International Coordination

Babson College (USA)

London Business School (England)
Kauffman Center for Entrepreneurial Leadership

Sponsorship and Institutional Support

Brazilian Institute of Quality and Productivity – IBQP

Sérgio Marcos Prosdócimo – President of the Board Managing
Fulgêncio Torres Viruel – Managing Director
Maria José Reis Pontoni – Administrative Financial Manager

Brazilian Service for Support to Micro and Small Businesses - SEBRAE

Paulo Tarciso Okamotto – President
Luiz Carlos Barboza – Technical Director
Enio Duarte Pinto – Unit of Education and Entrepreneurial Culture Development - UEDCE

Euvaldo Lodi Institute - IEL/Paraná State

Rodrigo Costa da Rocha Loures – Chairman of FIEP System
Marcos Mueller Schlemm – Deputy Director
Gina Gulineli Paladino – Executive Director of IEL/PR

GEM BRAZIL

National Coordination Team

Marcos Mueller Schlemm, PhD - Project Director
Simara Maria de Souza Silveira Greco - Executive Coordinator
Mateus Fabrício Feller - Statitician
Rodrigo Rossi Horochovski – Senior Researcher
Paulo Alberto Bastos Junior – Senior Researcher
Daniele de Lara - Trainee
Joana Paula Machado - Trainee
Nerio Aparecido Cardoso - Trainee

Special Topics
Gina Gulineli Paladino e Robert Edwin Binder

Interviewers of Experts in Brazil

Benedito Júlio de Souza, Jorge Macdowell, Marco Antonio Fagundes, Otávio Morand Bentes,
Paulo Alberto Bastos Júnior e Rodrigo Rossi Horochovski

Field Research
Bonilha Institute

Translation
Jussara Belo

Revision
Antônia Schwinden e Stella Maris Gazziero

English Revision
John Burton Duncan Junior

Graphic Design
Juliano Domingues
1 INTRODUCTION

This report is a summarized version of the Brazilian edition of the GEM National Report
2003, following the lines of the International Report. Brazil’s first entry into the Global
Entrepreneurship Monitor research Project dates back to 2000. In that year, the results coming
from the field showed a very entrepreneurial country. Brazil was ranked first among all other
participating countries. This was a surprising result, neither national nor international experts
expected. Since then the methodology has been refined and still, Brazil continues to show up
among the ten most entrepreneurial countries in the World. The reasons for that good standing
are well understood now. This first English version is an effort to make the Brazilian
entrepreneurial reality better known to a larger audience who from the beginning showed their
curiosity in learning about Brazil on this issue.
The work is divided as follows: a brief summary about the country, taking into account
secondary data; survey outcomes taken from an adult population sample, transcribed with a
comparison to the other participant countries; an overview on entrepreneurial motivations; the
business fields where entrepreneurs mostly invest; market impacts caused by new businesses; and,
more. Field data collection, along with the national conditions aforementioned are provided in
the next section, as well as the assessment of a selected group of Brazilian experts. In conclusion
some propositions derived from the outcomes are presented.
GEM 2003 Research used data on the national context, which affects entrepreneurship in
Brazil in order to investigate issues such as economy, finances, education, infrastructure, while
comparing the obtained results to other participant countries. Indicators used are tax burden and
the load of regulation, GNP, international trade, governmental and legislative efficiency,
enrollment percentage in the different educational level, etc.
The resulting overview is not very encouraging, because it pictures a country whose social
and economic development is inferior to most of the surveyed nations, mainly when per capita
figures are taken into account. This scenario is aggravated by the following: high tax burden and
bureaucracy; high unemployment rates; job or income shortage; an educational shortage mainly
when considering the highest educational levels; and, difficult infrastructure access evidenced by
insufficient communication and transport. Several conditions which seem to be barriers for
business, especially formal businesses, can, however be turned into opportunities. In the face of
short supplies with strong demands to be met in a relatively poor society, there is a considerable
and increasing labour force, which has a huge consumption potential.
2 LEVELS OF ENTRPRENEURSHIP IN BRAZIL AND IN THE WORLD

2.1 TOTAL ENTREPRENEURIAL ACTIVITY

The entrepreneurship rate in Brazil (TEA) was 12.9% in 2003. This follows the trend in
emerging countries and is among the highest in the GEM Survey (sixth place). This is so in these
societies due to a higher number of young people, informal market, and the existence of unmet
demands. Although the most affluent countries are globally ranked in the last positions, they have
significantly higher percentages of businesses with high technological and market expansion, & in
addition, having a higher impact on job creation and on international trade. They also enjoy a
higher rate of investors and general venture capital availability, including higher-risk ones.

