Brazil is located in Eastern South America, bordering the Atlantic Ocean. The country is slightly smaller than the United States with an area of 8,511,965 sq. km. (3,290,000 sq. miles).
Brazil’s government is a federal republic based on parliamentary democracy. It is made up of 26 states and 1 federal district.
State courts are often subject to political and economic influence. Several legal provisions do ensure the formal independence of judges, and the constitution grants the judiciary broad functional and structural autonomy.
Business executives give the Brazilian judiciary's level of independence from influences of government, citizens and companies a score of 2.0 on a 7-point scale (1 being 'heavily influenced' and 7 'entirely independent').
The use of bills of exchange, promissory notes, and checks for international settlements is not advisable. In case of default, they do, however, represent an effective means of applying pressure, constituting an extra-legal enforcement title that affords creditors privileged access to enforcement proceedings.
Bank transfers, sometimes guaranteed by a standby letter of credit, are commonly used for payments in foreign transactions. The major Brazilian banks are connected to the SWIFT electronic network.
Considering the slow pace and the cost of legal proceedings, it is advisable to negotiate directly with delinquent customers where possible and attempt to settle on an amicable basis.
Brazil is a dynamic country and poses a considerable challenge to debt collectors, not only because of its size, which is almost as big as the U.S, but also because of its diversity. Recovering claims from debtors in major Brazilian cities such as Sao Paulo or Porto Alegre, is quite a different matter from recovering claims from a typical Brazilian city like Manaus or Belém.
In general, Brazilian companies are well structured and make good business partners. Like most other countries, when cash flow problems arise in Brazil, it may signal the beginning of other (communication) problems as well. Brazilians tend to put up a ‘shield’ to protect themselves from creditors when cash flow problems occur.
Do not wait longer than 180 days after the due date before transferring a file to a debt collector/attorney.
Be prepared to accept a long repayment schedule (30, 40 or even 50 installments) as this is customary in Brazil.
Try to avoid legal proceedings because aside from high costs and protracted procedures, the execution of a judgment is often a difficult and complicated matter.
The 2013 World Bank “Doing Business” survey found that on average it takes 45 procedures and 616 days to litigate a contract breach at an average cost of 16.5% of the claim.
Brazil has ratified the 1975 Inter-American Convention on International Commercial Arbitration (Panama Convention), the 1979 Inter-American Convention on Extraterritorial Validity of Foreign Judgments and Arbitration Awards (Montevideo Convention). Brazil, however, is not a member of the International Center for the Settlement of Investment Disputes (ICSID), also known as the Washington Convention.
The 1996 Brazilian Arbitration Act defines a foreign arbitration judgment as any judgment rendered outside the national territory. The Act established that the Brazilian Federal Supreme Court must ratify foreign arbitration awards.
Coface Business Climate Rating: A4 -- The business environment is acceptable. Corporate financial information is sometimes neither readily available nor sufficiently reliable. Debt collection is not always efficient and the institutional framework has shortcomings. Intercompany transactions may thus run into appreciable difficulties in the acceptable but occasionally unstable environments rated A4.
Brazil's domestic market potential and competitive labor costs enhance its attractiveness to foreign investors. However, to achieve sustainable growth, structural reforms are necessary — notably in education, social security, the employment market, taxation, and the regulatory framework. Unfortunately, all have come up against major political obstacles. In addition, a lack of investment has resulted in deficient energy, rail, road, port and airport infrastructure.
Market Access: A constitutional amendment terminated the distinction between foreign and local capital in general, yet there are laws that restrict foreign ownership within some sectors — like media and communications, and aviation. Foreign investment restrictions remain in a limited number of other sectors, including highway freight and mining of radioactive ore. Foreign ownership of land within 150 km of national borders remains prohibited unless approved by Brazil's National Security Council.
Transparency of Regulatory System: Brazil has a functional 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 February 2005, bankruptcy legislation 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 give creditors improved ability to recover their debts.
Intellectual Property Rights: Brazil is a member of the World Intellectual Property Organization (WIPO) and a signatory of the Bern Convention for the Protection of Literary and Artistic Works, the Patent Cooperation Treaty, and the Paris Convention on Protection of Industrial Property. In most respects, Brazil’s 1996 Industrial Property Law brings its patent and trademark regime up to the international standards specified in the TRIPS Agreement. Brazil's 1998 copyright laws generally conform to international standards, yet piracy of copyright material remains a problem.
