Doing Business in Brazil
OVERVIEW
Practical Business
and Legal Considerations
Fabiano Gallo
September, 2016
Impeachment of President Dilma Roussef
Impeachment of President Dilma Roussef
 Brazilian economy started to face problems during the first term of President Dilma Roussef;
 Such problems have been caused by a less favorable international scenario combined with:

Heterodox Macroeconomic Policy;

Lack of a Long-Term Planning (“power project” vs. “country project”);

Lack of the necessary reforms (political, social security, tax and labor reforms);

Lack of investments in infrastructure;

Lack of credibility and political support owing to corruption scandals.
 Brazil entered into a political crisis, the Brazilian Real was depreciated and the economy
entered into a recession.
 Even being a success under the public and sport standpoints, the Rio Olympic Games were
also affected by the cutting of government’s spending.
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Impeachment of President Dilma Roussef

The Brazilian GDP had a decrease of 3.8% in 2015;

The inflation in 2015 was 10.67%;

The year of 2015 ended with an unemployment rate of 8.5%;

The Brazilian industrial production had a decrease of 8.3% in 2015, reaching its worst
level in the last 12 years.
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Impeachment of President Dilma Roussef
Source: Brazilian Central Bank
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Impeachment of President Dilma Roussef
Source: Brazilian Institute of Geography and Statistics
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Impeachment of President Dilma Roussef
Source: Brazilian Institute of Geography and Statistics
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Impeachment of President Dilma Roussef
Source: Brazilian Institute of Geography and Statistics
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Impeachment of President Dilma Roussef
 Besides the economic mistakes, Roussef’s government employed “creative accounting tools”
to hide Brazilian public deficit, which based the impeachment under a legal standpoint;
 During the impeachment process, the Vice-President Michel Temer assumed the interim
presidency and the Brazilian economy started to improve when compared to Roussef’s
government;
 President Dilma Roussef has definitely been impeached on August 31, 2016, and Michel
Temer assumed the Brazilian presidency on a definitive basis.
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Current Scenario
Current Scenario
 President Michel Temer is a neoliberal politician and is expected to substantially change the
path to be followed by the country during the next years.
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Current Scenario
 The measures that are planned to be taken by Temer’s government include:

A social security reform;

Constitutional
Government;

Creation of temporary new taxes;

New law for State-Owned Companies with more transparency and improved
corporate governance – less political influence in the management of such
companies;

Privatizations;

Substantial investments in the infrastructure sector through concessions and PPPs;
and

Incentive to foreign investments.
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changes to provide
a
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Foreign Direct Investments (FDI) in Brazil
Foreign Direct Investments (FDI) in Brazil
 Even during the economic crisis, Brazil received a sizeable FDI amount;
 Brazil is still the 6th country in the world that receives more FDI.
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Foreign Direct Investments (FDI) in Brazil
Source: United Nations, 2016
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Brazilian Expanding Areas
Brazilian Expanding Areas
 Brazil holds a good space in the sectors of production of goods and services as the consumer
market still has lots of potential to grow;
 Brazil also holds a huge agricultural potential, being one of the largest exporters worldwide;
 In addition, Temer’s government announced a plan of privatizations, concessions and PPP’s in
the total amount of R$269 billion until 2019;
 It is expected that a material portion of such investments be made by foreign companies and
governments.
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Brazilian Expanding Areas
 The investments will be focused on the following areas:

Oil & Gas;

Renewable Energy;

Telecommunications;

Transport;

Roads;

Urban Mobility;

Airports; and

Ports.
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Brazilian Expanding Areas
 The government developed a plan called “Investment Partnership Program” (“PPI”) in order
to:

Expand the investment opportunities;

Increase the employment rate;

Improve the public infrastructure.
 The Program establishes rules and a calendar for the concessions, privatizations and PPP’s;
 More stability and foreseeability for private investors;
 The program will be supported by:

BRL 30 billion of financing from BNDES and FI-FGTS;

Consistent return rates and feasibility studies; and

Pre-approved Environmental Licensing.
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M&A Trends | Due Diligence
M&A Trends
 Due to the recent crisis and the depreciation of the Brazilian Real, the price of Brazilian assets
is relatively low;
 Distressed M&A has seen a substantial increase, with cash-strapped companies – particularly
those affected by the “Car Wash” scandal – turning to restructuring proceedings and selling
off distressed assets as a means of staying alive.
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M&A Trends
 As the Brazilian economy seems to start a gradual recovery, Brazilian assets are a good longterm investment. Financial analysts have defined the Brazilian assets as the decade’s deal in
view of their current prices;
 Increased number of transactions starting with JV and cooperation agreements before
deciding on definite M&A deals.
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M&A Trends
Source: PricewaterhouseCoopers Brazil
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M&A | Due Diligence
 In Brazil, small and mid-sized businesses represent the majority of companies.
 Usually, these companies: (i) do not follow reporting and controls at international standards
(e.g.: auditing rules); and (ii) are not listed in the stock exchange market.
 Due diligence process is key for the successful acquisition of companies.
 A separate investigation by an auditing firm should be conducted simultaneously with the
legal due diligence.
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M&A | Due Diligence
 Main areas to be covered in a due diligence investigation:
(i)
Labor;
(ii)
Tax;
(iii)
Environmental;
(iv)
Compliance.
 In all such areas there are certain situations where the limited liability concept may be
disregarded and contingencies may flow to the shareholders, directors and officers.
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Overview about Campos Mello Advogados
Campos Mello Advogados | DLA Piper
 DLA PIPER has a well established practice in Latin America, advising clients in every industry
sector for clients worldwide;
 CAMPOS MELLO ADVOGADOS is a key player in DLA Piper’s footprint in Latin America,
advising international clients operating and investing in the Brazilian market, as well as
important local clients;
 We operate with DLA Piper through a Cooperation Agreement executed in 2010.
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Campos Mello Advogados | About Us
 Full service business law firm;
 Offices in São Paulo and Rio de Janeiro;
 140 lawyers.
“The team has been extremely successful in providing the assistance we need in all areas. The
only problem now is when we have to work with others firms, because we realize how
accustomed we have became to Campos Mello’s high standards.” (Client, Chambers Latin
America)
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THANK YOU
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