Academic journal article Journal of Accountancy

Business Basics in Brazil: Big Opportunities, Challenges Go Hand in Hand

Academic journal article Journal of Accountancy

Business Basics in Brazil: Big Opportunities, Challenges Go Hand in Hand

Article excerpt

[ILLUSTRATION OMITTED]

Brazil is a nation rapidly on the rise. In 2010, the country's economy grew 7.5%, making it the seventh-largest in the world, according to the World Bank. In 2011, Brazil's GDP is expected to grow 4.5%, slower than last year but still a healthy pace. And growth over the next few years also is projected to be robust as the country gears up to host two blockbuster events--the 2014 World Cup and the 2016 Olympic Games--that require huge investments in urban infrastructure, such as airports and public transportation.

With its large, expanding domestic market (the fifth most populous in the world, with a substantial middle class), wealth of natural resources and stable democracy, Brazil is a thriving destination for foreign investors. According to the United Nations Conference on Trade and Development, Brazil ranked fifth among all countries in foreign direct investment inflows in 2010, rising from 15th the year before.

In recent years, reported The Economist, "Brazil has been transformed from 'country of tomorrow' to 'once-in-a-lifetime opportunity.'"

Despite these bright prospects, however, Brazil remains a complicated place to do business for foreign-based companies. Challenges include a highly complex and expensive tax and labor environment, burdensome bureaucracy, costly credit, lingering corruption and deep social imbalances. On the World Bank's Doing Business Index (tinyurl.com/3kpfdyc), Brazil ranks 127th among 183 countries in the ease of doing business, which it defines as having a regulatory environment that is conducive to the startup and operation of a local company.

To gain insight into emerging opportunities, the JofA asked two top accountants with direct experience in Brazil to provide their perspectives about the country's business and accounting environment. Sharing their views were Eduardo Pestarino, regional executive for The Americas at Crowe Horwath International; and Jose Bendoraytes, managing partner of Horwath Bendoraytes Aizenman & Cia., a member firm of Crowe Horwath International in Brazil. Their answers are presented jointly

LEGAL/REGULATORY

JofA: What are the available forms of organization for a U.S. investor to do business in Brazil?

Pestarino/Bendoraytes: A foreign company can apply to open branches in Brazil by submitting an application to the Brazilian government. There are several formalities that have to be fulfilled, including the filing of documentation with the National Department of Registry of Commerce (DNRC). The process of registering a new business can be lengthy, since it involves as many as 15 different procedures. Foreign companies must appoint a representative (who does not need to be a native Brazilian but must be a resident in Brazil) to act on their behalf.

The two main types of business organizations in Brazil are the limited liability company (LTDA) and the corporation, known as "Sociedade Anonima" or "SA."

The LTDA is the simplest, least expensive and most popular form of organization in Brazil. It is similar to U.S. limited liability companies, limited partnerships and closely held companies. At least two partners are required to form an LTDA.

The Brazilian corporation resembles a U.S. corporation. It also must have at least two shareholders, who are liable only to the extent of the stake they hold in the company

A Brazilian corporation may be publicly held or closely held. A publicly held company must be registered at the Comissao de Valores Mobiliarios (CVM, Brazil's version of the SEC), along with the securities it issues, which may be traded on the stock exchange or on the over-the-counter market. The securities of a closely held company are not available to the general public.

At this point in time, Brazil only has around 1,000 public companies. Most of the country's 6.2 million businesses are small and medium-size enterprises. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.