Aoki Advogados Associados Erica Aoki Founding Partner Tel: 55-11-21224020 Fax (Optional) erica.aoki@aoki.adv.br www.aoki.adv.br
The Brazilian Laws and the Economy Growth After several decades of political uncertainty and high inflation levels, Brazil is experiencing a period of accelerated economic growth and increased prestige and confidence from the international community after being capable of sustaining the stability in its economy and policies even after almost a decade of a leftist’s government in power. The Brazilian economy is now considered to be the seventh largest in the world with the highest GDP of Latin America. Brazil will gain more visibility and international exposure with the chance to host the next Football World Cup in 2014 and the Olympic Games in 2016, which will also bring new investments in infrastructure and services. It is expected that the World cup will raise almost R$ 105 billion in investment projects and the hosting cities will develop necessary infrastructure and logistics to host tourists, thus generating new jobs, modernising transportation systems and other related projects not only in the big cities but also across the country. It is expected that another R$ 30 billion in investments will be generated from the Olympic Games, just two years after the World Cup. All the changes in the economy were followed by an introduction of new sets of laws and gradual changes in the judicial system. All these measures started in the mid-nineties aiming at stabilising the Brazilian economy, with the implementation of the ‘Real Plan’, implemented by then Minister of Finance, Fernando Henrique Cardoso. With all the changes in the economic scenario, the international financial community is renewing its interest in the country and the increased global need for commodities has positioned Brazil to gain a more influential position in the world. Now the largest country in Latin America, with huge natural resources, Brazil boasts a stable economy, consistent and consolidated politics based on democracy, a relatively modern infrastructure, the increase of a consumer market by the ascension of the lower classes that was possible after the Real Plan, is taking Brazil into the next decade as the
regional economic superpower. The growth of a new middle class and its expansion of purchase power, is proving the power of a new consumer market, making Brazil very attractive for investors. With all the changes in the economic and political arenas, Brazil has implemented new laws to regulate new demands and to guarantee that it is complying with international standards in some fields. The Consumer Protection Code (Law nº 8.078, of September 11, 1990), Software Protection Law (Law no. 9.609, of February 19, 1998), Copyright Law (Law no. 9610, of February 19, 1998), Industrial Property Code (Law no 9.279, of May 14, 1996), Anti Trust Laws (Law no. 8.884 of June 11, 1994) and many other laws, including a big reform in the Civil Code (Law nº 10.406, of January 10, 2002) was implemented in recent years. However, the flourishing economy and the implementation of modern laws still is not enough to heal all the social issues that are still very present in the Brazilian social system. The government’s poor historical habits are very present in constant scandals of bribes and illegal use of public money. Also, the Brazilian labour, tax and monetary system do not reflect all the modernisation and are points that new investors needs to consider before investing in Brazil. Brazilian labour cost is very high and historical tendencies of the Labour Courts in making decisions always favour the employee, which is a sign that some characteristic of a third world country with a tendentious judiciary system is left. Also, the complex taxation system and a tentative legal reform in the tax laws that started in 1995 to give continuity of a tax reform planned in 1992 is not even close to be implemented. The tax reform should be one of the next steps to guarantee the economic growth that Brazil is experiencing and it is very important to reflect the actual necessity of the country. For example, to regulate the deductibility of royalties and payment of technical assistance, Brazil is using Law no. 3470 of November 28, 1958 which is not reflective of the modern Brazilian spirit. Likewise, the several legal restrictions for the remittances of hard currencies abroad. The capital control laws, that regulate the foreign capital in Brazil, Law no. 4131 of September 3, 1962 is still in place. Although this law can be interpreted to refrain some of the investments in to Brazil, the opposite view is the existence of this law in fact, avoided and have minimized the effects of the worldwide economic crisis in Brazil. To guarantee the social stability, Brazil has already taken measures to guarantee a more transparent and fair judicial system. By punishing corrupt judges, the judiciary system implemented a regulatory body, the Conselho Nacional da Justiça (CNJ) to control the quality and capacity of judges and registrars.
July 2011 • GBM • 21