Custo Brasil X-ray: The 1.7 trillion Brazilian Reais drained annually from our competitiveness

Imagine two equally talented engineers or industrialists. Both use the same machines, master the same programming languages, and work the same number of hours per week. One of them, however, operates in an average country of the OECD (Organisation for Economic Co-operation and Development); the other operates in Brazil. Even before selling the first product or spinning up the first server in production, the Brazilian company already starts the race carrying an extra weight of R$ 1.7 trillion per year.

This number is not an informal estimate. It results from the official methodology developed by the Movimento Brasil Competitivo (MBC) in partnership with the Ministério do Desenvolvimento, Indústria, Comércio e Serviços (MDIC), which measures the so-called Custo Brasil (Brazil Cost): the differential in operational, financial, logistic, and regulatory costs that companies established in the country pay in excess of the OECD countries average, equivalent to about 19% to 20% of the Brazilian GDP.

Understanding the anatomy of this value is essential for two purposes: demanding the correct reforms in the public space and designing business strategies that do not break down halfway through.

1. Where the R$ 1.7 trillion comes from: the major headings of backwardness

The methodology of the Custo Brasil Observatory divides national competitiveness bottlenecks into twelve major dimensions. When we group the largest slices, it becomes clear why so many productive companies inside the farm gate or inside the office lose competitiveness when the product reaches the market.

Note: The approximate values reflect the proportions of the 12 dimensions mapped by the MBC/MDIC study based on the Brazilian GDP.

2. The visible cost and the invisible cost of complexity

Often, the debate about the Custo Brasil remains restricted to the nominal tax rate. In fact, the general government gross tax burden closed 2025 at 32.40% of GDP, according to the National Treasury, a level very close to the OECD average (about 34% of GDP), but well above the average of Latin America and the Asian tigers when they had our per capita income.

The real poison, however, lies in the quality and friction of this collection. In the OECD, taxation is concentrated mostly on income and profit, and the consumption tax (VAT) is simple, non-cumulative, and quickly refunds credits to those who invest and export. In Brazil, we historically built a labyrinth of taxes on revenue and circulation that makes investments in machines, servers, and inputs more expensive.

Even more serious is the brain drain: some of the brightest minds in mathematics, accounting, and software engineering in Brazil spend their entire careers programming tax rule engines, defending tax assessment notices, or managing ancillary obligations. It is a gigantic intellectual effort that adds zero to society's real productivity.

3. Expensive capital and infrastructure that does not connect

Logan's second major anchor of the Custo Brasil is the cost of financing the business. With a neutral real interest rate estimated by the Central Bank at about 5.0% per year and a bank spread pressured by the tax wedge, default, and the division between targeted and free credit, taking working capital or financing technological modernization in Brazil costs a substantial fraction of companies' EBITDA.

At the physical end, infrastructure charges another daily toll. Brazil invests about 16.8% of GDP (IBGE, 2025) in the total economy, and investment in logistics infrastructure barely exceeds 2% of GDP, half of what is necessary just to modernize and expand the network. Transporting cargo for thousands of kilometers on trucks over worn highways and paying cross-subsidies in the electricity tariff reduces the margin of any industry established in the country.

4. How to protect your operation from the Internal Custo Brasil

While the consumption tax reform (which unifies taxes into the IBS and CBS by 2033) and infrastructure frameworks advance at the pace of politics, business and technology leaders must relentlessly combat the internal Enterprise Cost:

1. Do not replicate state bureaucracy indoors: many corporations create endless committees, seven-tier approval levels, and software architectures full of internal tolls that mimic a notary's office. Simplify processes with the same radicalism we demand of governments.
2. Automate administrative and fiscal friction: if the regulatory environment requires complex reconciliations, use data engineering and automation so that this task consumes CPU cycles, not hours of your best analysts.
3. Protect cash flow and unit margin: where third-party capital is the most expensive item of the Custo Brasil, growing with self-generated cash flow and healthy unit economics from day one is the greatest competitive advantage a company can build.

Continue deepening: also read Tax litigation: over R$ 5 trillion in disputes that stall company balance sheets and 2041: the year the Brazilian population starts to shrink. Also explore the Brazil 2050 Agenda with interactive simulator and the Brasília Arcade.

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References and verifiable readings

• MDIC & Movimento Brasil Competitivo - MBC (2023-2025). Custo Brasil Observatory: Methodology and Measurement of the Competitiveness Differential against the OECD (R$ 1.7 trillion/year).
• Insper & CNJ. Diagnosis of Tax Litigation in Brazil.
• World Bank (2024). World Development Report 2024: The Middle-Income Trap.