The best cities for entrepreneurship in Brazil

RIO DE JANEIRO, BRAZIL – São Paulo, Florianópolis, and Curitiba are the three best cities in Brazil for entrepreneurship. That is what the Entrepreneurial Cities Index (ICE) 2022 points out, a study created by Endeavor and, in this edition, produced by the National School of Public Administration (Enap).

The survey was based on data from 2021 and is the main x-ray of the Brazilian business environment. It serves as a guide for the sector’s advancement, revealing to public managers which aspects need to be valued or improved in the cities. The data presented is based on seven determining factors for the success of entrepreneurship: regulatory environment, infrastructure, market, financial capital, innovation, human capital, and entrepreneurial culture.

“In the overall ranking, entrepreneurship is still concentrated in cities in the South, Southeast, and Center-West, but a deeper look by area allows us to see that municipalities in the Northeast and North also have relevant successful experiences. These experiences can and should be replicated in the post-pandemic context we live, especially because one of the marks of today is the breaking down of physical barriers and the permanent installation of digital businesses in the country,” highlights the president of Enap, Diogo Costa.

He believes entrepreneurship is the engine of productivity and economic growth: “All the digital, environmental, and social transformation we need to face starts with an entrepreneurial transformation.

“The Entrepreneurial Cities Index is a relevant contribution from Enap to evolve the debate on entrepreneurship in Brazil, presenting indicators that guide public policymakers of Brazilian cities in developing ecosystems more conducive to business growth,” adds Endeavor’s Director of Institutional and Governmental Relations, Renata Mendes.

REGULATORY ENVIRONMENT

In the regulatory environment, Rio de Janeiro, Macapá, São Gonçalo, and São Paulo remain in the list of the ten most favorable municipalities for entrepreneurship. Várzea Grande, Cuiabá, Joinville, Florianópolis, Blumenau, and Porto Velho improved in this aspect compared to the previous survey and are now in the top 10. These cities have little bureaucracy and attractive local taxes and fees for the business community.

• Best tax rates for Urban Real Estate and Land Tax (IPTU), Service Tax (ISS), and Tax on Circulation of Goods and Services (ICMS): Macapá, Campo dos Goytacases, Ananindeua, Porto Velho.
• Tax simplicity, such as on-line issuing of debt clearance certificates and updated municipal zoning legislation: São Paulo, Guarujá, Praia Grande and São Gonçalo.
• Reduced bureaucracy in registration and cadastre time: Várzea Grande, Cuiabá, Aracajú and São José dos Campos.

INFRASTRUCTURE AND URBAN CONDITIONS

Municipalities in São Paulo State are the best positioned and practically dominate the 10+ ranking concerning transport infrastructure and urban conditions. It was observed in the previous report and also in the current edition. Cities in other parts of Brazil, such as Brasília, Porto Alegre, Rio Branco, and Florianópolis, have improved and moved up in the ranking.

The good performance in this item is related to good road connectivity, shorter distances from ports, and a higher number of airplane take-offs per year. It is also the case of broad access to fast internet, good average property prices per square meter, satisfactory electricity costs, and low homicide rates (since studies show that commerce is the main group affected by violence and crime).

• Intercity transportation: São Paulo, Recife, Salvador, Porto Alegre, and Fortaleza.
• Road connectivity: São Paulo and Brasília.
• Distance from the nearest port: Salvador, Porto Alegre, and Fortaleza.
• Urban conditions: Rio Branco (low average price of the square meter) and Santos (low cost of electricity, broad access to fast internet, and low homicide rate).

MARKET

There are representatives from all country regions in a prominent position in the market item. In 2020, no municipality from the North appeared among the top 10, but in the new study, Boa Vista integrates the list, in 8th place. “It is this determinant that evaluates the purchasing power of the population, the consumer market, and the reach to the external market. The diversity of municipalities performing well in this area shows favorable scenarios in the production and consumption economy in various parts of Brazil,” celebrates Enap’s Director of Advanced Studies, Diana Coutinho.

Good market opportunities:

• Competitive environment (level of income and exporting companies): Niterói, Brasília, Canoas, Jundiaí, and Osasco.
• Attraction poles for new business (alternatives to larger cities): Jundiaí and Osasco.
• GDP growth: Canoas and Niterói.
• HDI, public purchases, and high GDP per capita: Brasília.

CAPITAL ACCESS

Capital for entrepreneurship in Brazil is available mainly in large urban centers. It is a reality that appears in the 2020 ICE and remains the same in 2021. Of the top 10 cities in the two recent index editions, eight are capitals, and two are part of metropolitan regions.

The main ways for entrepreneurs to raise financial resources in the country are bank credit with interest (available capital via debt), sale of part of the venture to investment funds (venture capital), and savings (capital saved per capita). Empirical studies indicate that the ‘cost’ of accessing these resources is the main impediment to starting a new business.

Good opportunities to access capital:

• Bank credit and saved capital: São Paulo and Porto Alegre.
• Venture capital: São Paulo, Curitiba, and Belo Horizonte.
• Credit operations by municipality: Osasco.

INNOVATION

Innovation in Brazil does not occur homogeneously in all cities – on the contrary, it is concentrated in the Southeast and South. In the 2020 edition of the report, only municipalities from these regions appeared at the top of the list. Still, in 2021 there is news: Campina Grande (6th) and Vitória (8th) will join the list of cities that stand out in this theme about the local business environment.

The cities that stand out in this aspect have many masters and doctors in science and technology (S&T), investments in research and development (R&D), local technological infrastructure, and many intellectual property contracts. It also means that these are the municipalities with the largest number of companies with their own patents and software, creative economy, innovative, or technology-related industries.

“The innovations companies present fuel competitiveness and generate higher profits for those that stand out the most,” says the ICE 2022. However, despite the good results, the report brings a warning: of the 101 cities analyzed in the new edition, about 80 lack technological infrastructure, 44 have no investment in R&D, and 29 have a very low proportion of masters and doctors in S&T. “Improving the Brazilian innovation scenario is always important for the economic development of a country,” says Enap’s General Coordinator of Research, Cláudio Shikida.

Good opportunities in innovation:

• Technological Parks: São Paulo, Campinas, São José dos Campos, Campina Grande, and Recife.
• High proportion of masters and doctors in S&T: Campina Grande, Belém, and Recife.
• Registration of patents: Campina Grande and São Paulo.
• Investment in R&D: Florianopolis, Belem and São Paulo.

HUMAN CAPITAL AVAILABILITY

Concerning human capital, the best-positioned locations in the ranking have qualified professionals in both basic and specialized labor. In this aspect, the top six in 2021 had already excelled in 2020. This year’s list includes one city in the Northeast (Recife), two in the South (Maringá and Porto Alegre), and one in the Southeast (Santos).

Good opportunities for human capital availability:

• Access to and quality of basic labor: Jundiaí, Florianópolis, Vitória, Santa Maria, Curitiba, and Niterói.
• Access to and quality of skilled labor: Florianopolis, Santa Maria, Vitória, Vila Velha, Niterói, and Curitiba.

ENTREPRENEURIAL CULTURE

Entrepreneurial culture is the determinant that presents the most different results when comparing the 2020 findings with those of 2021. This item was restructured, looking for new ways to capture trends within searches related to internet entrepreneurship – which was the form of doing business that developed most in the period.

“With this change in the methodology, we are guaranteeing greater agility and replicability of data, while maintaining the quality of the indicators,” concludes the technical responsible for the research, Arnaldo Mauerberg Jr. In this regard, the cities of Goiânia, Osasco, Brasília, Maceió, and Diadema are now at the top of the list.

With information from Gazeta do Povo