FIGURE 1 - TOTAL ENTREPRENEURIAL ACTIVITY [TEA PREVALENCE] 2003: BY COUNTRY

35,00

30,00

25,00

20,00

15,00

10,00

5,00

-
SW:Switzerland

US:U.S.A.
ES:Spain
BE:Belgium

SE:Sweden
ZA:South Africa

VE:Venezuela
JP:Japan

SI:Slovenia

UK:United Kingdom

CA:Canada

IS:Iceland

AU:Australia

BR:Brazil
SG:Singapore

DK:Denmark

AR:Argentina
CN:China

CL:Chile
HK:Hong Kong

NL.Netherlands

DE:Germany

GR:Greece

IR:Ireland
HR:Croatia

IT:Italy

FI:Finland

UG:Uganda
NO:Norway
FR:France

NZ:New Zealand

ALL Countries

2.2 MOTIVATION

In 2001, a new variable was introduced with which the total entrepreneurship index was
unfolded in a different indicator. The new variable is the “motivation to venture” designed to
measure if the business was created from the recognition of a true business opportunity or from
the sheer necessity to generate a reasonable source of living. The construction of this indicator
was a consequence of the search for explanations of the high entrepreneurship indexes obtained
by the emerging countries in relation to the numbers reached by the high capitalist development
countries. Concerning the motivation to venture, the comparison between the Brazilian situation
and that of the other participants of the research reveals that Brazil, in general, presents the profile
of an emerging society, going far away from the motivation profile of rich countries (Figure 2).
The opportunity-based entrepreneurship index (6.9%) in Brazil (Chart 1) is similar to the world
(6.4%) average for this indicator, and quite inferior to the one in Uganda, where the highest
index was registered (17.6%), Brazil however is much higher than in France, where only 1.1% of
the adults ventured by opportunity in 2003. The Brazilian index of necessity-based entrepreneurship
(5.5%), although a little lower than half the result obtained in Uganda (13.2%), is higher than
twice the average index of the group of participant countries (2.3%), and more than 25 times
higher than the percentile registered in Italy, country with the lowest necessity-based
entrepreneurship index (0.2%).

FIGURE 2 - MOTIVATION IN VENTURE CREATION - GLOBAL

35,0%
Others
30,0% Opportunity

25,0% Necessity

20,0%

15,0%

10,0%

5,0%

0,0%
Norway
USA

Denmark
Uganda

Germany
Canada

Spain

Japan
Hong Kong
Finland
Venezuela

Sweden
China

France
New Zealand
Brazil

Singapore
Swirtzerland

United Kingdon

South Africa

Belgium
Argentina

Greece

Croatia
Island
Ireland

Slovenia

Italy
Australia
Chile

Netherlands

The comparison of the Brazilian results with the results of the other participants of the
research in Latin America reveals that the four countries follow a similar tendency (Chart 1). In
all of them the global entrepreneurship indexes are quite high. Another common data is the high
proportion of necessity-based business, that reflects the Latin-American context of formal work
crisis and weakness of the State in offering of a social security system. Individually highlighting
the countries of the considered group, it is verified that Argentina and Venezuela present much
higher indexes, as much of global entrepreneurship as of both motivations to venture -
opportunity and necessity. During the period of the research, both countries lived the echoes of
serious economic crises, which implicated expressive falls of their GDPs. It is inferred, then, that
their labour force assumed an obligation to look for survival alternatives given the brutal fall of
the occupation opportunities and income. Brazil and Chile, for their shift, have entrepreneurship
indexes that translate a tendency toward their structural accommodation of entrepreneurial
dynamics. That is more evident in the case of Brazil, considering all the GEM researches, starting
from 2000.
CHART 1 - COMPARISON OF THE LATIN-AMERICAN COUNTRIES AND SELECTED COUNTRIES IN
THE GEM RESEARCH 2003
Country TEA TEA Opportunity TEA Necessity
Uganda 29.3 17.1 13.2
Venezuela 27.3 16.1 11.6
Argentina 19.7 11.9 7.5
Chile 16.9 10.5 6.1
Brazil 12.9 6.9 5.5
France 1.6 1.1 0.4
World 8.8 6.3 2.4
Source: GEM Research 2003
Concerning opportunity-based entrepreneurship, about 66% was verified between 25 and
66 years of age, and only 11% at 45 years of age or over. The last age category, on the other
hand, is responsible for approximately 25% of the necessity-based entrepreneurship. In relation to
income, about 80% of the necessity-based entrepreneurship is carried out by businesspeople with
a monthly income up to 6 MS.

TABLE 1 – OPPORTUNITY-BASED AND NECESSITY-BASED ENTREPRENEURSHIP X CATEGORIES

OPPORTUNITY NECESSITY
2000-2003 2003 2000-2003 2003
CATEGORIES
TEA TEA TEA TEA
TEA TEA TEA TEA
ratio ratio ratio ratio
Male 8.1 63 7.6 54 6.8 58 6.1 55
GENDER
Female 5.3 37 6.2 46 5.3 42 4.9 45
Single 7.4 35 7.4 36 4.5 24 4.0 24
MARITAL Married 6.6 56 6.3 52 7.3 69 6.8 70
STATUS Widow/er 2.2 1 3.8 2 2.2 1 1.3 1
Other 8.2 7 11.3 10 5.6 5 4.0 5
18 to 24 years 6.7 22 7.3 24 4.6 16 4.8 20
25 to 34 years 8.8 35 8.5 35 7.7 35 6.7 35
AGE 35 to 44 years 8.6 29 9.2 31 6.8 26 4.8 21
45 to 54 years 4.3 9 4.3 10 5.9 14 7.1 21
55 to 64 years 2.2 4 0.5 1 3.9 8 2.0 4
Less than 3 MS 4.2 34 4.6 42 6.2 57 5.7 66
From 3 to 6 MS 9.1 31 10.4 15 6.1 23 5 7
Over 6 to 9 MS 10.7 12 7.6 4 6.8 9 6.2 4
INCOME Over 9 to 15 MS 9.8 8 16.3 10 8.0 7 5.7 5
More than 15 MS 13.9 8 17.2 4 1.6 1 3.1 1
Refused to answer 12.7 2 4.0 1 4.2 1 8. 2
Don’t know 9.0 4 7.9 2 5.4 2 2.6 1
No formal education 6.5 12 0.0 0 3.8 8 3.8 3
1to 4 years 5.6 46 4.7 36 6.8 62 5.7 55
EDUCATION
5 to 11 years 8.9 30 10.2 48 6.1 23 6.0 35
Over 11 years 9.5 12 9.6 16 5.0 7 3.7 7
SOURCE: Survey GEM Brazil 2003 among adult population
2.3 BUSINESS SECTORS

