If you are considering starting a business in Latin America, Brazil and Mexico are two stand-out contenders. Both have large economies with strong entrepreneurial networks but as they each have unique opportunities, they each have their own challenges too.
Here is a side-by-side comparison of the two so that you can consider living expenses, taxes, visa requirements and how to set up a business in each one.
How Startup-Friendly Are Brazil And Mexico?
Brazil: The country has an estimated 14,000 startups with around 20 unicorns. These are companies with a value of $1 billion. With a population of more than 210 million people, it offers a large consumer base for new startups. The government is also highly supportive of tech startups in particular, offering incentives and guidance. However, Brazil does rank lower on the Ease of Doing Business Index due to high taxes, stringent regulations and a lengthy process to register a business.
Mexico: Similarly, Mexico has about 14,900 startups. The country does rank higher than Brazil in terms of ease of doing business and it has easy access to the US market. Still, safety remains a concern in some of the regions and the country is reliant on economic trends in America.
The Cost Of Living In Brazil And Mexico
Brazil: The cost of living will vary depending on which city you are in. São Paulo and Rio de Janeiro are typically more expensive, while outlying areas are a bit more affordable. In these main cities, a one bedroom apartment can range from £400 – £900 and overall monthly living costs are approximately £800 – £1,500.
Mexico: Living expenses are cheaper than in Brazil, which is ideal for entrepreneurs on a budget. Mexico City remains the most expensive, with rent ranging from £300 – £700. Monthly living costs can range from £600 to £1,100.
For those who are budget-conscious, Mexico would be the better option. Although, if you are able to live outside of the main cities in Brazil as a digital nomad, it may be more affordable.
What Are The Tax Regulations In These Countries?
Brazil: The corporate tax rate is 34% and Value Added Tax (VAT) ranges from 17% to 25% depending on the region. Employers also need to contribute 43% of their employees’ salaries towards social security contributions.
Mexico: Here, the corporate tax rate is 30% but is reduced for smaller businesses. VAT is set at 16% and employers must pay 25% towards social security contributions.
In this case, Mexico’s tax system is a bit simpler and easy to navigate especially for small startups.
Are There Any Language Barriers?
Brazil: The official language is Portuguese. On the whole, English is spoken very little even when it comes to conducting business so foreigners who can’t speak the language may encounter some challenges.
Mexico: The official language is Spanish but English is more widely spoken especially in tourist areas.
Regardless of which country you choose, it will be highly beneficial to have an understanding of their respective languages or consider working with a translator to avoid language barriers.
Visa And Residency Requirements
Brazil: A Business Visa is required for any business-related activity while a Work Visa will require a company to sponsor it. To acquire an Investor Visa, one must invest around £68,000. Foreigners can apply for permanent residency after four years. Remote workers can also apply for Brazil’s Digital Nomad Visa, allowing them to work in the country.
Mexico: Similarly, a Business Visa will permit business activities. An Investor Visa here will require an investment amount of about £165,000. After four years, foreigners can obtain a temporary residency which can lead to permanent residency.
Potential Challenges Of Starting A Business In Brazil And Mexico
Brazil: Business registration can take up to a few months and is a fairly lengthy process. While taxes and employment costs are high, the country is also prone to inflation and the economy isn’t always stable.
Mexico: Corruption is an ongoing issue with major crime in some regions. Their dependence on the US economy also means that any changes in America can consequently impact them.
How To Start A Business In Brazil Or Mexico
Here is a step-by-step process on how you would go about starting a business in Brazil or Mexico.
Brazil: The first step is to choose your business structure and register with the Board of Trade. After this, you can obtain a CNPJ which is your Tax Identification Number from Receita Federal. You can then register for municipal and state taxes, open a business bank account and apply for any applicable operating licenses.
Mexico: Select a business structure and register with the Public Registry of Commerce. You can then obtain a Tax ID from SAT and register with the Mexican Social Security Institute if you need to hire employees. After this, you can open a corporate bank account and obtain any necessary permits.
Should You Start A Business In Brazil Or Mexico?
Brazil and Mexico both offer exciting opportunities for startups, but the one that you choose will depend on your business goals and budgets.
Brazil offers a big consumer market and if you plan on launching a tech startup, you will have plenty of government support. However, you will need a decent amount of capital to accommodate the high startup costs.
On the other hand, Mexico offers an easier registration process with cheaper taxes. The cost of living is also more affordable with a relatively stable economy, in addition to close proximity to the US.
Good luck!
