Newly discovered oil deposits off its coast have increased the interest of foreign investors who traditionally have been attracted by its natural resources.
The prospects of the Rio+20 environmental conference in June, the World Cup in 2014 and the Olympic Games in 2016 have fueled even greater interest.
But panelists at a seminar on May 2 at the Atlanta office of the global law firm Jones Day were quick to counsel caution. Due diligence and well-chosen partners are keys to success, they said. But they warned of a minefield of risks.
With the World Cup alone generating an estimated $8.3 billion between 2010-14, the expectations are high for investments in stadiums, hotels, urban planning, security, roads, airports, information technology, power generation and supply, recreational parks and media and broadcast centers.
Yet Atlanta-based companies, especially small entrepreneurial firms that are interested in getting down to business quickly, have found the going difficult with delays caused by numerous regulations and red tape, according to Ricardo Hubler, director of global business growth at the Metro Atlanta Chamber.
“The U.S. small- to medium-sized companies sometimes feel like they are hitting a wall,” he said, citing the example that it may take as long as a month to obtain a work visa.
Jones Day partners S. Wade Angus and Luis Riesgo warned that to open a company can take as long as a year, and once opened unexpected problems may arise such as getting goods through the Port of Santos, the busiest port in Latin America, a process that can take months.
They also said that to open a bank account can take four months, to create a limited liability company four to six months and to resolve a legal case as long as 10 years.
They peppered their comments with phrases such as “very bureaucratic,” “highly litigious,” and “a complex legal environment.”
Frustrated entrepreneurs should be careful not to try to facilitate business with bribes, the firm’s Atlanta-based partner Jean-Paul Boulee warned as the U.S. Justice Department is increasingly cracking down on violations of the Foreign Corrupt Practices Act and beefs up its anticorruption enforcement.
The panelist cited Brazil’s ranking of 3.8 on Transparency International’s scale of 0-10 with 10 the best possible, least corruptible ranking, placing it just ahead of China’s 3.5 in comparison to Chile’s 7.2 or the U.S.’ 7.1.
Donna Fuller, senior manager for forensic and dispute service in the Sao Paulo office of the accounting firm Deloitte Touche Tohmatsu, pointed to the World Bank’s assessment ranking Brazil 126 out of 183 countries in terms of ease of doing business behind Bangladesh, Uganda, Swaziland and Bosnia Herzegovina.
Jones Day, which has 2,500 lawyers on five continents and 35 offices around the world, waited until last year to open its office in Sao Paulo, it’s first in Brazil.
Although the firm has been active throughout Latin America for four decades, its activities in Brazil were managed from different offices out of the country depending on client demand.
“We are very thoughtful and careful when we open an office because we send our people and there is quite an investment,” Maria Fernanda Farrall, a Jones Day partner in the Atlanta office who served as moderator of the seminar, told GlobalAtlanta.
An additional reason for the delay, she said, was that Brazil does not allow foreign law firm to practice Brazilian law, forcing foreign law firms set up what are known as consultancy offices.
But client demand pushed the firm to open its office in Sao Paulo, the country’s largest city with a population of more than 11 million, as its clients are increasingly active there.
And Jones Day is not alone among the major U.S. law firms, which now have more than 20 represented there.
Lucia Jennings, president of the Brazilian-American Chamber of Commerce of the Southeast Inc., opened the seminar with an overview of Brazil’s economy and culture.
The overview of the country’s growth rate, its consumer purchasing power, its natural resources and its prospects for growth with its BRICS counterparts, Russia, India, China and South Africa, explained the heightened interest in its development.