As for the entrepreneurial profile, survey among the adult population enables us to
describe the business sectors developed, job creation potential, and growth projections.
Only four categories of activities out of seventeen account for 72% of businesses set up in
the country. These entail: 35% for Retail & Wholesale Automotive sales and service, 14% for
Transforming Industries, 12% for Board and Lodging, 11% for Collective, Social and Personal
Services. As is evidenced, Retail businesses prevail, accounting for 80% of the first category
businesses. It should also be pointed out the predominance of business activities related to board
and clothing. Within the manufacturing category, clothes and clothing accessories prevail. In
Board and Lodging, 97% of the businesses are connected with meal serving. In Other Collective,
Social and Personal Services, entertainment and esthetics stand out.

FIGURE 3 – TOTAL OF ENTREPRENEURS’ GROUP IN BRAZIL – ACCORDING TO CNAE SECTION –

GROUPING 2000-2003

6.8% RETAIL/WHOLESALE/AUTOMOTIVE
SALES AND SERVICE
3.3% TRANSFORMING INDUSTRIES
3.5%
BOARD AND LODGING
6.0% 34.6%
OTHER ACTIVITIES/COLLECTIVE
SERVICES
8.3% REAL ESTATE, RENT

CONSTRUCTION

10.9% TRANSPORTATION, STORAGE

AGRICULTURE/CATTLE RAISING
14.4%
12.3% OTHERS

SOURCE: GEM 2000-2003 Survey

Considering the business sectors, the trend evidenced does not present much difference
from necessity-based rates of global TEA. That is to say, there is strong presence of retail
businesses and Transforming Industries, mainly the ones related to food and clothing. As for
opportunity-based TEA, pooled data from 2001 to 2003, only three sectors are responsible for
around 66% of the generated businesses: commerce, industry and collective services. It is in this
category of entrepreneurship that Transforming Industries stand out: one out of five opportunity-
based businesses are connected with them, which is, food and clothing.
2.4 ENTREPRENEURS’ PROFILE

In relation to gender, in the period of 2000 – 2003, 18% of the male labor force and 12%
of the female labor force developed some kind of entrepreneurial activity. Women were
responsible for 36% of the new businesses set up in Brazil. In 2003, male TEA specifically
accounted for 14.2%, making the country rate seventh among male entrepreneurship, while
Brazilian women occupied the fourth position (11.7%). These results reflect a visible change in
rate behaviour, showing that women practically performed level with men when we consider the
data about year-to-year evolution.

TABLE 2 – ENTREPRENEURSHIP DISTRIBUTION BETWEEN MEN AND WOMEN IN BRAZIL – 2003

MEN WOMEN BRAZIL

Total Population 89,894,000 92,139,000 182,033,000
Population between 18-64 years 51,832,000 53,126,000 104,958,000
TEA 14.2 % 11.7 % 12.9 %
Entrepreneurs (estimation) Fig. 7,360,000 6,216,000 13,576,000
Entrepreneurs (estimation) (%) 54.2 45.8 100.0
General Ranking 7th 4th 6th
SOURCE: Survey among adult population GEM BRAZIL 2003

TABLE 3 – ENTREPRENEURIAL PARTICIPATION IN BRAZIL – MEN vs WOMEN - 2000-2003

GENDER 2000 (%) 2001 (%) 2002 (%) 2003 (%)

Men 71 71 58 54
Women 29 29 42 46
Total 100 100 100 100
SOURCE: GEM 2000 – 2003 Surveys

In relation to age category, higher entrepreneurial rates were obtained both between 25
and 34 years, and between 35 and 44 years. Both categories verified a TEA of 19% during 2000-
2003. Considering the number of entrepreneurs, about 64% were between 25 and 44 years. The
youngest entrepreneurs, 19% of the total, were between 18 and 24 years of age. In relation to
entrepreneurs over 45 years of age, it was pointed out that they are responsible for only 17% of
the businesses set up in Brazil during the same period. Only considering the year 2003, TEAs are
as follows:
between 18 and 24 years: 12.6%
between 25 and 34 years: 16.1%
between 35 and 44 years: 14.4%
between 45 and 54 years: 11.5%
between 55 and 64 years: 3.5%
 Viewing these results, slight changes can be perceived, although they do not alter
entrepreneurial dynamics by age.
In relation to income ranking during the period 2000-2003, the highest entrepreneurial
1
rate (21%) is verified among those who monthly earn between 6 and 15 minimum salaries. In
relation to the educational level, the highest entrepreneurial rate was verified among those with
over 11 years of study, with a TEA of 19%, followed by the ones who studied between 5 and 11
years (not a meaningful difference).

