This information is derived from the State Department's Office of Investment Affairs Investment Climate Statement. Any questions on the ICS can be directed to EB-ICS-DL@state.gov.
Last Published: 7/31/2017

Transparency of the Regulatory System

In the 2017 World Bank Doing Business report, Brazil ranked 123th out of 190 countries in terms of overall ease of doing business in 2016, a decline of eight positions compared to the 2015 report. According to the World Bank, it takes approximately 101.5 days to start a business in Sao Paulo. Rio de Janeiro was also profiled in the report. The GOB is seeking to streamline the process and decrease the amount to time it takes to open a business to five days through its RedeSimples Program. Similarly, the GOB reduced red-tape through the implementation of the SIMPLES program, which was designed to simplify the collection of up to eight federal, state, and municipal-level taxes into one single payment.

The 2017 World Bank study noted that the annual administrative burden of tax payments to a medium-size business in Brazil is an average of 2,038 hours versus 163.4 hours in the OECD high-income economies, which marks an improvement for Brazil that corresponded with improvements in other OECD high-income economies over recent years. The total tax rate for a medium-sized business in Rio de Janeiro is 69 percent of profits, compared to the average of 40.9 percent in the OECD high-income economies. Business managers often complain of not understanding tax regulations, despite their investments in creating large local tax and accounting departments in their companies.

Tax regulations, while burdensome and numerous, do not generally differentiate between foreign and domestic firms. However, there are instances of complaints that the value-added tax collected by individual states (ICMS) favors local companies. Although the tax is designed to be refunded when goods are exported abroad, exporters in many states had difficulty receiving their ICMS rebates. Taxes on commercial and financial transactions are particularly burdensome, and businesses complain that these taxes hinder the international competitiveness of Brazilian-made products. In addition, the U.S. government has been evaluating and continues to monitor the impact of PIS/Cofins tax rates on imported goods after the passage of Law 13137/2015.

Of Brazil’s ten federal regulatory agencies, the most prominent include: ANVISA, the Brazilian counterpart to the U.S. Food and Drug Administration, which regulatory authority over the production and marketing of food, drugs, and medical devices; ANATEL, the country's telecommunications agency, which handles licensing and assigning of bandwidth; ANP, the National Petroleum Agency, which regulates oil and gas contracts and oversees the bidding process for oil blocks, including for pre-salt oil; ANAC, the agency that oversees the civil aviation industry; and ANEEL, the country’s electric energy agency. In addition to these federal regulatory agencies, Brazil has at least 27 state-level agencies and 17 municipal-level agencies.

The Office of the Presidency’s Program for the Strengthening of Institutional Capacity for Management in Regulation (PRO-REG), created in 2007 by Decree 6062, has introduced a broad program for improving Brazil’s regulatory framework, including via an ongoing Work Plan launched in 2014 with the U.S. White House Office of Information and Regulatory Affairs (OIRA) to exchange best practices in developing high quality regulations that mandate the least burdensome approach to address policy implementation. Ex-ante Regulatory Impact Analyses (RIAs) are completed on a voluntary basis by regulatory agencies. A bill on Governance and Accountability for Federal Regulatory Agencies (PL 6621/2016) has been approved by the lower house of Congress and presently awaits Senate approval. Among other provisions, the bill would make RIAs mandatory for regulations which affect “the general interest”. Pro-Reg is drafting enabling legislation for implementing this provision.

The general public has online access to both approved and proposed federal legislation via websites for the Chamber of Deputies, Federal Senate, and the Office of the Presidency. Brazil is seeking to improve its public comment and stakeholder input process. In 2004 the GOB instituted a Transparency Portal, a website in which data is available on funds transferred to and from the federal, state and city governments, as well as to and from foreign countries. It also includes information on civil servants’ salaries.

International Regulatory Considerations

Brazil is a member of Mercosul, and routinely implements Mercosul common regulations.

Brazil is a member of the WTO; the government regularly notifies draft technical regulations, such as on agricultural potential barriers, to the WTO Committee on Technical Barriers to Trade (TBT).

Legal System and Judicial Independence

Brazil has a civil legal system structured around courts at the state and federal level. Contract enforcement can be accomplished either through the court system or via mediation, although both processes can be lengthy. Foreign contract enforcement judgments must be accepted by the Brazilian Superior Court of Justice (STJ) to be considered valid in Brazil, and among other considerations must not contradict any prior decisions by a Brazilian court in the same dispute. Commercial disputes are regulated under the Brazilian Civil Code, enacted in 2002, although an older, largely superseded Commercial Code remains applicable solely for commercial cases involving maritime law. Federal judges hear most disputes in which one of the parties is the Brazilian State, and also rule on lawsuits between a foreign state or international organization and a municipality or a person residing in Brazil.

