sexta-feira, 21 de fevereiro de 2014

New Brazilian investment guide - Brazilian Agency for promotion of exports

How to incorporate a Brazilian company through foreign direct investment
List of documents for setting up a company in Brazil
Power of Attorney for setting up a company in Brazil

Apex, the Brazilian agency for promotion of exports, has published a new Investment Guide to Brazil.

The material is beautiful.  The agency in charge of the design did good work.

Compared to the earlier versions, I think that the legal part has  improved. It is more detailed and fairly close to reality.  The main slides regarding company incorporation are reproduced below.

The problem with this guide is excessive optimism and misleading information. For example, it lists as "Tax Incentives"some programs that are, in reality, very limited in scope.

It is also a publicity piece, with government agencies fighting to shine in their respective areas.  Brazilian Development Bank (BNDES) almost convinced me that obtaining loans is easy.

If you already know Brazil, I don't think the guide will add much. If you are a beginner, go for it (link below):


Brazilian (not so) timid take on transnational jurisdiction: OGX Austria included in the Brazilian bankruptcy

I had recently commented on OGX bankruptcy.

Specially about the possible inclusion of its foreign subsidiaries in the Brazilian bankruptcy.

At the end of the first post, I said:

Brazilian general procedural rules are very cautious when dealing with extraterritorial competence. In general terms, only companies with a permanent place of business in Brazil (or, at leas, a fixed representative here) can be included in litigation procedures as if they were nationals.

Third, the judge has claimed that including foreign subsidiaries in the Brazilian bankruptcy would amount to piercing the corporate veil.  He didn't elaborate much, but I think his reasoning was that doing so would be unfair to other foreign partners who might participate in the OGX Austria, for example. Also, the arbitrary inclusion of foreign controlled companies could pave the way for the inclusion of foreign investors in the bankruptcy. This would generate and absurd jurisprudence, that could upset markets and make Brazil an undesired place for the world's money. 

I think the Judge was right. Let's see what the court of appeal will say about it. 

The Court of Appeal has had its say, and declared that: OGX'S international  unit in Austria, OGX Austria GmbH, must be added to its bankruptcy filing in Brazil. (check the Reuter's report here)

This is singular and extraordinary.

 I think this is the most audacious decision on transational jurisdiction ever made in Brazil. It will certainly be the leading case for similar situations. 

Is there any Austrian lawyer among the readers that may iluminate how is Austria going to handle this?

quinta-feira, 20 de fevereiro de 2014

Selling engineering services in Brazil

Please also read:

Reduction in the Brazilian taxation of imported services - if you are from the right country

I have been talking to a lot of engineering companies lately.

Most of them want to know two things:

How much in taxes will the Brazilian clients pay when they import my engineering services?


Why so much? Is Brazil crazy? Don't you know you need engineers desperately?

The reaction is understandable. After all the due calculations, a Brazilian client may pay 50% in taxes, over the original cost of the service. (For a breakdown of this, please read my article on "taxes over software importation in Brazil". Taxation over software and services is very similar)

Usual solutions to this problem are the incorporation of a Brazilian subsidiary, the creation of a JV between the engineering company and the buyer in Brazil or some kind of technology transference agreement that will allow part of the service to be performed in Brazil. The use of non double taxation agreements complements all the above.

Each of those partial solutions also brings new questions.

For instance,  Brazilian law is not clear on the issue of services invoiced from a subsidiary in Brazil directly to the Brazilian customer,  but partially performed by the controlling company of that subsidiary (for example, a team of game developers in Moldova that has a sales team in Brazil). Should transfer pricing rules apply in this case?

Also, JV agreements do not fully solve the problem.  How much investment should be registered for the foreign party that brings 100k in cash, but allow access to cutting edge software?

On top of that, it must be stressed that the Brazilian revenue service has an internal directive that comands its agents to disregard NDT agreements. If you want to see the law being applied, you must file a lawsuit (some french oil drillers that provided services to Petrobras have Recently won a case).

The use of offshore companies to channel payments has been common. But recent changes on regulation of offshore subsidiaries brought uncertainty to this method.

At the end of the day, each of my clients chooses a different mix of solutions, trying to balance tax economy and safety.