TABLE 4 – EVOLUTION OF BRAZILIAN ENTREPRENEURS’ IN BRAZIL INCOME 2000 – 2003

INCOME CATEGORY 2000 (%) 2001 (%) 2002 (%) 2003 (%)
Less than 3 MS 30 39 43 53
Between 3 and 6 MS 30 31 34 22
Over 6 to 9 MS 14 12 11 8
Over 9 to 15 MS 12 8 9 8
Over 15 MS 9 11 3 6
Don’t know 1 3 1 1
Refused to mention 4 6 2 2
Total 100 100 100 100
SOURCE: GEM 2000 – 2003 Surveys

FIGURE 4 – EVOLUTION OF BRAZILIAN ENTREPRENEURS’ INCOME – 2000-2003

60% 53%

50% 43%
39%
40%
30%
30%

20%
21%
19%
10% 14%
12%

0%
2000 2001 2002 2003

Less than 3 MS Over 9 MS

SOURCE: GEM 2000-2003 Surveys

1
At the time of the survey, minimum monthly salary in Brazil approached US$ 80.00
FIGURE 5 – TEA BASED ON EDUCATIONAL LEVEL IN BRAZIL - 2003

19%
18%

14%

10%

No Formal Education 1 to 4 years 5 to 11 years Over 11 years

SOURCE: GEM 2003 Survey

Although the highest entrepreneurial rates are found among higher educated people with
higher income rates, it is appropriate to point out that they are in the minority compared to the
total population. In absolute figures, most entrepreneurs come from low educational and income
levels. In 2003, practically 60% of the entrepreneurs earned less than six minimum salaries and
40% earned less than three minimum salaries. Verifying year-to-year data, there has been an
income depreciation to the same extent that lowest income people’s percentage goes up. Likewise,
almost 50% of the businesses were created by people with one to four years of education, while
only 13% were generated by those with secondary educational level.

2.5 MARKET AND JOB CREATION

Three out of 10 entrepreneurs do not project the creation of more jobs in the next 5 years
and only about 7.5% anticipate the creation of 20 or more jobs in their businesses. It should be
pointed out that 45% of entrepreneurs project the creation of 1 to 5 jobs in this period. In
2
relation to Market Creation , the Brazilian situation is not very encouraging: 1,100 out of 10,000
Brazilians (11%) own businesses without any possibilities of market creation; and, 183 out of
10,000 (1.83%) own businesses with a very small chance of market creation. Moreover, no
entrepreneurs who were interviewed are running businesses with medium or high possibility of
market creation. These figures have ranked Brazil in a very inferior position in relation to the
averages of the group of surveyed countries.

2
In order to rank businesses according to market creation, the following indicators were included: technology age, market knowledge of the
product, amount of competitors. In general lines, the lower the values obtained for these indicators, the higher the possibility of market
creation. The pursuit for these rates implied the analysis of 36 different possible combinations of answers, which enable to rank businesses in
four types: no market creation, low market creation, medium market creation, high market creation.
 3
In turn, respondents who intended to run high growth businesses were just over 5 out of
10,000 inhabitants (0.05%), which comprises one fourth of the average index of 22 (0.22%) of
the group of participant countries, and is much lower than the New Zealand results, with an
index higher than 75/10 thousand people (0.75%).

FIGURE 6 – MARKET CREATION

Product = known Product = new

Competition = high Competition = low
Technology = known Technology = new
1,200
1,100 Brazil
Amount of People/10,000

1,000
world

800

600
542
400
225
200 79
37
183
- 0 0
None Low Medium High

FIGURE 7 – HIGH GROWTH POTENTIAL

25
22
Aount of Peple/10,000

20

15

10
5
5

0
Brazil Médium World

SOURCE: GEM 2003 Survey

3
That is to say, a low market creation, over 19 jobs generated in the next 5 years, obtain at least 11% income over exports and have at least
25% of its clients living over an hour distance, by land.
2.6 BUSINESS STAGES

When businesses are ranked according to their stages, taking in account pooled data from
2000 & on, the following rates are obtained: global TEA of 15.1%; nascent businesses, 8.9%;
and, 7.0% new businesses. Considering only 2003, global TEA decreased, reaching 12.9%. The
same is evidenced to nascent businesses, as in 2003 the corresponding rate is 6.5%. As for the
new businesses, even varying along the period, their pooled data held steady, that is, 6.9%. These
th
figures rank Brazil in the 6 position in terms of new businesses and 9th position in relation to
the nascent ones. Considering pooled data, it is evidenced a similar behavior to global data when
business sectors are referred to, with higher entrepreneurial dynamics verified on nascent
businesses. According to the figures, four segments prevail: Retail, Wholesale, Transformative
Industry, Board and Lodging, Collective Services, always stressing clothing and meal serving.

