Brazil Breaks Record for Opening Companies in Q1, Says SERASA

RIO DE JANEIRO, BRAZIL – A total of 889,003 new companies were created in the first quarter of 2020, according to data from SERASA Experian (information services to support businesses). The number is the highest since official records began in 2010.

The study, entitled “Company Formation Indicator”, shows that the volume of new companies opened in the first three months of this year is 17.1 percent higher than the same period in 2019, when 759,257 new companies were opened.

According to Luiz Rabi, an economist at SERASA Experian, the need to generate income amid unemployment has been one of the main drivers of increased entrepreneurial activity in the country.

“The cost of opening a business is a factor that weighs on the new entrepreneurs’ decision. Companies requiring little investment in equipment do not need a commercial site to operate and basically depend on the entrepreneur’s workforce,” Rabi says.

Contrary to expectations, considering only the month of March, when the isolation measures began to be adopted in Brazil, the emergence of new companies increased by 24 percent, representing the largest expansion of the year. There was a 10.4 percent increase from February to March, with no seasonal adjustment.

The data from SERASA reflect only the initial impact of the pandemic. Another survey by the Ministry of Economy shows that 189,878 companies were opened in April this year, a 29.5 percent drop compared to the same period in 2019.

Sectors and regions

According to the SERASA survey, for every ten companies created between January and March this year, seven (69.6 percent) operate in the service segment. Commerce accounts for a 21.8 percent share of new ventures, while industry represents 7.4 percent of all companies opened in 2019.

Of the five states leading the ranking of new companies opened in the last quarter, three are located in the North: Amazonas (46.9 percent), Pará (35.2 percent), and Roraima (31.9 percent).

The list also includes Sergipe in third place (32.1 percent) and Maranhão in fifth (31.7 percent). The state presenting the most modest growth in the creation of companies was Bahia, with an increase of 7.8 percent.

Although the Southeast region recorded the lowest growth of new companies in the first quarter of this year (14.7 percent), in absolute numbers it records the highest number of new businesses: 462,555.

The first Southeast state to be listed is Rio de Janeiro in 19th place, with 16.3 percent, followed by São Paulo, with 14.8 percent.

The North, with 45,248 companies created in the period, is the leader in terms of growth, with a high of 30.7 percent. The South (20.2 percent), Midwest (20.0 percent) and Northeast (16.2 percent) are next.

MEIs are highlights

Microenterprises (MEIs) account for the largest share of new business in the first quarter. With a growth of 11.8 percent compared to the same period last year, MEIs represent 79.3 percent of openings, or 707,022 new CNPJs (Federal Company Tax Registry) that fit this legal structure.

According to Rabi, the crisis and increased dismissal scenario indicates that the creation of sole proprietor MEIs will be boosted, given that they are the most common form of business organization among people turning to entrepreneurship out of need.

“People who have lost their jobs at this time of economic uncertainty seek entrepreneurship and self-employment, typically from home, as a way out to get back into the market,” he says.

In addition, companies classified as limited liability companies also grew strongly in the last quarter, up 60.4 percent, but represent only 8.5 percent of the universe of new business, with 75,939 companies created in the period.

Sole proprietorships lost ground in the last quarter, with a decline of 13.2 percent – accounting for a share of 4.1 percent of the total number of companies opened in the last quarter (36,058 new ventures in the period).

Source: InfoMoney