Brazil’s growing game industry is seeking official recognition from the government in a vote that may come up before the country’s legislature soon.
As a relatively young industry, gaming always has to be aggressive about getting access to the same cultural and government recognition as other entertainment, as well as tax breaks. Games are also an industry where — at least in most years — there is the promise of job creation in the future.
Rodrigo Terra is president of Abragames in São Paulo, Brazil. He said in an interview with GamesBeat that Abragames, Brazilian Association of Digital Game Developers, has been advocating for the recognition and tax breaks in light of the potential of gaming to create a vibrant game industry in the future.
“We want to be recognized in a way that other countries were recognizing video games from the last decade or 20 years ago. So we need to catch up,” Terra said. “We’ve brought the video games onto their radar. Here in Brazil, the new government wants to foster digital industrialization. So they’re calling for a new focus of empowering digital initiatives. And, of course, the video games ecosystem is aligned with that.”
He added, “Video games are becoming a priority to the government across science and technology, across culture, across economic development. And that’s something that matches our desires.”
Terra said the Brazilian industry has been tracking other political movements on behalf of games around the world, including Canada and South Korea. He noted that Canada, the United Kingdom and France have had tax breaks for many years. It took five years to get to the point of having a bill ready before Congress to do research on the size of the game market, which is huge.
Based on a survey, Brazil generated $2.3 billion in revenue in 2021 and it is growing at 5% a year. The country has more than 1,000 game studios and 12,000 workers. That made it the 12th-largest game industry in the world.
In 2022, Brazil was ranked as the fifth-largest market for gamers with 102 million players, according to Newzoo. The industry grew 3.2% that year, even as the world’s game industry contracted by 5%, according to the Brazil Game Survey, released in 2023.
About 80% of the population plays games, with PC and console gamers playing an average of 5.12 hours a week.
A new legal framework for games?
Brazilian senators Leila Barros and Flávio Arns authored the bill and proactively consulted various people from the game development industry, including Abragames. A lot of the political activity started in 2021, after some attacks on gaming from conservative politicians.
Since 2021, the game companies have been lobbying the government that they need to be recognized as an industry to qualify for a direct stance with the government. Theoretically, once the industry is defined, it can lobby for tax breaks from the government in exchange for creating good jobs.
“We started a dialogue with government. We organized ministries like the Minister of Economics and Development, economic development by the Ministry of Culture, the Ministry of Science and Technology. And we started dialoguing since day one,” Terra said.
A few years ago, many governments and organizations like the World Health Organization (WHO) recognized that games were good for the mental health of people during the pandemic. The bill’s journey in the Senate started in 2022, and it has been winding back and forth on its legislative journey.
“We have one of the largest consumers of technology, but we’re not even close to being organized” like the tech companies and social media firms, Terra said. “Since the 1990s, we were treated like a part of the software ecosystem. The industry organized itself and said to the government that we need to consider video games as an industry per se.”
If the current version of the bill stands, Terra said, “We will have a legal framework that recognizes games as an industry in Brazil.”
Terra said the aim is to open up a horizon of possibilities, end misconceptions about what video games are, and boost the economic development of the sector over the next decades.
Abragames recently launched the second edition of the National Game Industry Survey, which maps national game development companies by region, technologies used, diversity, production capacity, and revenue sources, among other aspects. The study revealed 3.2% growth in the number of Brazilian studios in activity.
Abragames, a nonprofit entity, was founded in 2004 by a number of Brazilian digital game studios. The bill had to withstand an amendment that was aimed at delaying the implementation. Abragames wants to make sure that games are legally distinguished from gambling and daily fantasy sports betting.
“It took all of 2023 to tear them off the bill,” he said.
While the sector is growing fast in Brazil, Terra said that it still requires basic conditions to evolve further as Brazilian companies seek a bigger role in the global market. The Senate Education Committee approved Bill (PL) 2,796/2021 in February. [Update:] The Senate approved the bill in March, and on April 9, the lower house approved the changes the Senate made to the bill. Now the bill is just waiting for presidential approve, which should happen within the next couple of weeks.
“There are important points like the definition of games and a clear definition for game companies and professionals,” Terra said.
There are options for being hired full-time or as a contractor. The bill has improvements in the treatment of intellectual property. And there is a path for the government to invest in education for game developers. It notes where the industry does or does not need regulation.
“That helps create a more safe environment for companies to invest. And then if the government changes if people change, it’s something that is guaranteed by in the law,” Terra said.
Tax changes
The game industry wants to correct a significant tax disparity between video games and computer equipment. Currently, video games face an average taxation rate of 72%, which is considerably higher than that applied to computing hardware.
The proposed bill seeks to align taxes on video games with those on computing equipment. This adjustment would allow the sector to benefit from tax cuts and breaks that have made computer hardware and software more affordable in Brazil over the past two decades.
It also aims to regulate the manufacture, import, sale, and development of video games, as well as entertainment services linked to games across the country. By providing clear guidelines, the industry seeks stability and predictability in its operations.
And the bill includes explicit definitions for video games, mobile apps, and software developed for fantasy game entertainment. These definitions are crucial for legal clarity and consistency — and so there is no confusion with gambling.
The Brazilian video games industry has seen remarkable growth, with a 169% increase in the number of homegrown developers over the last four years. The bill aims to foster this growth by creating a favorable regulatory environment. There are more than 1,000 game studios in Brazil, Terra said.
A significant portion of the industry comprises self-taught programmers and developers. The bill recognizes this reality and does not impose specific qualifications or licenses for professionals working in the sector. The bill has already been approved in the lower house of Congress and is now awaiting analysis in the Senate.
Brazil could also have tax breaks for cultural production, where companies can reduce 70% of their taxes as long as they invest in local production. There are also tax breaks for R&D investments.
“This is a mechanism that opens the door to establish new tax breaks. But these tax breaks are attached to fostering local production,” he said. “The goal is to foster innovation.”
The Ministry of Culture will also have a fund to benefit game culture and art produced by the local industry.
Terra said that video games have faced challenges from many people who are opposed to its effects on culture or children, and Brazil is no exception. The debate is not over yet, especially in a country as polarized as Brazil, he said.
“My view is we can have good support from the government itself, which took 30 to 40 years to understand that games are not just about violence or cheap entertainment,” he said. “At least 74% of the population plays games, we have new generations that understand games. These generations support a better environment in terms of protection or regulation because they understand how much value video games add to their lives.”
Game industry support
Game companies are staying quiet in the background and trying to drum up support “backstage,” Terra said.
“The studios are being receptive to the bill itself,” he said. “I think we are going to see more public manifestations of support.”
Terra pointed out that the Brazil video game event, BIG, will now take place inside the new Gamescom Latam from June 26 to June 30 in São Paulo, Brazil. Courtesy of the Brazilian government, I will be attending the show and going to Brazil for the first time.
With the cancellation of E3 in the U.S. in June, Terra believes, “This has the opportunity to be THE event now. It’s going to be in the Southern Hemisphere for the first time. I’m pretty excited.”