The judicial system is generally independent and frequently rules on politically sensitive issues. Judges at both the state and federal level are largely career officials selected through a meritocratic examination process. The judicial system is extremely backlogged, however, and disputes or trials of any sort frequently require years to arrive at a final resolution, including all available appeals. Regulations and enforcement actions can be litigated in the court system, which contains mechanisms for appeal depending upon the level at which the case is filed. The Supreme Federal Court (STF) is the ultimate court of appeal on constitutional grounds; the STJ is the ultimate court of appeal for cases not involving constitutional issues.

Laws and Regulations on Foreign Direct Investment

Foreigners investing in Brazil must register their investment with the BCB within 30 days of the inflow of resources to Brazil. Registration is done electronically. Investments involving royalties and technology transfer must be registered with Brazil’s patent office, the National Institute of Industrial Property (INPI). Investors must also have a local representative in Brazil. Portfolio investors must have a Brazilian financial administrator and register with the Brazilian Securities Exchange Commission (CVM).

Competition and Anti-Trust Laws

Regulatory review of mergers and acquisitions are carried out by the Administrative Council for Economic Defense (CADE). In October 2012, Brazil performed its first review of a pending merger, bringing Brazil in line with U.S. and European practices. This shift to pre-merger review was a result of 2011 legislation (Law 12529) adopted to modernize Brazil’s antitrust review process and to combine the antitrust functions of the Ministry of Justice and the Ministry of Finance into CADE. This government body is responsible for enforcement of competition laws and consumer defense.

Expropriation and Compensation

Article 5 of the Brazilian constitution assures the property rights of both Brazilians and foreigners that live in Brazil. The Constitution does not address nationalization or expropriation. Brazilian Law does allow the government to exercise eminent domain under certain criteria which include, but are not limited to, national security, public transportation, safety, health, and urbanization projects. Owners are compensated in cash. The rules for eminent domain are laid out in Decree-Law 3365 from 1941, as amended.

There are no known expropriation actions in Brazil against foreign interests in the recent past, nor have there been any signs that the current government is contemplating such actions. Some claims regarding land expropriations by state agencies were judged by Brazilian courts in U.S. citizens’ favor; however, compensation has not always been paid, as states have filed appeals to these decisions.

Dispute Settlement

ICSID Convention and New York Convention

Brazil ratified the 1958 Convention on the Recognition and Enforcement of Foreign Arbitration Awards. Brazil is not a member of the World Bank’s International Center for the Settlement of Investment Disputes (ICSID). Brazil joined the United Nations Commission on International Trade Law (UNCITRAL) in 2010, and its membership will expire in 2022.

Investor-State Dispute Settlement

Article 34 the 1996 Brazilian Arbitration Act (Law 9307) defines a foreign arbitration judgment as any judgment rendered outside the national territory. The law established that the Brazilian Federal Supreme Court must ratify foreign arbitration awards. Law 9307 also stipulates that the foreign arbitration award is to be recognized or executed in Brazil in conformity with the international agreements ratified by the country and, in their absence, with domestic law. A 2001 Brazilian Federal Supreme Court ruling established that the 1996 Brazilian Arbitration Act, permitting international arbitration subject to Federal Supreme Court ratification of arbitration decisions, does not violate the Federal Constitution’s provision that “the law shall not exclude any injury or threat to a right from the consideration of the Judicial Power.”

Contract disputes in Brazil can be lengthy and complex. Brazil has both a federal and a state court system, and jurisprudence is based on civil law. Federal judges hear most disputes in which one of the parties is the State, and rule on lawsuits between a foreign State or international organization and a municipality or a person residing in Brazil. Five regional federal courts hear appeals of federal judges’ decisions. The 2017 World Bank Doing Business report found that on average it takes 11 procedures and 731 days to litigate a contract breach.

International Commercial Arbitration and Foreign Courts

Brazil ratified the 1975 Inter-American Convention on International Commercial Arbitration (Panama Convention) and the 1979 Inter-American Convention on Extraterritorial Validity of Foreign Judgments and Arbitration Awards (Montevideo Convention). Law 9307/1996 pertains to advanced legislation on arbitration and anchored in what is most modern about the principles and guarantees of litigants. The GOB developed a new Cooperation and Facilitation Investment Agreement (CFIA) model in 2015 (http://dai-mre.serpro.gov.br/atos internacionais/bilaterais/2015) that does not include investor state dispute settlement mechanisms. (See section 13)

Bankruptcy Regulations

Brazil has a commercial code that governs most aspects of commercial association, except for corporations formed for the provision of professional services, which are governed by the civil code. In 2005, bankruptcy legislation (Law 11101) went into effect creating a system modeled on Chapter 11 of the U.S. bankruptcy code, which allows a company in financial trouble to negotiate a restructuring with its creditors outside of the courts. In the event a company does fail despite restructuring efforts, the reforms improved creditors’ ability to recover their debts. In the World Bank’s 2017 Doing Business Report, Brazil is ranked 67th out of 190 countries for ease of “resolving insolvency.”

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Brazil Economic Development and Investment Law