from credit cards and reshaping the country’s financial infrastructure in just a few years.

Thirdly, logistics and infrastructure, continue to be an engine for startup-led innovation. Brazil’s physical infrastructure—marked by geographic vastness and uneven urban planning—presents chronic delivery and mobility challenges. Startups offering “infrastructure hacks,” from last-mile solutions in remote villages to delivery routes that navigate river-bound communities, are addressing real gaps in a way that is both localized and scalable.

Stages of innovation

Innovation in Brazil is not just the exclusive terrain of startups. Large corporations, many of which once viewed digital transformation with skepticism, are now central players in the ecosystem, and the evolution of the landscape has occurred in three phases.

The first was state-led, when public programs and government-backed incubators seeded early-stage ventures around 15 years ago. The second saw a growth of corporate interest, with many firms launching innovation labs or investing through venture arms—sometimes more as branding exercises than strategic bets. The third and current phase reflects a more mature collaboration, with select corporates integrating startups into their value chains or acquiring them outright.

Prominent examples include Itaú Cubo—a leading innovation hub akin to a kind of startup incubator run by the largest bank in Brazil, Itaú Unibanco—Ambev’s partnerships in beverage logistics and Randon’s engagement in mobility tech. Regional innovation hubs such as Porto Alegre’s Instituto Caldeira and Recife’s Porto Digital have become vibrant micro-clusters of co-creation where startups, corporates and academia converge—and are the places foreign investors must examine closely if they want to spot Brazil’s most compelling opportunities early.

Importantly, this convergence is not just about capital—it’s about capability. Corporates gain agility, while startups gain access to customers and infrastructure, resulting in a more dynamic innovation landscape, better equipped to address systemic challenges.

Going out or staying at home?

Brazil’s startup ecosystem is fundamentally domestic-facing. With a population of over 200 million and a relatively closed economy, most entrepreneurs are focused on solving local problems and there is plenty of market space into which expansion is still possible. That said, the strategic imperative to look outward is becoming clearer, both as a potential source of new capital but also for inspiration for new business ideas.

Looking at China as an example, there are, despite the geographical distance, surprising parallels between the economic and business environments of the two countries. Both are large, complex economies with sizable rural populations, mobile-first digital ecosystems and, at least historically for China, fragmented infrastructure. Consumer behavior—especially online—is remarkably similar, both in terms of attitudes and tastes. In both countries, social commerce is on the rise, mobile payments are dominant and super apps are gaining traction.

What works in China often also resonates in Brazil, with examples including business models such as on-demand delivery and fintech, as well as broader policy frameworks for development. For Brazilian entrepreneurs and investors, the Chinese playbook could offer a roadmap: build from infrastructure gaps, focus on inclusion and leverage digital platforms. For Chinese stakeholders, Brazil therefore represents a relatively fertile landscape to approach with a similar playbook to those that worked in China. And beyond that, Brazil can act as a gateway to the wider region of Latin America, given its similar digital and demographic profiles.

Barriers in Brazil

Despite any potential strategic alignments, it remains difficult for businesses that prove successful in Brazil to expand onto the global stage. Currency depreciation can make international expansion prohibitively expensive for startups that aren’t already operating in strong international currencies. Compounding this are the usual operational complexities stemming from differing regulatory frameworks to unfamiliar consumer behaviors.

That said, cross-border collaboration is growing. The key lies in aligning capital sources with expansion goals. International investors who bring not only funding but also market knowledge can play a catalytic role in enabling Brazilian startups to scale abroad. The inverse is also true: foreign companies seeking access to Latin America may find Brazilian startups to be the right partners.

Brazil may not yet be a springboard for global tech giants, but it is rapidly becoming a regional base for scalable innovation. With the right partners, a startup born in São Paulo can just as easily find product-market fit in Bogotá, Buenos Aires or even Jakarta.

Democratization through digitalization

The key undercurrent across the country’s startup and business ecosystem is digitalization and its use for inclusion across the board. The country has transitioned from cash to credit cards to digital payments in less than two decades, with smartphones becoming the default interface for banking, shopping and healthcare, among other things. For many Brazilians, particularly in underserved areas, startups have been the first point of contact with modern services.

This digital shift has not only redefined business models, it has also created new social contracts, with entrepreneurs building systems that integrate millions into formal markets. This is where Brazil’s innovation model shows not just technological sophistication, but the ability to understand and develop solutions to specific and complex issues. Dealing with these issues requires innovation, and given the macroeconomic instability and infrastructure gaps present, the solutions that emerge are often robust, inclusive and potentially exportable to other countries that are trying to make similar developmental jumps.

Facing forwards

Brazil is not yet a global tech powerhouse, but its trajectory is a positive one. Its ecosystem has evolved from grant-dependent startups to VC-backed scale-ups. It has diversified beyond just São Paulo to regional development hubs across the country that offer different ideas and services, and is shifting from copying models to creating them.

Although the next five years are likely to be tough, due to a devalued currency and something of an identity crisis when it comes to global political alignment, there is a lot of potential in Brazil. The country is filled with willing entrepreneurs and offers a wide range of opportunities for both domestic startups and international investors, and can play a positive role as a landing point for those looking to enter the wider Latin American markets.