Brazil lost nearly 10 million entrepreneurs to pandemic

RIO DE JANEIRO, BRAZIL – The number of Brazilians with a business established for at least 3.5 years plummeted from 22.3 million in 2019 to 12 million in 2020. The drop was not higher because of the increase in the number of startup entrepreneurs who opened a small business “out of necessity” because of unemployment.

The coronavirus pandemic drove almost 10 million Brazilians out of entrepreneurship, with women being the majority of those forced to close their businesses. This is shown in the 2020 Global Entrepreneurship Monitor report – a survey conducted in Brazil by SEBRAE (Brazilian Micro and Small Business Support Service) in partnership with the Brazilian Institute for Quality and Productivity (IBPQ).

According to SEBRAE, the number of Brazilians with a business established for at least 3.5 years plummeted from 22.3 million in 2019 to 12 million in 2020. The contraction of entrepreneurship in Brazil was only not greater because the newcomers continued to grow last year.

The survey shows that the entrepreneurship rate in the total adult population in Brazil fell to 31.6% from 38.7% in 2019, reaching its lowest level in 8 years.

The survey considers as an entrepreneur every adult who owns a business (formal or informal) or undertook any action in the year of the survey seeking to have a business in the future.

The Global Entrepreneurship Monitor survey was conducted in 2020 in 46 countries. In Brazil, 2,000 interviews were conducted with people aged 18 to 64 between July and October 2020.

Only necessity-driven entrepreneurship grows

The total number of startup entrepreneurs (with businesses up to 3.5 years in operation) increased from 32.2 million in 2019 to 32.6 million in 2020, reaching a rate of 23.4% of the adult population – the highest since the survey began in 2002.

The trend was driven by “out of necessity” or “survival” entrepreneurship.

According to the survey, the number of new entrepreneurs driven by necessity jumped from 37.5% to 50.4%. Moreover, 82% of respondents claimed that their motivation for starting a business was “to earn a living because jobs are scarce.”

The share of women among startup entrepreneurs also dropped last year to 45.9%, down from 50% in 2019.

Cross-country comparison

The decline in the number of more experienced small business entrepreneurs shows a worsening quality of entrepreneurship in Brazil. According to the survey, the rate of established entrepreneurship plunged from 16.2% to 8.7% last year, the largest reduction ever recorded in the past 17 years.

With the impact of Covid, Brazil fell from 4th place in the world total rate of entrepreneurship to 7th place. Considering only the rate of established entrepreneurs, the country is ranked 13th.

However, it is worth noting that the countries with the highest percentage are not necessarily the most developed. At the top of the overall ranking is Angola (57.5%), followed by Togo (48.8%), Guatemala (39.8%), Colombia (36%, Panama (35.9%), and Burkina Faso (34.5%). In the United States, the rate stood at 24.8% in 2020.

Nevertheless, the survey suggests that some entrepreneurs who closed their business with the pandemic have not yet given up on owning their own business. “Having your own business” was the 2nd most cited dream by respondents (59% versus 37% in 2019), second only to “traveling around Brazil” (63%).

“I would say it will return. This coming and going motion occur in micro and small businesses. Informal business leaves faster, but it can also come back faster,” says the president of SEBRAE, adding that the main differentiator for a successful business is entrepreneurial training and skills.