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Legal and Political Environment of Brazil

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Legal and Political Environment of Brazil
 

Modern world offers numerous opportunities for doing business. An investor can choose almost any state to start a company. The only difficulty that he or she may have is legal regulations and political environment that greatly differ from those of his or her own country. This factor greatly influences the issues of doing international business as lack of awareness of some principle issues can lead to financial losses. Brazil is a country that offers numerous opportunities for investment, which are supported by the government; however, bureaucracy and corruption still interfere with doing business in the country.

Overall, Modern Brazil has a favorable climate for doing business. As Brazil is a federative republic, it has a federal government. The country consists of 27 states, each having its own administration. “Each state has a governor who is its chief executive, and power is divided among the state’s executive, legislative and judicial branches” (Doing business, 2013, p. 13). The political stability of Brazil ranked 0.81 in 2014. This index is a little lower than the value of 2007 – 2013, but higher than the level of 2002 – 2006 (The World Bank, 2014). The political system of the country is generally conductive for doing business It consists of three independent branches – executive, legislative and judicial – and is not simple. However, “The Brazilian Government is actively cultivating relationships with international and U.S. businesses and prioritizing macroeconomic stability.” (U.S. and Foreign Commercial, 2015, p. 3).

 

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In spite of a normal political atmosphere in Brazil, businessmen may face some legal challenges in the country. In most cases it is very important to have a local legally registered subsidiary in Brazil for performing all operations. The World Bank estimated the regulatory quality of Brazil as 50.5 % (2014), which is lower than in 1988 (65.2 %). At the same time there is an increase in the rule of law indicator, and it is 55.3 % in 2014 compared to 41.6 % in 1988 (The World Bank, 2014). It may take a businessman 90 days to get a license and from 500 to almost 800 days to enforce a contract with a rather low quality of judicial processes due to legal authorities being overloaded with work (Doing business, 2015). Thus, the legal situation in Brazil is not as favorable as the country’s political atmosphere.

The aspect of corruption in the state is worth special attention. The World Bank reported the decrease in the level of corruption conntrol in Brazil of 12 % in 2014 compared to 1998 (The World Bank, 2015). In 2014, there was a great corruption scandal in Brazil related to the government-owned electricity company. The corruption perception index is 69 out of 175 (U.S. and Foreign Commercial, 2015). The scholars and economists state that the level of corruption is especially high in large-scale business. The owners of the companies want to pass numerous long and tiring stages of business establishment process more quickly (I.S. and Foreign Commercial, 2015). Thus, corruption has a negative impact on doing business in Brazil as it leads to closing many foreign companies, paying great penalties and spoiling the business ethics and the image of the state.

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In conclusion, nowadays Brazilian government has opened many spheres for foreign investment. In spite of the fact that it does everything possible to create attractive opportunities for businessmen, the state still has some serious obstacles for starting a company. Long bureaucratic procedures and bribing interfere with doing business in Brazil. The solution for this issue is to implement changes in the legislative system of the country in order to facilitate the bureaucratic procedures, and consequently prevent corruption.

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