Brazil: New Rules to Improve the Investment Environment

By Thiago Hohl, WFaria Advogados

Brazilian maestro Tom Jobim once said, “Brazil is not for beginners.” The last decade proves that the maestro was right. During this period, Brazil moved from 10th to 6th place among the world’s largest economies and then fell back to the 8th position. It faced a period with an annual growth rate of 8% and then lived with negative figures, while hosting a World Cup and the Olympic Games.

The reasons to invest in Brazil are wellknown: a domestic market of more than 200 million inhabitants, easy access to raw materials, a diversified economy that is less vulnerable to international crises, and a strategic geographic position that allows easy access to other South American countries. However, Brazil is also the place where bureaucracy and corruption collect their token from investors. In this sense, since 2015, after a presidential impeachment and a large corruption scheme was revealed, the government realised that strong measures were required to encourage the return of foreign direct investors (FDI), such as reducing red tape, assuring legal certainty for contracts and enforcing compliance rules.

FDI Representation

An FDI can only invest in Brazil by appointing a legal representative in the country. However, it is common to have in expired power of attorneys still in place. Authorities and creditors only become aware that an FDI does not have legal representation when actually needing to serve them. There is also no certainty whether only government authorities or interested party could summon an FDI through a legal representative. For that reason, in 2017, it has been determined that FDI’s power of attorneys must have an undetermined expiration term and express provisions granting powers to receive court summons in any type of lawsuit, thus reducing transactional insecurity to all interested parties.

Central Bank Red Tape

The Brazilian Central Bank also began a process to reduce bureaucracy and costs, as well as to adapt regulations for technological innovations. Brazilian banks can now accept electronic signatures of foreign exchange contracts, which previously could only be signed in ink or electronically through digital certificates issued by the Brazilian Public Key Infrastructure. Another breakthrough introduced this year was the new system for registration of foreign investments in Brazil, which must be made through the Electronic Declaratory Registration of FDI.

This system was subject to important changes, such as the automatic investment registration and the revocation of the investor duty to proceed with a previous registration of funds to be sent to Brazil and the later registration of the funds effectively sent. Now, any amounts derived from international transactions, such as direct foreign investments, transfers between different registered foreign capital categories, international transfers of shares, remittances of dividend, interest on net equity and capital reductions to foreign investors will be automatically registered in the electronic system based on the information of the respective exchange transaction or the international money transfer in BRL, reducing transaction time and cost.

New Investment Vehicles

A new law also introduced positive changes for angel investors, contributing to the high-tech and innovation environment by providing transparent and safer rules regarding seeding investment for micro and small size companies and safe harbour with regard to the startup’s debts. The terms of investments shall be governed pursuant to a specific investment agreement entered into by the parties whose main guidelines are provided by this new legislation.

Another recent development is the possibility of a legal entity with headquarters in Brazil or abroad to be the owner of an Individual Limited Liability Company - EIRELI, eliminating the need for a second shareholder. Therefore, an investment vehicle that has existed since 2012 but rarely used, can now be a real alternative for investors.

New Code of Civil Procedure

In 2016, the new Brazilian Code of Civil Procedure (“CPC”) came into effect, introducing important innovations to reduce the backlog of cases piling up in courts. In addition to reducing the number of admissible appeals, the new CPC also seeks to ensure procedural celerity upon extending the fines to punish the use of such instruments with the only purpose of slowing down the proceedings.

Another old problem in Brazil was the selection of foreign jurisdictions in private agreements. The “old” CPC was not clear on the subject so the view of the Superior Court of Justice was that when the main obligation/object of an agreement was to be performed in Brazil, the selection of a foreign jurisdiction would not prevent the parties to file a lawsuit in Brazil. The new CPC explicitly provides that Brazilian courts have no jurisdiction over proceedings when a foreign jurisdiction clause is provided in the agreement. Consequently, parties are now free to choose an international jurisdiction and law to govern their affairs without bearing the risk of such choice of law and foreign jurisdiction being considered null and void.

Compliance Rules

Lastly, since the regulation of the Brazilian Anticorruption Law in 2015, several new rulings in different areas have been enacted to implement compliance rules. Specifically related to FDI, Brazilian IRS updated the rules on Corporate Taxpayer Registry (“CNPJ”), with the purpose of helping the fight against corruption, money laundering and tax evasion and increase transparency of resources invested in Brazil. Now, in order to obtain or update a CNPJ, an FDI must provide information on its legal representatives and shareholding structure until its ultimate beneficiary or equivalent entity. Specific rules to trusts and other entities acting as fiduciary owners of property, which must enrol before the CNPJ exclusively to carry out investments in the financial or capital markets, were also introduced.


The measures above are just some steps taken by the government in the last couple of years to facilitate foreign direct investment and to prove to investors that Brazil no longer wants to be the country that averts beginners. Other reforms are undergoing accelerated discussions and should only increase this perception, such as labour and tax reforms that aim at simplifying the legislation in force. Results are just beginning to appear: the official interest rate is declining, inflation is again within the government’s target, BRL value is appreciating and growth projections are again positive. Expectation is that FDIs will realise that the Brazilian business environment is regaining its high level of attractiveness.

Thiago Hohl

Thiago Hohl

WFaria Advogados, São Paulo, Brazil
T: +55 11 3018 7878
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Published: May 2017 l Photo: filipefrazao -

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