reforms improve climate, but Brazil remains expensive

Investments: US Bureau of Economic and Trade Affairs report assesses business climate in Brazil | Photo: Marcelo Andrade / Gazeta do Povo

The US State Department believes that Brazil has made progress in its investment attraction environment, but remains costly for investors due to complex legislation and political uncertainties. The analysis is contained in a report by the United States Bureau of Economic and Business Affairs on the country’s investment climate in 2021.

The publication incorporates a series of corporate temperature reports in more than 170 countries. The documents list the local characteristics of each market, highlighting areas that have shown improvements in the conditions of access to foreign capital and indications of remaining barriers for investors.

The office emphasizes the reform program as a tool to modernize the economy. The US report recalls that at the end of the first year in office, President Jair Bolsonaro sanctioned the “very necessary” pension reform and prioritized additional economic reforms, in addition to developing a future agenda with the economic team. to simplify the “complex system”. the country’s onerous tax and labor laws ”.

“The additional costs of doing business in Brazil”

The assessment is that legal and regulatory changes have contributed to the modernization of the economy, despite the fact that Brazilian legislative activity has been largely absorbed by the pandemic response in 2020.

In the text, the office also points out that the Brazilian government has given priority to attracting private investment in infrastructure and energy between 2018 and 2019, but that from the following year, the pandemic of Covid-19 has delayed planned privatization efforts (with a strategy focused on sectors such as automobiles, renewables, oil and gas, and infrastructure).

Despite the advances noted in the report, the US Bureau of Economic and Commercial Affairs stresses that “high transportation and labor costs, low national productivity and persistent political uncertainties make investment in Brazil difficult.” There are also concerns about the deficiencies in the country’s existing infrastructure, relatively rigid labor laws, and complex tax and regulatory rules. “This is all part of the additional costs of doing business in Brazil,” according to the report.

The attention of the US State Department has been drawn to the fact that in Brazil, foreign investors enjoy the same legal treatment as local investors in most economic sectors. The restrictions under the law are appearing in segments such as healthcare, telecommunications and rural property, the latter with initiatives in Congress for changes.

On the other hand, there are potential difficulties due to the absence of a “one-stop-shop” for business facilitation, which is dispersed in specialized government agencies, but which act without immediate articulation between them, like the Brazilian for promotion of exports and investments. (Apex) and the extended ombudsman for direct investments (OID) of the Ministry of the Economy, a sort of ombudsman of the executive secretariat of the Chamber of Foreign Trade.

North American investments in Brazil

United Nations data places Brazil the sixth largest global destination for foreign direct investment (FDI) inflows in 2019, with inflows of US $ 72 billion and which have increased by 26% since Brazil announced its privatization plan the same year. According to the measures of the Central Bank of Brazil, the stock of US investment accounts for 23% of all FDI in Brazil, which represents 145.1 billion US dollars.

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