TABLE 5 – NEW AND NASCENT BUSINESS RATES IN BRAZIL, 2000-2003 POOLED DATA; 2003
ISOLATED DATA
NASCENT BUSINESSES NEW BUSINESSES
CATEGORIES 2000-2003 2003 2000-2003 2003
TEA TEA TEA TEA
TEA TEA TEA TEA
ratio ratio ratio ratio
Male 10.6 65 7.4 56 8.3 64 7.3 52
GENDER
Female 6.8 35 5.6 44 5.4 36 6.6 48
Single 9.2 34 7.8 40 6.3 30 5.5 26
MARITAL Married 9.0 59 6.0 52 7.5 63 7.7 63
STATUS Widow/er 5.8 2 5.1 3 1.8 1 1.3 1
Other 8.0 5 5.6 5 8.5 6 11.3 10
18 to 24 years 8.6 20 6.9 23 5.4 16 6.0 19
25 to 34 years 10.6 33 7.6 33 9.0 36 9.2 38
AGE 35 to 44 years 11.4 30 8.5 30 8.9 30 6.8 23
45 to 54 years 6.3 10 4.7 12 6.3 13 7.1 17
55 to 64 years 4.5 7 1.5 2 2.5 5 2.5 4
Less than 3 MS 7.0 41 5.8 56 5.0 38 5.4 49
From 3 to 6 MS 10.7 28 6.9 10 8.1 27 9.6 14
Over 6 to 9 MS 13.1 13 5.5 3 10.3 13 9.0 5
INCOME Over 9 to 15 MS 9.3 7 12.6 9 12.5 11 10.3 7
More than 15 MS 10.8 6 12.5 3 9.5 7 15.6 4
Refused to answer 12.4 3 8.0 2 8.6 3 8. 1
Don’t know 9.9 2 7.9 2 4.6 1 2.6 1
No formal education 6.8 8 2.5 2 3.7 5 2.5 1
1to 4 years 8.1 48 5.1 41 6.4 49 6.0 45
EDUCATION
5 to 11 years 10.7 31 9.1 45 8.3 31 8.0 38
Over 11 years 10.6 13 6.9 12 9.3 15 10.0 16
SOURCE: Survey GEM Brazil 2003 among adult population
 From the new businesses, two- thirds are among the four highest-incidence segments,
with Retail accounting for 30% of the total. Taking only 2003 data, there is also a high
prevalence in the Construction field (exclusively male activity, with 20% of new companies run
by men). A decrease in Board and Lodging should be pointed out (lower than 6% of the total)
and a boom of retail businesses with over 40%.

2.7 VENTURE CAPITAL

GEM 2003 survey shows that venture capital is scarce in Brazil. Informal investors take
up only 0.8% of the adult population, ranking last among the surveyed countries. The average
per investor is less than 900 dollars, superior only to Uganda (270 dollars/investor). As a way for
comparison, emerging countries like Argentina, China and Venezuela displayed significantly
higher amounts, between 4,200 dollars and 5,400 dollars. 21 countries, mostly developed ones,
showed higher averages than 10,000 dollars/informal investor per year. There are few Brazilian
investors and they invest little.

2.8 GENERAL SYNTHESIS

In short, the survey found Brazil to be a dynamic society, heavily involved with
entrepreneurial activities, which could be surprising due to framework shortcomings. It is the
economic context – low economic growth, unemployment, job scarcity – which compels many
Brazilians to entrepreneurship. Besides, a needy market offers an encouraging set of opportunities,
even if businesses are set up in consolidated, saturated sectors. The country lacks generation of
businesses in new innovative areas, compelling other demands. This reflects the scarce
relationship between knowledge generating centers and enterprises as well as the low private
investment on research and development.
Other inferences are also possible. First of all, there is a high presence of opportunity-
based entrepreneurship in the last surveys. This category has held steady while necessity-based
entrepreneurship has decreased. This suggests that the former is structural, evidencing that a
small somewhat stable share of population (who should not be overlooked) responds to perceived
business opportunities. Another variable, which calls attention, is gender. Male prevalence, a
characteristic in the first years of survey, has significantly dropped, while a higher female
participation in the entrepreneurship rate has been evidenced. It is a favourable datum if gender
equality is to be pursued by societies. Another fact is the ratio of Brazilian entrepreneurship and
youth: nine out of ten entrepreneurs in Brazil are between 18 and 44 years of age.
Income and education results suggest that these variables are somewhat related to
entrepreneurship, which may evidence GEM survey hypothesis that entrepreneurship can
positively impact societies’ socioeconomic development. The continuity of the survey will
probably ratify the hypothesis.

3 THE ASSESSMENT OF NATIONAL EXPERTS

Experts interviewed in 2003 stated their views, which were quite similar to participants in
former studies, unfolding a framework trend, which presents a certain level of homogeneity and
recurrence in their perceptions, although every year different people are surveyed. Respondents in
question are closely related to the entrepreneurial issue because they are entrepreneurs themselves
or participants in the definition and operation of business fostering policies. Thus they are better
used to the entrepreneurial issue than the population as a whole. This chapter states the experts’
views, present in the interviews and questionnaires.
In the interviews, the experts pointed out weaknesses and strengths to entrepreneurship in
Brazil, as well as proposals to improve (these are found within the final chapter of the report).
Briefly, the main obstacles to businesses in Brazil are:

