20% of New Brazilian Businesses Don’t Resist a Year. Half Disappear in 8 Years

Brazilian small business Survival of businesses in Brazil is the highlight of the Company Demographics survey, disclosed this Thursday, November 29, by the IBGE (Brazilian Institute of Geography and Statistics). Of the total of 737,950 firms established in 1997 throughout the country, only 51.6% remained active as of 2005.

Enterprises with up to four employees answered to 90.8% of the total number of companies established. According to the analyst in charge of the survey, Kátia Carvalho, the IBGE observed that of the companies established in 1997, eight years after their establishment, in 2005, nearly half had already closed their doors. "Nearly half the companies was already out of the market. It is a survival problem."

Kátia Carvalho stated that the survey does not provide an explanation for those trends. "We can only portray what is happening," said the technician at IBGE. She admitted, however, that aspects of the economic conjuncture might be linked to the extinction of companies in Brazil.

"These factors might definitely play a role." The analyst called attention to the fact, though, that the "survey has no means for determining the cause."

According to the survey by the IBGE, the ratio of companies established in 1997 that survive decreases over time in all ranges of occupied personnel, with the lowest survival rates being recorded among smaller-sized companies, of up to four occupied persons.

According to the survey, in the first year of existence, 19% of the enterprises closed their doors. Survival rate in 1998 stood at 81%. Two years later, the rate of defunct companies rose to 27.2%. Eight years later, the survey shows that only 51.6% of the companies established in 1997 remained active.

By region, one can observe that the lowest enterprise survival rate occurred in the North of the country, where 46.5% of the units established in 1997 remained active as of 2005.

The highest survival rate after the eight-year period was recorded in the South of Brazil: 53.8%. A total of 51.8% companies remained active in the Southeast, 51.6% in the Northeast and 47.8% in the Midwest.

The analysis by size indicates that 5.3% of the companies established in the range of up to five occupied persons entered the next highest range, of between 5 and 19 occupied persons, in the year after establishment.

The IBGE technicians claimed, however, that a company not entering a higher range does not imply that it did not grow, only that the growth was not sufficient for the occupied personnel range to be changed.

ABr

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