published on January 19, 2024
by João Gabriel Ferrari

In recent decades, the interest of foreign companies in so-called emerging markets has been growing. Factors such as the internal market, labor, costs, bureaucracy, inflation, geographic positioning, access to raw materials, among others, feed a complex equation through which investors decide where to direct their investment.

Brazil, due to its set of advantages, has attracted many of these companies, especially those interested in accessing the thriving Latin American market. However, guidance, knowledge and planning are necessary for a smooth and profitable landing in the Brazilian market.

Why establish a subsidiary in Brazil?

Among the points that place the country on the private investment route, the size of the consumer market stands out often among the 3, 5 or 10 largest markets in each segment, the international logistics network, access to specialized labor at cost competitiveness, and the abundance of natural resources.. The continental dimension, in this sense, combined with a friendly climate throughout the year and abundant nature, facilitates access to inputs and labor, while at the same time offers a heated domestic market with significant consumption power.

These are characteristics that, added to the favorable macroeconomic context, which includes significant industrial capacity, monetary estability and potential for economic growth, place Brazil in a privileged position to receive foreign companies. Betting on the country is proving to be an increasingly attractive and rewarding alternative, even if, to do so, it is essential to carefully navigate the treacherous waters of bureaucracy.

Brazilian bureaucracy

We need to take seriously the cliché that “Brazil is not for amateurs”. Regulatory difficulties and bureaucratic obstacles, in general, can frighten investors who are less prepared to deal with an avalanche of formal requirements involving successive protocols, stamps, licenses and authorizations.

On the other hand, these requirements can be overcome with experience and vast knowledge of local legislation and regional procedures, particularly when we are talking about a territory with continental dimensions like Brazil. As a general rule, knowing the regulatory framework will bring greater understanding to comply with local legal requirements.

In Brazil, opening a subsidiary of a foreign company takes more than triple the time than the global average. A long wait that, depending on the sector and the complexity of the operation, requires authorizations issued by up to four different ministries and several months of going back and forth to notary offices and public bodies.

Brazilian bureaucracy is almost a separate “language”, so it is necessary to master it to be able to operate in the country. Or, as a solution, hire a specialized team accustomed to following this path in a much safer, faster and more efficient way. Assistance that will be necessary not only to overcome the initial obstacles, but also to deal with the complex tax framework, the lack of clarity in the legal environment, the difficulties in bookkeeping and the peculiarities of our banking system, among other obstacles.

7 steps to establish a subsidiary in Brazil

In general, except for the specificities of sensitive sectors, as well as differences in procedures in different regions, it is possible to open a subsidiary of a foreign company in Brazil in seven (7) steps:

1. Fiscal/tax and corporate planning;
2. Appoint legal representatives in the country;
3. Define the address of the registered office and branches, if applicable;
4. Prepare constitutive acts with essential clauses that will establish the rights and duties of partners and managers;
5. Obtain licenses/registrations/registrations and certificates at municipal, state and federal levels;
6. Register foreign capital operations with the Central Bank; and
7. Implement or outsource backoffice structure (accounting, human resources tax, billing, accounts payable, accounts receivable, controllership, finance). *

With seriousness, competence and professionalism, we make our experience and reputation of more than 18 years in Brazil available at the service of our clients, enabling the installation of subsidiaries of foreign companies in Brazil in a safe and efficient way.

Conclusion

The difficulties of operating in Brazil are directly proportional to the growth opportunities for foreign investors. Once the obstacles to start operations have been overcome, the return expectations certainly make up for the bet.

It is essential, therefore, that the path is followed with full awareness of the challenges imposed by Brazilian bureaucratic culture and guided by precise, constant and efficient guidance. Our offices in São Paulo and Rio de Janeiro are available to help with this process.