• Capital is scarce and costly. There is not a significant amount of sources and
investment types (common in developed economies), such as venture capital and seed
money, To make things worse, situational policies make capital costly and curb a
more effective participation of the State to solve this problem.
• The State hinders businesses, either not supporting them or imposing upon them a
heavy tax and regulation load. Bureaucracy and an excess of legal procedures to set up
a business mirror this reality.
• Concerning entrepreneurship, information and programs are scattered. There is no
integration, making it difficult to access.
• Brazilian educational system does not foster entrepreneurship, due to two main
aspects: low-quality education, principally in elementary levels, causes negative results
to educate the labour-force in general; on the other hand, school curricula do not
offer, in a massive and systematic way, teaching contents and entrepreneurship
promotion.
• Brazilian culture is an obstacle by encouraging the pursuit of a formal job, a career in
large established companies. It does not claim the entrepreneur as a person to be
admired and imitated.
The main strengths pointed out are:
 • Brazil has got a large market, featuring the most varying demands. It has undergone a
positive process of market openness in the last decade, which brings about business
perspectives for those who are capable of digging opportunities.
• The movement for creation of incubators in traditional companies as well as
technological-based ones, encouraged in the 90s, is highly responsible for business
generation, mainly in highly technological fields.
• There is job scarcity in Brazil, with a sharp reduction in the amount of formal jobs.
The need for income generation makes people pursue alternatives to survive, which is
a proper environment for entrepreneurship.
• Brazilians are creative and have learned to survive in a highly adverse and unstable
environment, thus being prepared to struggle and survive away from the formal
traditional occupations.
Experts were very realistic. Except for only three factors: entrepreneurial motivation,
entrepreneurial opportunity and market opportunities, their assessment always ranks Brazil
among the countries with the worst possible entrepreneurship conditions or, in the last position
as can be apprehended by reading the Table below.

TABLE 6 – CONDITIONS WHICH HINDER ENTREPRENEURSHIP IN BRAZIL – ASSESSEMNT MADE

BY NATIONAL EXPERTS.

BRAZIL WORLD BRAZILIAN

CONDITIONS WHICH HINDER ENTREPRENEURSHIP IN BRAZIL
AVERAGE AVERAGE RANKING
Entrepreneurial Potential: Motivation 0,53 0.38 10/31
Entrepreneurial Opportunity 0,34 0.19 11/31
Women’s participation 0,18 0.34 19/31
Physical infrastructure access 0,13 0.95 31/31
Obstacles to Market access – internal market and dynamics/opportunity 0,12 -0.19 7/31
Education and Training – Higher Studies and specialization -0,37 -0.21 22/31
Social and Cultural Norms -0,43 -0.23 18/31
Commercial and Professional Infrastructure -0,45 0.23 31/31
Entrepreneurial Capacity: Potential -0,63 -0.52 19/31
Financial Support -0,76 -0.39 23/31
Government Programs -0,78 -0.38 25/31
IPR Protection -0,83 0.12 28/31
Obstacles to Market set up – biggest obstacles – costs, competition, legislation -0,90 -0.25 31/31
Transference and Technological Development -0,98 -0.51 28/31
Federal, state, municipality policies; policy effectiveness -1,05 -0.40 28/31
Education and Training – primary and secondary -1,28 -0.94 27/31
Government Policies: Taxes; Answer Time -1,68 -0.57 31/31
SOURCE: GEM 2003 Expert Survey
4 CONCLUSION – ENTREPRENEURSHIP IN BRAZIL: OUTCOMES