Conversion and Transfer Policies: There are few restrictions on converting or transferring funds associated with foreign investment in Brazil. Foreign investors may freely convert Brazilian currency in the unified foreign exchange market. All foreign exchange transactions, including identifying data, must be reported to the Central Bank. Foreign exchange transactions on the current account have been fully liberalized.
Corruption: Several studies indicate that corruption and bribery are serious obstacles to doing business in Brazil. Although the fight against corruption faces obstacles in terms of implementation and lack of political support, anti-corruption initiatives in Brazil are formally strong and well-developed.
Expropriation and Compensation: In the recent past, there there have been no expropriation actions against foreign interests in Brazil nor have there been any signs that the current government is contemplating such actions. In the past, some claims regarding land expropriations by state agencies have been judged by courts in U.S. citizens' favor. However, compensation has not always been paid, as states have filed appeals to these decisions.
Economic Freedom: According to the 2019 Index of Economic Freedom, Brazil’s economic freedom score is 51.9, making its economy the 150th freest in the 2019 Index. Its score is 0.5 points higher than last year as a result of declines in Government spending and labor freedom. Brazil is ranked 27th out of 32 countries in the South and Central America/Caribbean region. Its overall score is below regional and world averages.
Brazil is a mixture of races and ethnicities, resulting in rich diversity. The family is the foundation of the social structure and forms the basis of stability for most people. Nepotism is considered a positive thing, since it implies that employing people one knows and trusts is of primary importance.
Brazilians need to know who they are doing business with before they can work effectively. They prefer face-to-face meetings to written communication. In general, the individual they deal with is more important than the company.
Business Cards: Business cards are exchanged during introductions with everyone at a meeting. It is advisable, although not required, to have the other side of your business card translated into Portuguese.
Business Attire: Brazilians pride themselves on dressing well. Men should wear conservative, dark colored business suits. Three-piece suits typically indicate that someone is an executive. Women should wear suits or dresses that are elegant and feminine with good quality accessories. Manicures are expected.
Names and Titles: In formal situations, for superiors, use titles like Mr. and Mrs. followed by their surnames. In informal situations, the first name is almost always used. The terms “Seu” (for men) and “Dona” (for women) are used regularly. Doctors and lawyers are always called Doctor.
Conversation: Since this is a group culture, it is important that you do not do anything to embarrass a Brazilian. Criticizing an individual causes that person to lose face with the others in the meeting. The person making the criticism also loses face, as they have disobeyed the unwritten rule.
Gifts: Brazilians do not expect gifts and they are not important to establish a business relationship. It's advisable to give only company materials like: pens, notebooks, or any other giveaways without great material value. Expensive gifts can be understood as bribes and are not welcomed.
Meetings: Business appointments are required. Confirm the meeting in writing. In Sao Paulo and Brasilia it is important to arrive on time for meetings. In Rio de Janeiro and other cities it is acceptable to arrive a few minutes late. Do not appear impatient if you are kept waiting. Brazilians see time as something outside their control and the demands of relationships take precedence over adhering to a strict schedule.
Meetings are generally rather informal. Expect to be interrupted while you are speaking or making a presentation. Avoid confrontations. Do not appear frustrated with your Brazilian colleagues.
Negotiations: Wait for your Brazilian colleagues to raise the business subject. Never rush the relationship-building time. Brazilians take time when negotiating. Do not appear impatient. It is advisable to hire a translator if your Portuguese is not fluent. Use local lawyers and accountants for negotiations. Brazilians resent an outside legal presence.
Brazilians negotiate with people not companies. Do not change your negotiating team or you may have to start over from the beginning.
Acceptable Public Conduct: It's not permitted to smoke in closed spaces like shopping centers, restaurants, shops, etc. Topics like salaries, matrimonial status and age should be avoided. Try not to reinforce male chauvinism towards women. Although Brazilians have a good sense of humor, they can be offended with jokes about Brazilian women.
This information is provided by ABC-Amega Inc. Providing international receivable management and debt collection services for exporters to more than 200 countries including Brazil. For further information, contact [email protected].
Risk Assessment information: Provided with permission by Coface Country Rating. Also Belgian credit insurance company Ducroire Delcredere.