Brazil's Gaming Industry Poised for Unprecedented Growth with Landmark Legal Framework

The Brazilian gaming industry is on the cusp of a transformative shift, as a new legal framework redefines the industry's landscape and opens up a world of opportunities. This pivotal moment, described as a "game changer" by industry leaders, is set to propel the nation's gaming ecosystem into a new era of prosperity and global recognition.

Unlocking the Potential of Brazil's Gaming Powerhouse

A Watershed Moment for the Brazilian Gaming Industry

The Brazilian gaming industry is experiencing a seismic shift, with the adoption of a groundbreaking legal framework that redefines the industry's status and unlocks a wealth of incentives and opportunities. This landmark legislation, passed in May, has been hailed as a "phase two" for the nation's gaming landscape, ushering in a new era of growth and development.The framework's impact is far-reaching, as it officially recognizes video games as a distinct industry, rather than simply a subset of the software or technology sectors. This distinction is crucial, as it paves the way for tailored policies, tax incentives, and investment opportunities that were previously out of reach."We're calling it phase two of the Brazilian games industry," says Rodrigo Terra, the president of Abragames, the Brazilian games trade body. "We've had the boss fight, now we have the next level."

Redefining the Industry's Legal Status

The new legal framework is a game-changer in several ways. Firstly, it establishes a clear definition of video games, granting them their own unique classification within the National Classification of Economic Activities (CNAE). This means that gaming companies will now be treated as distinct entities, with their own set of tax rules and regulations, rather than being lumped in with general software or technology businesses."We now have the opportunity to have Brazilian states looking into games from an economic perspective," explains Terra. "Many other countries were doing that ten, 15 years ago: the UK, France, Germany, the United States, even South Korea. Those governments were creating [hubs], tax incentives, tax relief, and operations that would help games companies perform better."Furthermore, the framework has also recognized video games as a cultural asset, opening up new avenues for grants, funding, and support. This distinction helps to differentiate the gaming industry from sectors like gambling or sports betting, providing a clearer path for the industry to establish its own identity and secure the necessary resources to thrive.

Fostering a Conducive Environment for Growth

The legal framework's impact extends beyond just the industry's legal status. It also aims to create a more favorable environment for gaming companies to operate and grow within Brazil. This includes addressing longstanding challenges, such as the difficulties in accessing crucial development tools and equipment, like console dev kits."We're one of the ten biggest countries when it comes to expenditure on games, but we're not even close to that when it comes to making revenue for the video games industry here," says Thiago de Freitas, the CEO and founder of Kokku, one of Brazil's largest studios. "We're now finally in a position where we can get investment and real opportunities to access equipment that has been so hard for us to access, such as dev kits, test kits."The framework also paves the way for tax incentives and other financial support mechanisms, which have proven to be a game-changer for gaming industries in other countries. While the specifics of these incentives are still being ironed out, the industry is optimistic that they will help to level the playing field and attract more investment, both domestic and international.

Empowering the Independent Gaming Sector

The legal framework's impact extends beyond the larger studios, as it also holds significant implications for the independent gaming sector in Brazil. Julianna Brito, who runs the Indie Hero accelerator, explains that prior to this framework, Brazilian indie studios were essentially "invisible to foreigners," making it challenging to secure partnerships and investment."One of the first things investors are going to do when they come to a country they don't know is see how many companies there are," Brito says. "Because [if] there are many companies they [think], 'Oh, this market is developed there, because there are many companies'."With the new framework in place, indie studios will now have a clearer path to visibility and recognition, both domestically and internationally. This, in turn, will open up new avenues for funding, collaboration, and growth, empowering the independent gaming community to thrive alongside their larger counterparts.

Overcoming Challenges and Charting a Path Forward

While the excitement surrounding the legal framework is palpable, industry leaders acknowledge that the implementation process will not be without its challenges. Navigating the complex tax landscape in Brazil, for instance, will require careful planning and coordination between the government and the gaming industry."From a federal level and a state level, our taxation here is really a mess," says Terra. "They are [making changes] to be closer to what Europe and the US does for consumer goods and productivity companies. The Tax Renewal Law that's going to be implemented in 2030 will simplify a lot of our taxes."Additionally, the industry is eager to see the government take a more active role in supporting the growth of the gaming ecosystem, particularly when it comes to education and skills development. Thiago de Freitas of Kokku emphasizes the need for "proper education for working on AAA games" and the importance of incentivizing companies to invest in Brazil's gaming talent.Despite these hurdles, the industry remains optimistic about the future. Rodrigo Terra estimates that it will take around two years to fully implement the legal framework, but when it's complete, he believes Brazil will have "the best place in the world to start and work in a games company."As the Brazilian gaming industry embarks on this new chapter, the potential for growth and global recognition is palpable. With the legal framework in place, the nation's gaming powerhouse is poised to emerge as a force to be reckoned with on the global stage, unlocking a wealth of opportunities for developers, investors, and the industry as a whole.