In the light of the survey results, propositions to foster entrepreneurship in Brazil close
this report. These propositions sum up the experts’ contributions, interviewed in 2003 from
suggestions by the research staff and, for better understanding, are disposed in blocks that follow,
in general, describes the entrepreneurship conditions, which also affected data collection.
Venture capital is the first issue. The general proposal is to facilitate credit access, cut
down bureaucracy and costs. Financial agents and government are the main capital source in face
of venture capital scarcity. What follows is a summary of capital-related propositions:
• expansion of the stock market in Brazil, considered very incipient. The recent
initiative of federal government to release funds from the Mandatory Fund for
Unemployment Benefits (FGTS in Portuguese), to purchase state company shares is a
step forward. This measure, however, cannot be restricted to state companies. The
access to the stock market should be liberated as well as information on its risks and
possibilities;
• expansion in the offer of credit mechanisms like seed money. However, it is deemed
necessary that some existing mechanisms in countries such as England and the USA
be adapted to Brazilian context. In practice, government funding would be
implemented for businesses unable to access venture capital;
• microcredit incentive, which makes it necessary to change the access structure to
public funding by small businesses, in a way that the government be involved in the
lending as well as the business management.
Some measures are concerned with government policies and programs, such as the
reduction of tax burden over production and consumption, simplify legislation, cut down
bureaucratic barriers by reducing the necessary procedures to set up and run a firm, decrease
registration and professional costs. Moreover, integration of programs and information related to
launch and the running of a business was also proposed. Thus, it is public and private initiative’s
duty to:
• simplify tax and labor legislation so that everybody can and must pay taxes, avoiding
unfair competition on the part of informal businesses which do not comply with their
legal duties;
• integrate all information that entrepreneurs need. This can be carried out by
government organizations which are able to transfer knowledge and interact with
other private, state or municipal institutions;
 • carry out specific policies to foster and support new businesses’ creation so that such
institutions design and implement their programs, based on macro-guidelines, with
complimentary and integrated actions;
• have in their entrepreneurial supporting teams, other entrepreneurs who have already
undergone all the process of a new business launch.
• accelerate infrastructure works – housing and sewage system, for example – mainly in
the interior of the country to meet the social demands and encourage business
opportunities away from the large urban centers in order to create income and jobs
for the unskilled workforce, which is the profile of Brazilian labour force;
• facilitate the access to legal, managerial and accounting quality services, which will
also provide occupation and income to self-employed professionals. This could be
made feasible by institutions like SEBRAE, at low costs. Support would be available
from business conception up to services related to business setup and management:
planning, feasibility analysis, financial analysis, registration, licenses, etc.;
• provide some kind of funding so that nascent entrepreneurs be able to access
consultancy firms to carry out market analysis, market and advertising planning;
To education and culture, the propositions are as follows: 1) enhance the quality of
Brazilian education and introduce, at all educational levels, entrepreneurial subjects and contents,
aiming to qualify students to entrepreneurship, not only to a formal job pursuit; 2) change the
culture which praises formal jobs, mainly in the public service, or government agencies, into
entrepreneurship as a feasible career possibility. What follows are specific propositions:
• encourage nascent entrepreneurs to look for consistent information about the
intended business, not only relying on their own beliefs or relatives’, acquaintances’
opinions, but looking for technical assessment. This initiative must be followed by
support to necessity entrepreneurs from the business choice and feasibility analysis up
to its implementation, offering the best management tools in order to reduce failure
risk;
• intensify and refine qualification programs to entrepreneurial educators;
• qualify secondary and college students to examine ideas of already existing businesses
besides passing on successful entrepreneurial history-cases. Technical and superior
courses must change their focus once they qualify students to pursue a career in a big
company, even self-employed professionals.
About the propositions concerning the economic organization and the Brazilian market
organization, strong alternatives to the crisis of formal jobs were proposed. Thus, some
suggestions to develop cooperative culture, partnerships and clusters have been brought about
with some proposals, such as:
• companies should intensify their outsourcing process, while returning to their core
business, purchasing products and services from third parties;
• carry out a specific project of entrepreneurial motivation and qualification to Brazilian
women who comprise an increasing public of heads of family.
Besides the above-mentioned propositions, there are business possibilities for management
and environmental conservation. Not only environmentally sustainable extraction but also
residential, commercial and industrial recyclable waste cooperatives have become increasingly
common. They bring about positive results to reduce environmental impact as well as to create
jobs for the existing labour force without demanding costly investments for their implementation
and personnel training. They could generate an interesting market niche but specific funding and
government policies are deemed necessary.
Putting in practice the above propositions implies an effort not only on the part of
government agents but it also demands a direct and intense participation of the society as a
whole, organized in unions, NGOs and people in general to the extent that many proposals entail
somewhat deep cultural changes. Lack of private venture capital as seed money, for example,
cannot be only attributed to an assumed risk-adverse national trait, but a relatively recent
memory of macroeconomic instability. Economic stability must be kept so that people feel secure
to invest and set up businesses in a rewarding way.
The implementation of the aforementioned proposals must be considered a decisive step
to face the obstacles that hinder the successful management of stable businesses (although they do
not prevent the entrepreneurial development in our country as GEM 2003 Research outcomes
have shown), which meet regional traits, generate jobs and income and have a strong impact to
create new market niches, innovations and attract consumers beyond the national borders.
APPENDIX

