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70% of New Companies Fail in Brazil

A Brazilian store Between 2000 and 2006 726,600 companies were established each year, in average, in Brazil. That's what shows the 2006 Company Demography Research disclosed at the end of last month, by the Brazilian Institute of Geography and Statistic (IBGE). In the meantime, 493,800 were closed.

The average annual balance of surviving companies was 233,000, equivalent to 32.07% of all new establishments.

The average annual growth in the total of companies active in the period was 5.7%. In 2006, there were little more than 5 million companies active in the country.

According to the report, the greater number of companies in 2001 was the result both of greater entry of companies in the period analyzed (829,302) and due to a lower number of companies leaving (330,276). The low growth in 2006, in turn, was the result of average new entries of (710,868), and a greater number of exits in the period (664,489).

The study also shows that the average rate of entry of companies in the market, between 2000 and 2006, was 16.9%, whereas average exits were 11.2%.

Activities related to agriculture, livestock farming, wood, forestry exploration, fisheries and services represented the greatest rates of company entries. The lowest rates were identified in industrial activities.

The IBGE study also shows that business established between 2001 and 2006 was responsible for 46.5% of formal employment in companies in the period.

Of every ten formal jobs created by new companies (with up to five years in operation), between 2000 and 2006, an average of four were in trade, three in the service sector and three in industry. With regard to company size, five of these posts were established in micro companies, three in small ones, one in medium ones and one in large ones.

The study analyzed 5.1 million establishments among the 5.7 million companies and other organizations active in the 2006 Central Company Registry.

Anba

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  • João da Silva

    Ch.C
    [quote]Every aspect of the companies are controlled by the government through administrative forms, red tape and corruption.
    – the more tax layers and admin. forms layers there is, the more government administration workers there will be…by definition.[/quote]

    Some more thought provoking comments. Spot on.

    That is the reason why I think that there are not going to be any Tax reforms nor Labor law reforms, especially the latter. I always make it a point to ask one single question when someone talks about labor law reform: What are we going to do with the Labor Tribune, which has hundreds of thousands of [i]well paid[/i] jobs, starting from a mere clerk to the President of the Tribune?

    I don’t know if you know that the government is going to introduce a new labor law which will forbid the companies to fire a worker whose wife or girlfriend is pregnant till the baby is 12 months old. First I thought it was a joke, but came to know that it is not. 😉

    I am sure that this law will create more well paid jobs for “Inspectors” in the Labor Tribune.

  • ch.c.

    Joao !
    a point for every excess job in the administration !

    Joao, let me tell you something that is not coming from me :
    “A Government is not supposed to, and cannot, create wealth for their citizens.
    A Government must provide a good environment.
    In a good environment, entrepreneurs will reveal by themselves.
    Those who succeed must pay back something to the governemt, through taxes”

    This is as good for companies employed individuals and entrepreneurs !
    What does Brazil ?
    The exact opposite for the country environment :
    – low and bad overall education
    – very bad and low infrastructure
    – the world highest interest rate after inflation
    – Every aspect of the companies are controlled by the government through administrative forms, red tape and corruption.
    – the more tax layers and admin. forms layers there is, the more government administration workers there will be…by definition.

    Even the Brazilian Government loans subsidies are made from a Government Controlled Rate (TJLP), PLUS PLUS PLUS PLUS all the financial DIFFERENT intermediaries various charges….ending usually AT AROUND 1 time the TJLP rate….AS ADDITIONAL COST !

    Is all the above PRO BUSINESS ?
    WELL……. Just look at your Doing Business ranking !!!!

  • João da Silva

    [quote]No doubt Brazil is AGAINST BUSINESS…AND PRO GOVERNMENT NON EFFICIENT ADMINISTRATION BECAUSE THAT CREATE A LOT OF
    JOBS….ALL THESE VARIOUS AND ENDLESS ADMINISTRATIONS FORMS, LAW AND REGULATIONS ! [/quote]

    You may have a point there, old chap. 😀

  • ch.c.

    but…but……
    Just look at one the preceeding article talking about your 17 millions…. STRONG…. companies !!!!!!!

    LAUGH…LAUGH…LAUGH…LAUGH….LAUGH….LAUGH !

    As I said, the Brazilians talks are always different from proven facts and stats !
    Proven…once more !
    Never ever trust a Brazilian is as true now as in the past.
    Cheaters always cheat, liars always lie, hiders always lie……until they no longer can.
    And LOSERS are by definition…cheaters, liars and hiders…such as Brazil !
    New promises are then promised…but never come true.

    Just look once more at your ranking of Doing Business.
    Brazil rank is 125th out of 185 countries or so.

    Better yet, analyzing the report you will see that a an average size Brazilian Company has to spend 2600 hours YEARLY…to figure out and paying their various tax bills.
    THE WORLD WORST RANKING !
    World second worst ? Cameroon with “only” 1400 hours !

    NOOO ? Do I lie or dont know what I am talking ?
    Hmmmmm….here are the rankings…for your own reviews of how BAD Brazil really is in time spent just to figure out the tax due and payment of those taxes :
    http://www.doingbusiness.org/ExploreTopics/PayingTaxes/?direction=Asc&sort=3

    For the overall ranking of Doing Business :
    http://www.doingbusiness.org/economyrankings/

    And for starting a business you are ranked 127th

    No doubt Brazil is AGAINST BUSINESS…AND PRO GOVERNMENT NON EFFICIENT ADMINISTRATION BECAUSE THAT CREATE A LOT OF
    JOBS….ALL THESE VARIOUS AND ENDLESS ADMINISTRATIONS FORMS, LAW AND REGULATIONS !

    Hip..hip..Lula, hip….hip…Lulaa, hip…hip Lulaaa !!!!!

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