This document provides an overview of opportunities and considerations for doing business in Brazil. It notes that Brazil remains an attractive market with over 115 million middle-class consumers and abundant natural resources. However, doing business there involves navigating a complex legal and regulatory system as well as cultural differences. Key challenges include high bureaucracy and corruption, which can significantly extend timelines. Thorough compliance procedures and patience are important, as is developing personal relationships and learning Portuguese for long-term success operating in Brazil. The tax system is also very complex and continuously evolving.

1. WORKSHOP – DOING BUSINESS IN BRAZIL
Key Points
Lublin, 27. November 2017

2. 1. Opportunities to Foreign
Investment

3. 1. Opportunities to Foreign Investment
§ Brazil remains a solid democracy with a very large market:
– 115 million “middle-class” Brazilian consumers;
– Abundance of natural resources;
– Confidence is coming back (Bovespa index 66%+ in 2016; 27%+ in
2017).
§ Factors that can indicate a good entry point:
– Local assets can be found at an attractive price;
– Average wages reduced;
– Opportunities for acquisition of distressed assets;
– Business confidence surging after conclusion of impeachment;
– Efficiency is a key to success.

4. 2. Legal Aspects: Direct Investments
and Exports to Brazil

5. § High-level Highlights – Exporting to Brazil:
– Relatively protectionist:
• Import duties;
• Local content requirements for certain industries (automotive, oil & gas etc.);
• Necessary registry of certain products (oil byproducts, chemicals etc.) with
public agencies.
– Importation procedure is bureaucratic. Customers may want to buy goods
cleared from customs, in this case a local partner is required for the exporter;
– Sales agents are protected by specific local legislation.
2. Legal Aspects:
Direct Investments and Exports to Brazil

6. § High-Level Highlights – Direct Investments:
– Incorporating a subsidiary: Limitada or S.A. (EIRELI ?);
– No minimum capital required (relevant for other purposes as import license,
thin capitalization etc.);
– Flow of capitals is controlled by the Central Bank, but foreign investment is
generally welcome and there are no significant barriers to transfer funds
into/from the country;
– Acquisitions need careful planning and due-diligence;
– Tax incentives may be available (federal, state and municipal levels);
– Tax system is complex and requires extra compliance effort;
2. Legal Aspects:
Direct Investments and Exports to Brazil

7. § High-Level Highlights – Direct Investments (Continued):
– Employment laws are very strict, inflexible and protective of employees,
even after the recent labor law reform;
– Strong consumer protection, environmental, antitrust and anti-bribery
legislation;
– Protection of patents and trademarks;
– Rule of law generally prevails, but judiciary is slow;
– Arbitration is a good option, albeit more expensive;
– Sophisticated and well regulated banking system;
– Financing through ordinary means is expensive: high interest rates; possible
special credit lines with governmental banks for productive projects.
2. Legal Aspects:
Direct Investments and Exports to Brazil

8. 3. Relevant Business & Cultural Aspects

9. 3. Relevant Business & Cultural Aspects
3.1 Brazil’s Costs
§ This term is used to refer to the extra costs that come with doing
business in Brazil: such as those related to bureaucracy, under-
developed infrastructure, high labour costs or various kinds of
inefficiency;
§ Once in Brazil: with an awareness of key issues (and more patience),
it is possible to minimise the effect of the “Brazil’s costs” on your
company.

10. § Corruption of all kinds affects many aspects of doing business in
Brazil. Unfortunately, where there is excessive bureaucracy,
corruption comes in the trunk;
§ The key is to understand that things will take longer to get done in
Brazil and to set realistic deadlines, as well as making sure that
suitable compliance procedures are implemented right from day one.
3. Relevant Business & Cultural Aspects
3.2 Bureaucracy and Corruption

11. § The World Bank ranks Brazil as
116th out of 189 countries for the
ease of starting a business;
§ This extended timescale must be
borne in mind in every step your
investment is going to take in Brazil;
§ Things usually take longer to
happen in Brazil (e.g. registering
documents, issuing licenses etc.);
§ In some periods of the year, as
Carnival, Easter and at the end
and beginning of the years, the
processes slow down even more.
3. Relevant Business & Cultural Aspects
3.3 Putting-Into-Operation Procedure

12. § Brazil is recognized as “the country that places the most importance
on personal relationship”.
§ Brazilians tend to prefer meetings instead of calls and business
networking is usually slower process than in Europe, since trust is
constructed gradually.
§ Once these relationships are formed, they tend to be for long term.
3. Relevant Business & Cultural Aspects
3.4 Personal Relationship

13. 3. Relevant Business & Cultural Aspects
3.5 Less Formality
§ Meetings of any kind are generally less formal than in Europe and it is
almost mandatory to start them with small talk about non-business subjects;
§ Brazilians are usually tight to punctuality
than Europeans, but they expect you to
be punctual;
§ Although the dress code is generally
more relaxed than in Europe, the
safe approach is to follow the
European code.
§ Given names are more used and usually
the Sir comes before the given name, not
the family name;

14. 3. Relevant Business & Cultural Aspects
3.6 Compliance
§ Due to the over regulated environment with high level of
bureaucracy, Brazilians can be many times not fully compliant with
rules;
§ Besides, although non-compliance can be not hardly encountered,
Brazilians tend to expect you to be complaint.
§ This doesn’t mean that the rules are
not enforceable or the consequences
(even criminal) are not concrete;
thus, double checks, reviews, due
diligences are always mandatory;

15. 3. Relevant Business & Cultural Aspects
3.7 The Portuguese Language
§ Brazilians are in general not polyglots;
§ Although in international transactions and in administrative level of
large companies Brazilians usually speak English, misunderstandings
and misinterpretations are not very hard to find;
§ For working long term in
Brazil, it is essential to speak
Portuguese.

16. 4. Important Tax Aspects

17. 4. Important Tax Aspects
4.1 Tax Policies in Brazil
• Is the Brazilian tax system complex?
• Do the Brazilians [businessmen, advisors, accountants, tax
authorities, judges etc.] really understand their tax system?
• Should I rely on an answer received from my consultant last
year? Last month? Yesterday? This morning?

18. • Inversion of the taxation on income to consume taxes [indirect
taxation]; perverse effects:
2016 38%
4. Important Tax Aspects
4.1 Tax Policies in Brazil

19. General Tax Aspects:
- Payment of following taxes:
1. II – Tax on Imports
2. AFRMM – Duty on Maritime Freight
3. IPI – Excise Tax
4. PIS/COFINS – Social Contributions
on Imported Goods and Services
5. ICMS – State VAT
_____________________________
-“bad guys”:
a) II – Tax on Imports [costs]
b) ICMS – State VAT [financial burden]
Domestic
Market
Mercosul
Market
Importation
Exportation
Trade
Manufacturing
4. Important Tax Aspects
4.2 Importation of Goods

20. Dziękuję za cierpliwość
Dr. Paulo César Teixeira Duarte Filho, LL.M
Partner
pduarte@rothmann.com.br