Appendix 1
TEA rate for all countries 2000-2003
Country 2001 2002 2003
Argentina 10.5 14.2 19.7
Australia 16.2 8.7 11.6
Belgium 4.6 3.0 3.9
Brazil 14.2 13.5 12.9
Canada 11.0 8.8 8
Chile _ 15.7 16.9
China _ 12.3 11.6
Croatia _ 3.6 2.6
Denmark 8.1 6.5 5.9
Finland 9.3 4.6 6.9
France 7.2 3.2 1.6
Germany 7.0 5.2 5.2
Greece _ _ 6.8
Hong Kong _ 3.4 3.2
Hungary 11.4 6.6 _
Iceland _ 11.3 11.2
India 11.3 17.9 _
Ireland 12.1 9.1 8.1
Israel 6.0 7.1 _
Italy 10.2 5.9 3.2
Japan 5.1 1.8 2.8
Mexico 18.7 12.4 _
Netherlands 6.4 4.6 3.6
New Zealand 15.6 14.0 13.6
Norway 8.7 8.7 7.5
Poland 10.0 4.4 _
Portugal 7.1 _ _
Russia 6.9 2.5 _
Singapore 5.2 5.9 4.9
Slovenia _ 4.6 4.0
South Africa 9.4 6.5 4.3
South Korea 14.9 14.5 _
Spain 7.8 4.6 6.8
Sweden 6.7 4.0 4.1
Switzerland _ 7.1 7.4
Taiwan _ 4.3 _
Thailand _ 18.9 _
Uganda _ _ 29.3
United Kingdom 7.7 5.4 6.4
United States 11.7 10.5 11.9
Venezuela _ _ 27.3
 Appendix 2
ENTREPRENEURIAL ACTIVITY - NASCENT AND BABY BUSINESS - BY COUNTRY: 2000-2003
NASCENT ENTREPRENEURIAL ACTIVITY BABY BUSINESS ENTREPRENEURIAL
Country ACTIVITY
2001 2002 2003 2001 2002 2003
Argentina 7.98 8.52 12.4 2.54 6.20 8.5
Australia 8.97 3.76 6.6 7.24 5.22 5.4
Belgium 3.36 2.13 2.8 1.23 1.08 1.2
Brazil 9.2 5.7 6.5 5.0 8.5 6.9
Canada 7.04 5.94 5.1 3.94 3.58 3.8
Chile _ 10.40 10.9 _ 5.49 7.1
China _ 5.54 4.3 _ 7.41 7.4
Croatia _ 2.81 1.7 _ 0.94 0.9
Denmark 5.31 3.63 3 2.76 3.12 3.3
Finland 5.98 2.68 4.1 3.34 2.06 3.1
France 6.35 2.40 0.9 0.88 0.86 0.7
Germany 4.81 3.51 3.5 2.23 2.07 2.1
Greece _ _ 2.9 _ _ 3.9
Hong Kong _ 2.04 1.7 _ 1.40 1.6
Hungary 7.78 3.49 _ 3.64 3.62
Iceland _ 5.65 7.3 _ 6.23 4.4
India 7.77 10.89 _ 3.48 7.45
Ireland 7.27 5.66 5.1 4.85 4.20 3.8
Israel 1.18 3.36 _ 4.79 3.88
Italy 7.82 3.74 2 2.35 2.35 1.3
Japan 4.26 0.87 1.4 0.82 1.04 1.5
Mexico 12.69 9.18 _ 6.05 3.22
Netherlands 2.59 2.57 1.7 3.79 2.09 1.9
New Zealand 9.32 9.13 9.3 6.31 6.06 5.2
Norway 5.73 5.23 4 2.97 4.40 3.9
Poland 7.41 3.67 _ 2.58 0.77
Portugal 3.93 _ _ 3.16 _
Russia 3.65 1.09 _ 3.26 1.54
Singapore 3.50 4.03 3 1.69 2.03 2.3
Slovenia _ 3.28 3 _ 1.53 1.1
South Africa 7.23 4.71 2.7 2.14 2.00 2
South Korea 7.66 5.85 _ 7.19 9.29
Spain 5.62 2.24 4.4 2.16 2.54 2.5
Sweden 4.19 1.80 2 2.48 2.51 2.4
Switzerland _ 4.44 4.3 _ 3.26 3.7
Taiwan _ 1.28 _ _ 3.08
Thailand _ 11.63 _ _ 8.40
Uganda _ _ 14.8 _ _ 16.9
United Kingdom 4.94 2.49 3.4 2.74 3.05 3.2
United States 8.19 7.09 8.1 3.46 4.57 4.9
Venezuela _ _ 19.2 _ _ 9.7
 Appendix 3
OPPORTUNITY AND NECESSITY BY COUNTRY
OPPORTUNITY TEA NECESSITY TEA
Country
2001 2002 2003 2001 2002 2003
Argentina 6.2 6.8 11.9 4.7 7.1 7.5
Australia 12.0 6.7 9.9 2.9 1.5 1.6
Belgium 3.6 2.0 3.3 0.8 0.3 0.3
Brazil 8.5 5.8 6.9 5.7 7.5 5.5
Canada 7.6 7.4 6.7 3.0 1.1 1.1
Chile . 8.5 10.5 . 6.7 5.9
China . 5.6 5.5 . 7.0 6.1
Croatia . 2.2 . . 0.9 .
Denmark 6.6 5.9 5.3 0.5 0.4 0.4
Finland 6.2 3.9 2.7 0.6 0.3 0.3
France 3.8 2.8 1.1 1.4 0.1 0.4
Germany 5.6 3.9 3.7 2.0 1.2 1.2
Greece . . 4.2 . . 2.6
Hong Kong . 2.3 2.2 . 1.2 1.1
Hungary 7.9 4.0 . 3.3 2.1 .
Iceland . 8.6 9.4 . 0.9 0.8
India 3.9 12.4 . 7.7 5.0 .
Ireland 9.3 7.8 6.7 2.1 1.4 1.3
Israel 2.0 5.2 . 0.6 1.4 .
Italy 7.8 3.3 2.9 2.1 0.5 0.2
Japan 2.3 1.2 . 2.2 0.5 .
Mexico 12.9 8.3 . 7.1 2.7 .
Netherlands 5.4 4.0 3.0 0.4 0.5 0.4
New Zealand 14.9 11.6 11.5 2.8 2.3 1.7
Norway 7.4 7.4 6.7 0.2 0.4 0.7
Poland 4.7 2.8 . 4.9 1.3 .
Portugal . . . . . .
Russia 5.1 1.9 . 1.1 0.6 .
Singapore 5.1 4.9 3.9 1.2 0.9 1.0
Slovenia . 3.3 3.1 . 1.4 0.8
South Africa 6.0 3.3 2.9 3.0 2.4 1.5
South Korea 8.0 8.6 . 5.8 4.1 .
Spain 5.6 3.4 6.1 1.9 1.0 0.5
Sweden 5.5 3.3 3.8 0.8 0.7 0.4
Switzerland . 6.0 6.3 . 0.9 1.0
Taiwan . 3.3 . . 0.7 .
Thailand . 15.3 . . 3.4 .
Uganda . . 17.1 . . 13.2
United Kingdom 5.1 4.4 5.4 1.4 0.7 1.0
United States 10.3 9.1 9.1 1.3 1.2 1.7
Venezuela . . 16.1 . . 11.6