What do you do when you face this problem?

segunda-feira, 17 de fevereiro de 2014

Which way now for Latin America’s equity markets? Hear from Credit Suiss’s Brazilian CEO at Latin Lawyer Corporate Finance, March 2


3rd Annual Corporate Finance Conference
Thursday, 27 March 2014, Hotel Unique, São Paulo, Book now by Friday, 21 to save over 35%.
Chaired by
José Eduardo Carneiro Queiroz, Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados and Juan Giraldez, Cleary Gottlieb Steen & Hamilton LLP

10.30 – 11.00: Welcome coffee and registration
11.00 – 11.30: Opening keynote: José Olympio Pereira,
 CEO of Credit Suisse Brazil
11.30 – 12.30: Latin America’s equity markets: Where are we now?
A panel of leading bankers and regulators will assess the evolution of the region’s equity markets over the last 10 years, using the discussion to predict future trends, as well as areas in which development is still required.
Moderator: José Eduardo Carneiro Queiroz, Mattos Filho, Veiga Filho Marrey Jr e Quiroga
José Olympio Pereira, CEO of Credit Suisse Brazil
Marcelo Trindade, Trindade Advogados
12.30 – 14.00: Networking lunch sponsored by Demarest
14.00 – 15.00: Corporate infrastructure financing: public and private working together
Moderator: Claudette Christian, Hogan Lovells
Luis Souza, Souza, Cescon, Barrieu & Flesch
Ricardo Fandiño, Gómez-Pinzón Zuleta
Enrique Felices Saavedra, Miranda & Amado 
  • How can infrastructure companies access private money – resolving the collateral issue
  • The role of private companies in developing projects
  • Balancing public and private sources of funding – making banks more competitive
15.00 – 15.20: Coffee break sponsored by Gómez-Pinzón Zuleta
15.20 – 16.20: Resolving creditors’ rights disputes in insolvency cases
Carlos Aiza, Creel, García Cuéllar, Aiza y Enríquez
Eduardo Secchi Munhoz, Mattos Filho, Veiga Filho, Marrey Jr e Quiroga
Guillermo Cabanellas, Cabanellas Etchebarne Kelly
Giuliano Colombo, Pinheiro Neto
  • Balancing the rights of different creditors and the conflicts issues presented
  • The impact of inter-company relationships on core company creditors
  • Resolving disputes between creditors
16.20 – 16.40: Coffee break sponsored by Gómez-Pinzón Zuleta
16.40 – 17.40: Assessing the regulators: enforcement
  • Comparison of how, and how well, regulations are enforced across the region
  • What are the regulators’ priorities?
  • Settlement agreements – a viable route?
Moderator: Stuart Fleischmann, Shearman & Sterling
Breon S. Peace, Cleary Gottlieb Steen & Hamilton
Antonio Aires, Demarest
17.40 – 18.00: Coffee break sponsored by Gómez-Pinzón Zuleta
18.00 – 19.00: How to raise money in Latin America
A panel of finance directors and CFOs from around the region will debate various corporate financing mechanisms, the pros and cons of each and to what extent Latin American markets provide the necessary alternatives to plan corporate financing.
Moderator: Nicolas Grabar, Cleary Gottlieb Steen & Hamilton
Grenfel S. Calheiros, Simpson Thacher & Bartlett
Nei Zelmanovits, Machado Meyer
19.00 onwards: Cocktails for the Latin Lawyer 8th Annual Charity Awards Ceremony

Registration typeSuper early booking rates (until 21/2/2014)Early booking rates (22/2/2014 - 14/3/2014)Standard booking rates  (15/3/2014 onwards)
Private practitioner$650$850$1,050
In-house counsel / Government Agency$400$500$600
Register online at to pay by credit or debit card.

For more information please email
or call +44 207 467 974

The Brazilian Anti-Corruption Act - It is a TAX trap, not morals

I have been trying to write about the new anti-corruption act, but couldn't find the right angle. 

A very good description of the law and its main characteristics can be find below (an article from y Sheppard Mullin Richter & Hampton LLP, published at Mondaq). 

My honest opinion is that this Act is a publicity stunt, at the best, and a tax trap, if anything else.   

In Brazil, every complex problem is immediattely addressed by an inocuous law, that is what they say. 

The punishment described in the law is nothing extraordinary. In fact, most of the penalties listed there could already by applied, based on many other laws. For example: laws for crimes against the public administration, law for breach of fair competition, law against misuse of financial institutions, etc. 

 In addition, most of the penalties are subject to a previous judicial ruling. 

A company that is willing and able to bribe officials would not be dissuaded from doing so, just because of this new law. . Any company can just insurance itself and its directors agains penalties for corruption-related condemnations. 

In my opinion, the key to understanding this law is knowing that is serves two other purposes: 

i) ease the public opinion, that has been extraordinarily worried about corruption lately;

ii) obtain as much information as possible from Brazilian companies, in order to use them for tax collection purposes (days after the Act has  been published, it was possible to find many articles talking about transparency, compliance precautions and, even disclosure of legal opinions drafted by law firms and accounting firms. All with aims at reducing the risk of the company suffering legal prossecution)

This second reason seems, to me, the most important one.

Take notice that the law does not create any new source of funds to be used in police investigations on corruption. Hardly a good way to effectivel tacke the problem. 

