Improving Brazil’s Business Environment

Brazil

On 30th March 2021, two legislative measures were published in Brazil. The first, Law 14,129/2021 (“The Law”) implements the Brazilian Digital Government Policy (“DGP”), while the second, Provisional Measure 1,040/2021 (“The Measure”) aims to improve the business environment in Brazil, with the objective of improving its position in the World Bank’s “Doing Business” ranking. While they are distinct acts, there is a strong common theme to both: reducing bureaucracy in both the public administration and the private sector.

The Law provides for the principles, rules and instruments for the implementation of the DGP. It aims to improve the efficiency of public administration through digitalising records and using technology to make public services more widely accessible to the population, including those on low incomes or residing in rural and isolated areas.

The Measure sets forth legislative changes to promote and foster the creation and development of businesses in Brazil. Brazil is currently ranked 124 in the world on the World Bank’s “Doing Business” rankings[1]. This Measure directly addresses some of the issues currently faced by those wishing to start or grow businesses in Brazil, in accordance with the recommendations of the World Bank, and with the aim of improving that ranking. 

Law 14,129/2021

Background

Tracing its origins back to 2016, the DGP has at its heart a desire for the state to more effectively reach its citizens, to deliver more efficient, higher quality services, while reducing the need for in-person contact with state authorities. In 2016, the Digital Governance Policy and Strategy was published, laying out a roadmap for the digitisation of public services. Initiatives such as publishing a performance dashboard (updated weekly and found here: Painel de Serviços (servicos.gov.br)) allow citizens to keep track of digitisation progress made to date and reflect the government’s oft-stated desire for transparency.

The DGP has three essential components:

  • The National Public Service Base, to collect information on public services in each federative unit;

  • The User Service Letters (as discussed in Law 13,460/2017); and

  • The Digital Government Platforms, which are designed to offer and provide public services digitally and include a panel to monitor and track their delivery and performance.

The Law is applicable to the federal government and its various administrations, public companies and government-controlled companies (including their subsidiaries and controlled companies). It must be implemented in line with Brazil’s data protection legislation, the LGPD (similar to the GDPR).

Key Objectives

The Law targets key principles of the DGP including:

  • The reduction of bureaucracy;

  • Modernizing, strengthening and simplifying the relationship between citizen and state through digital services;

  • Transparency in terms of performance and quality of government services;

  • Better integration between different government agencies to ensure a more efficient service, and more secure sharing, handing and dissemination of personal data in line with the LGPD.

How will this help?

Of particular interest to those wishing to do business in Brazil is the commitment contained in The Law to open data, allowing any data generated by public entities which is not secret or restricted to be made available on the internet under an open licence for use by any person or entity. Equally, The Law encourages the use of electronic signatures in interactions between public agencies and citizens. Clients looking to commence business in Brazil will benefit from the creation of a single platform for access to information and public services. Brazil and the UK have recently signed an agreement to cooperate on the digitisation process[2], which should support these changes. Finally, The Law simplifies procedures for requesting, offering and monitoring public services.

Provisional Measure 1,040/2021

Background

Out of the 190 countries listed on the World Bank’s “Doing Business” rankings, Brazil is 124th in the 2020 report. Given Brazil’s position as the largest economy in Latin America and the World Bank classing Brazil as an upper middle income country, Brazil’s ranking therefore has significant room for improvement. The Measure seeks to tackle some of the issues highlighted in the report in order to improve Brazil’s rankings in future editions.

Key Objectives

The Measure implements changes in a number of different areas, including:

  • Streamlining of procedures for starting a business;

  • Enhancement of protection of minority shareholders;

  • Facilitation of foreign trade;

  • Establishment of an integrated asset recovery system;

  • Facilitating of works to extend electricity distribution networks.

How will this help?

The business environment in Brazil can be overly bureaucratic and complicated. Reforms to procedures for starting a business, such as unifying federal, state and city tax registrations and removing the need to assess a company’s registered address will help to speed up the creation of new companies. Increased protections for minority shareholders are important, particularly considering the abundance of government-controlled and family-controlled companies. New rules prohibit on one person being both CEO and Chair of the Board and require independent directors on the boards of public companies. The introduction of a fully integrated asset recovery system, aims to facilitate debt recovery and reduce the costs of borrowing.

It is important to note that The Measure is a temporary legislative act issued by the President for matters considered urgent. Although it comes into force on publication, unless The Measure is approved and converted into Law by the National Congress within 60 days of publication (with the potential to extend for a further 60 days), it will cease to be effective.

Conclusion

In conclusion, both measures aim to tackle bureaucracy with the overall aim of increasing efficiency and facilitating interactions with the state, for companies and citizens alike.

Upon full implementation of the changes introduced by The Measure and The Law, they are expected to improve both the Brazilian Governments’ ability to interact and serve its citizens and create a more welcoming and efficient environment in which for businesses to grow. Time will tell whether they are successful in improving Brazil’s World Bank ranking.


[1]Doing Business in Brazil - World Bank Group

[2]Brazil and UK to cooperate on digital transformation and innovation | ZDNet