What’s it Like to do Business in Brazil?

The Brazilian motto “Ordem e Progresso” (Order and Progress), emblazoned upon its national flag, was intended upon its adoption in 1889 to reflect the positivist philosophical goals that guided the country’s transition from its imperial past to its republican future. And while Brazil has certainly progressed, such progress has not always been orderly. In fact, order is probably not the first adjective that jumps to mind when thinking about Brazil. Nonetheless, as the largest economy in South America, Brazil presents many unique opportunities for those willing to navigate the somewhat chaotic waters of law, finance and business. It is the aim of this column to help you do just that.

As U.S. lawyer who has represented various clients which have established businesses, bought companies and made investments in Brazil, I am frequently asked: “So, what’s it like to do business in Brazil?” My response is always the same. Doing business in Brazil can be complicated, confusing, time consuming, chaotic and at times quite frustrating. In fact, the World Bank ranks Brazil as 121st out of the 175 countries it has surveyed in terms of the ease of starting a business, and 115th in terms of doing business. This said, depending on the opportunity, and there are many, doing business in Brazil can be quite rewarding. And it certainly is an adventure.

There are many reasons why doing business in Brazil can be difficult. The primary reason is the heavy burden of business regulations and the accompanying bureaucratic hurdles which are spread out among various governmental agencies. Jumping through the various bureaucratic hoops required to start a business in Brazil can at times be down right Kafkaesque.

But, before we cut to the chase about such matters, take note that cutting to the chase with Brazilians can kill a business deal before it even begins. Unlike Americans, Brazilians generally don’t like to jump right into things or to get straight to the point. In fact, getting straight to the point is in my experience quite un-Brazilian. Instead, Brazilians tend to want to get to know you, and for you to get to know them, before they do business with you. For this reason doing business in Brazil is essentially another form of social interaction. As a result, doing business in Brazil can take a bit more social finessing than it does in other countries. So, if you are like me, an impatient attorney who cut his teeth in the demanding culture of New York City where everything needed to be done yesterday, you’ll need to brush up on your small-talk, chit-chat and other social skills before you begin your Brazilian business adventure. It might help to think of doing business in Brazil like a relationship with social niceties as the required foreplay that proceeds jumping into bed with your business partner or counter-part.

With your social skills honed and plenty of patience, you are ready to face some of the obstacles you are likely to encounter when doing business in Brazil. According to the Work Bank, entrepreneurs should expect to go through 17 steps to launch a new business in Brazil, which steps will take on average 152 days to complete. For now, let’s not worry about these 17 steps, or whether the actual number is 16 or 18. In fact, thinking about steps will probably just frustrate you. Thinking in terms of steps is likely to result in your falling into the trap of thinking that such steps, regardless of the number, are a definitive road map, guide or check list for doing business in Brazil - and that you simply need to follow these steps, one by one, checking each one off as you go. Unfortunately, things do not always proceed in such an orderly fashion in Brazil. But don’t let this discourage you. Things do get done in Brazil, just at a some what slower pace than that to which you may be accustomed.

Doing business in Brazil requires that you understand some of the basics about the country. The best place to start is with the legal system. The legal system provides the structural frame work for doing business. The legal system in Brazil is based upon the Napoleonic Code, or the “Code Napoléon,” originally called the “Code civil des Français,” or the Civil Code of the French, which was brought to Brazil by the Portuguese. The Civil Code, perhaps needless to say, is quite different from the Common Law upon which the legal systems of the U.S. and the U.K. are based. These differences not only impact how business is done, but also how Brazilians and their lawyers think. At this point, there is no need to get into all the differences between the Civil Code and the Common Law, but do keep in mind that this difference does impact the nature of doing business in Brazil. For instance, in the U.S. if you want to know what the law is, you check the statutes, rules and regulations. But you also need to review how these laws have been interpreted and applied by reviewing past legal cases. Under the Civil Code your inquiry stops with the statutes, rules and regulation - the Civil Code itself. Forget about creative interpretations of the law, or complying with the spirit of the law rather than the letter of the law. If the Civil Code says that you need to do X, you need to do X. There is no room for making analogical arguments, such as since doing Y would have the same result as doing X, it should be okay - and perfectly legal - to do Y rather than X. You might as well put away your thinking cap, and get ready to follow the letter of the law down to a T, even if you can think of a hundred different and perhaps better ways to accomplish the same thing.

In our next column we will explore additional aspects of law, finance and business in Brazil.

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