The Brazilian Anti-Corruption Act Of 2013 (Act # 12846) - International Law - Brazil:

Brazil: The Brazilian Anti-Corruption Act Of 2013 (Act # 12846)

1.      Background

The early 1990's in Brazil were marked by a combination of extremely high inflation, poor quality services and goods (which were mostly manufactured locally), onerous bureaucracy, and persistent corruption.  An elected president, who followed a military government which had lasted for decades, was seen to be looting most Brazilians' savings.  He was in turn removed from office and then impeached amid a corruption scandal.  No wonder distrust in Brazilian public officials has been so high.
But much has now changed in Brazil.  From extractive industries to soccer stadium construction, Brazil has been growing non-stop locally and internationally; in addition, some projects are too challenging, costly or risky to be assumed by Brazilians only.
Brazil has signed and implemented key international treaties or conventions under which corruption is an "evil to be defeated" at all reasonable costs, including treaties and conventions adopted by the OECD, the Organization of American States and the United Nations.  But in 2013, in Transparency International's Corruption Perceptions Index, Brazil ranked number 71, a troubling position which has been fairly stable for some time.
Brazil continues to be very interested in attracting foreign direct investment.  The country is also progressively the global or regional headquarters for multinational corporations.  But something had to be done.
A civil law country where the widespread perception is that certain prohibited actions can only be implemented by statutory changes rather than enforcement, businesses have not been deemed subject to any anti-corruption enforcement for corruption in or with respect to Brazil.  The Brazilian Anti-Corruption Act (or "BAA"), which was enacted in 2013 and came into force on January 29, 2014, is meant to change that.

2.      What has changed

Under the BAA, any incorporated or non-incorporated business (and potentially permanent establishments in the continental shelf such as oil rigs offshore Brazil) will be subject to fines of up to c. 25 Million USD per violation, sanctions (including dissolution) and liabilities (which are legally uncapped).  Individual wrongdoers will also be subject to prosecution under Brazilian criminal and other statutes.
The BAA makes it illegal to (a) promise, offer or give, directly or indirectly, "advantages" to public official or related parties; (b) fund, sponsor or subsidize any infringement of the BAA; (c) use a "straw man" to conceal interests or the identity of the beneficiaries of the wrongdoing; (d) defraud competitive bids, tenders or government contracts by setting terms with competition; or (e) create obstacles for enforcement action.
What constitutes advantages seems particularly broad – and probably intentionally so – in order to cover anything of value, favor, etc.  The breadth of advantages sits uneasily with the concepts of strict liability and joint and several liability, and the practice of shifting the burden of proof to the defendant.  These not entirely complementary concepts, some of which were borrowed from environmental laws, are expected to add complexity to enforcement of the BAA, and complicate the job of defendants when defending against an action brought under the law.

3.      Which public officials

Brazilian and non-Brazilian public officials are covered by the BAA, including, without limitation, employees of state-owned entities and international organizations. Subject to how the law is interpreted by Brazilian enforcement officials and courts, employees of state-controlled entities (as in not wholly-owned, e.g., Petrobras) are likely to be covered, too.
The BAA is silent about candidates to political office, political parties or political party officials.  In a country where most  investigated corruption cases are elections-related, this seems strange.  But the omission was probably intentional, the result of an ongoing debate about whether legal entities should have the right to make donations to candidates or parties in connection with any election in Brazil.

4.      Mitigation & Enforcement

Companies that adopt "effective" compliance programs and codes of conduct should be able to reduce exposure to fines and other sanctions under the BAA.  In addition, the BAA expressly provides that cooperation during an investigation will count in the determination of whether to apply a penalty.  Although many cases will likely settle rather than proceed through the courts, admission of guilt will be a condition to any settlement.
Enforcement of the BAA will be decentralized at the State or local level (at their respective costs), unless the matter involves a foreign public official or, in some not yet fully specified circumstances, a Federal official.  Brazil has 27 states, one Federal District, and more than 5,000 cities or towns, so this can be tricky.
Although regulations to implement the law are expected, to date none have been issued.  When promulgated, the regulations should help clarify – among other things – what amounts to an "effective" compliance program.

5.      Conclusions

Both Brazilian and non-Brazilian investors are looking forward to seeing how the BAA will be regulated and enforced.  Brazil's President, Dilma Rousseff, has reassured the international community that Brazil is a safe destination for foreign direct investment.  In the context of the BAA, that remains to be seen, especially if the law is employed mainly to pursue non-Brazilian parties.
However the law is interpreted and enforced, any company operating in Brazil needs to make sure it has appropriate compliance processes in place to protect against corruption.  Clear, well-articulated standards for compliance and ethics are a must.  Training and education are essential.
There is no silver bullet for compliance with the BAA.  But developing and implementing an appropriate compliance infrastructure now, even though it is early days, is the best way to protect against a violation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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