Thais Cordero
Lawyer at Marcos Martins Advogados
Being aware of the opportunities that arise, especially in times of uncertainty, is fundamental. The impacts resulting from the conflict between Russia and Ukraine are reflected in the world economy – especially in the nations close to the countries involved. Despite the extremely negative circumstances for humanity, such as the deaths of civilians and military personnel, as well as a strong immigration movement, the fact is that, as a result of the war, Brazil has become an attractive country for foreign capital worldwide.
This attractiveness has already been a trend since 2021, when according to a survey by the United Nations Conference on Trade and Development (UNCTAD), the country reached 7th place in the ranking of countries that attracted the most international investment. During the year, there was a 133% increase in the inflow of foreign capital into the country.
With the war, Brazil has been setting new records. According to XP Investimentos, this year alone R$62 billion has already flowed into the country, amounting to three-fifths of the entire amount obtained last year. Among the most promising sectors are the pharmaceuticals, human and veterinary surgical instrumentation, chemical oils and digital platforms markets.
There is no shortage of reasons for the boom. As well as being a country with a privileged demographic position, far from conflict, Brazil has a large consumer market, a rich diversity of natural resources, as well as being highly receptive to new technologies to make up for the shortfall in the domestic market. In other words, there are plenty of opportunities.
In this context, it is common for foreign investors to want to do business here. Usually, the most common path is to start import and/or export operations, which involve lower risks and investments than setting up a factory, for example, without knowing the market well first. However, faced with such favorable prospects, many investors make management mistakes simply because they don’t know the country’s laws.
What are the steps for foreign investment in Brazil?
Before making any move, the investor, whether an individual or a company, must register with the Central Bank through the Non-Resident Declaratory Register (CDNR), appointing an attorney-in-fact who can, among other powers, receive court summons in the country and present the documents proving their existence abroad. In other words, for legal entities, their articles of association and, for individuals, their passport. All these documents must be apostilled, translated and sworn to have legal value. With this procedure, foreign investors obtain the Individual Taxpayer Registry (CPF) and the Corporate Taxpayer Registry (CNPJ), as appropriate.
Once this is done, they need to start their business and focus on the area of activity and the licenses required to operate regularly in the country, through the company to be set up. In the area of services, for example, operations are usually simpler, with no need to establish a specific physical space – which, in turn, is necessary in import and export activities where the location is the essence of the business to be developed, requiring, for example, the RADAR operating license – Registration and Tracking of Customs Interveners’ Activities obtained from the Federal Revenue Service.
It should also be noted that each operation requires licenses from specific bodies, such as ANVISA – the National Health Surveillance Agency, for products such as medicines, food and cosmetics, or ANP – the National Petroleum, Natural Gas and Biofuels Agency, for products in this category. Knowing the regulatory body for each segment is fundamental to obtaining the necessary licenses.
You also need to choose the right corporate model, taking into account the business model, the need for new investors and the entry of other partners and possible partnerships. Undoubtedly, the most commonly used models are Limited Liability Companies or Corporations, whose models are generally similar to those adopted in other countries – as well as the taxation system – Real Profit or Presumed Profit, with a view to the efficiency and operational and tax intelligence of the business. If poorly advised, the investor may pay more tax than necessary.
In view of all the procedures to be carried out and studies, activities that involve an industrialization chain as well as marketing, importing or exporting, the foreign investor’s path is usually M&A (Mergers and Acquisitions) operations, precisely because operating licenses are linked to the place where the operation takes place or to the CNPJ, which makes it easier to speed up business in the acquisition of companies already up and running in Brazil.
In these cases, the investor carries out due diligence (the process of investigating a business opportunity and risks) in order to acquire all or part of a company that is already operating in the country, knowing full well the tax and labor laws in force. This movement has been so strong that, in 2021, these transactions reached the highest volume since 2010, with around R$344 billion, according to data from consultancy Bain & Company.
What are the prospects for foreign investment in the country?
Taking all the necessary precautions, foreign investors will find a very fertile environment for doing business in Brazil. Despite the instability typical of an election year, the country has been safe and has a favorable exchange rate. In addition, we are a country with good international relations, far from conflicts that could put the economy at risk.
Regardless of the path chosen, foreign investors will need to pay special attention to all the documentation required to do business in the country. As in other countries, Brazil has its own specific requirements for obtaining licenses to legalize the activities to be carried out.
And, contrary to what it may seem, investors who don’t have good planning and legal support can have their interests frustrated in Brazil. The country is very receptive to foreign capital, but you need corporate, accounting and tax knowledge to create a sustainable business here.
