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07/01/2020

Bolsonaro’s first year – I was wrong about China, but right about the banking industry

At the end of 2018 I posted some predictions about Bolsonaro’s election and about the policies he was likely to pursue. This is the review and critique of that forecast. No dictatorship, etc. Of course not. This “threat” has always been propaganda. Restrictions on the purchase of land by Chinese investors I didn’t get it quite right. I assumed the military sectors would try to impose restriction on the purchase of land, due to nationalistic ideology. Reality, however, was much more complex. I couldn’t notice that: a large number of congressmen were interested in developing connections with China. Several have even visited China; the army was busy dealing with the reform of pensions and issues with indigenous peoples; the market had already adapted to the current legislation and there was no pressure that could trigger a government response. And, finally, I wasn’t aware of the signs of Trump’s trade war with China. The US-China… Leia mais

31/12/2019

Brazilian new franchising law – changes to international franchising

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Brazil has just published a new franchising law. The most relevant changes when it comes to international franchises interested in Brazil are as follows: 1) The mandatory use of Brazilian law has been removed. Future franchising agreements in Brazil may select any applicable law. This is a consequence of an express provision in the act that allows for the use of arbitration. When arbitration is used, the parties are thus able to elect the applicable law. 2) International franchising agreements may be bilingual, provided that a sworn translation to Portuguese is provided. 3) The ability to use a “choice of forum” clause has been specifically included in the law. This has two important consequences: a) it may, indirectly, result in the selection of a different applicable law (for example, if the courts in the US determine that US law shall be applicable to the agreement); b) it makes clear that the choice of forum is permitted. This was a contentious topic. The… Leia mais

16/12/2019

Brazilian tax ID can be obtained using Power of Attorney

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Any individual who owns shares of a company in Brazil must be enrolled with the tax authorities. This enrollment is called CPF (Cadastro de Pessoas Físicas). The CPF is also required in order to open bank accounts, buy cars or real estate and, basically, for any commercial activity in Brazil. There used to be only two ways to obtain a CPF number. Either the foreign investor would have to come to Brazil and reques it here, or he would have to schedule an appointment at the Brazilian consulate in his country and obtain the CPF there, in person. This process was tedious and slow. Fortunatelly, a couple months ago the Brazilian Revenue Service updated its procedures and started to issue CPF inscriptions via power of attorney. This means that the foreign investor can name a representative in Brazil who will be able to visit the Revenue Service’s offices and obtain a CPF number. The physical presence of the investor will not be required at any time. The new process will… Leia mais

26/11/2019

When will Brazil regain the investment grade?

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This report from Novus Capital, an investment management firm, shows that, by 2027, Brazil may reach an acceptable debt to GDP ratio for purposes of receiving investment grade, provided that the government does a very good job on the management of the budget. In a less than optimistic scenario, the goal of a maximum of 63% of debt to GDP would only be reached by 2040. The findings are similar to the reports issued by the Brazilian Central Bank on the matter. Although the findings are not stelar, they are positive. The study shows that the country may stabilize and improve its finances without much effort, just by not increasing expenses. The cabinet is very much willing to speed up this kind of good news. I would bet that, before long, Brazil will receive at least an update in its rating. You can download the full report (in… Leia mais

21/10/2019

OPENING A BANK OR FINTECH IN BRAZIL IS CHEAP AND EASY NOW. HERE IS THE PROCEDURE.

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As mentioned in my last post, Brazil has eased restrictions to foreign investment in the financial market. The text of the new regulation was a bit ambiguous about the definition of “branch”. But the Brazilian Central Bank has issued a public statement that indicates that the term “branch” is to be understood as “new company”. As a result, the process for incorporating a bank in Brazil has become much more streamlined. And, due to the current exchange rate, minimum capital requirements are very low. This post will give you a list of the minimum capital requirements for finance companies and a general overview of the process to obtain authorization from the Brazilian Central Bank. MININUM CAPITAL FOR FINTECHS THAT DO NOT ACT AS FINANCIAL INSTITUTION The definition of financial institution is not totally clear in Brazilian law. A good rule of thumb is that any company that provides loans at interest rates determined by the market (which, in case of… Leia mais

29/09/2019

Brazil eases restrictions to foreign investment in the banking industry

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I study regulations on foreign investments from many countries. From experience I know that it is never a good sign when a company needs authorization from the President himself before it can incorporate in a given place. Brazil, embarrassingly, required a presidential decree, no less, before authorizing any foreign financial institutions to invest in Brazil (even though foreign investment in other areas, including mining, cattle and farming, is mostly unrestricted). Fortunately, this rule has changed. As from September 27, 2019, the Brazilian Central Bank will be the sole responsible for authorizing foreign investments in the financial sector in two cases: Opening of new Brazilian branches of foreign institutions; Increase in the participation of foreign investors in the equity of Brazilian financial institutions. It should be noted that the Brazilian Central Bank (Bacen) is not only a Central Bank, in the financial sense, but it is also the main regulatory agency… Leia mais

02/09/2019

FINDING INFORMATION ABOUT YOUR JV PARTNER IN BRAZIL

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Brazil has a lot of government databases. Several of them are available through internet search. They are very useful when evaluating potential suppliers or targets for a Joint Venture or Acquisition This post will cover the Federal tax registration, the São Paulo state registration and the status of mining rights. CNPJ – THE MASTER CODE Everything in the Brazilian business world is centered around the CNPJ number. CNPJ is the tax enrollment number for companies. It is similar to the EIN code used by American companies, but much more prevalent. It is also usually public. You can ask your target for his CNPJ number. If he doesn’t give you one, there are two probable explanations: The project is not yet incorporated. It could be a seed project, for example. Or, it could be an individual working alone; It is scam or fraud. Get out. You can consult the CNPJ number at the Federal Revenue Service website:… Leia mais

15/08/2019

Mandatory representative in Brazil – nuissance or safeguard?

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The first step when incorporating a company in Brazil is to prepare a PoA to the local representative, who must be a permanent resident in the country. The local representative will have powers to represent the investor before the commercial registry and the tax authorities. The representative must also have powers to receive summons and subpoenas on behalf of the investor, and to manage local assets of the investor (this means, in practical terms, that he must have powers to deal on the investor’s shares) Now, due to the way Brazilian tax and labour courts work, this representative might also be liable for tax debts or labour responsibilities of the Brazilian company. On top of that, the local representative’s credit score may affect the BR subsidiary’s business. For example, by restricting its acess to lines of credit. The representative will usually receive powers to represent the investor in several dealings involving the company. For example: naming a local… Leia mais

31/05/2019

Swiss-brazilian tax information exchange agreement enters into force in Brazil

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Today, with the publication of Federal Decree n. 9.814 from 2019 (link here), the agreement between Switzerland and Brazil regarding the exchange of tax information became enforceable in Brazil. This means that it can now be used by the Brazilian Federal Revenue Service and other agencies as if it were a local Act. The agreement was signed in 2015 but, in practical terms, this decree is the starting point for its application and full validity in Brazil. Please notice that this is not the double tax treaty signed in 2018, which is still waiting for approval of the Brazilian… Leia mais

30/05/2019

Non-residents individuals do not pay income tax on gains from Brazilian real estate funds

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As long as the real estate fund abides by a few conditions, such as having at least 50 investors, gains arising from it and paid to individual investors who reside abroad are exempt from income tax in Brazil. To be eligible for this tax break, the non-resident investor must not own more than 10% of the quotas in the fund. However, the benefit applies even when the non-resident investor is based on a low tax… Leia mais

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