Unlocking Brazil: Keys to Success in Latin America's Largest Economy
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Transcript of Unlocking Brazil: Keys to Success in Latin America's Largest Economy
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Introduction to Brazil
Economy in Latin America
Largest country by land mass + population
Largest economy by nominal GDP
Member Member
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GDP Equivalent Nations by State
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More on Brazil
Home to 12% of the planet’s surface water
Largest exporter of beef and chicken
Agricultural powerhouse
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Rise of the Brazilian Middle Class
40 million new consumers since 2003
3rd largest market for beauty and healthcare products
4th largest market for mobile phones, automobiles and TVs
5th largest market for medical equipment
MACRO ENVIRONMENT,
LEGISLATIVE UPDATE, AND
MERGERS + ACQUISITIONS
P R E S E N T E D B Y R AFAE L V I L L AC V I C E N T E D E C AR VAL H O
M&A ACTIVITY
IN BRAZIL
TOTAL TRANSACTIONS PER YEAR
Source: PwC
Average of
361
transactions
per year
JulyJan-Dec
Average of
454
transactions
per year
Average of
210
transactions
per year
Average of
362
transactions
per year
M&A TRANSACTIONS AMOUNT
M&A transactions achieved R$ 58.6 bi in the first semester of 2014.
Source: ANBIMA
Highest number of transactions in the range of R$100M-R$499M.
MOST ACTIVE SECTORS
Sector 2006 2007 2009 2010 2011 2012 20131st semester
of 2014
Information Technology (IT) 49 56 73 58 85 90 104 99
Services 43 66 54 39 42 44 46 63
Food, Beverages and Tobacco 17 35 18 18 30 41 65 58
Energy Generation 61 25 24 19 36 42 30 35
Advertising 19 35 26 22 26 29 24 35
Financial Institutions 21 19 23 22 28 35 24 28
Shopping Centers/Real Estate 5 51 17 23 61 20 36 19
Telecommunication and media 28 27 19 23 28 59 27 18
Chemical and pharmaceutical products 15 12 9 12 18 21 25 12
Electronic products 14 18 8 15 11 19 17 12
Chemical and petrochemical products 21 39 17 9 19 16 18 12
Metallurgy and steel 38 31 20 9 14 15 4 5
Source: KPMG
PRIVATE EQUITY / VENTURE CAPITAL
PE funds participation in M&A transactions
YearNumber of M&A
transactions
Participation of
PE funds
2014 (1st semester) 192 43%
2013 796 53%
2012 816 45%
2011 817 42%
2010 808 42%
2009 644 31%
2008 644 20%
Source: ABVCAP, Ernst & Young, KPMG
PRIVATE EQUITY / VENTURE CAPITAL
Perspective of growth of internal market
Fairly adequate asset prices
Tax benefits available for investment funds - FIPS
OUTLOOK FOR THE SECTOR
Capital market very dependent on world economy
Incipient secondary market
High interest rates
Low dispersion
TYPICAL M&A TIMELINE
Valuation Due Diligence Definitive
Agreements
NDA
Preliminary
Agreements
(LOI, MOU, etc)Structuring
Closing
Antitrust (?)
PRELIMINARY DOCUMENTS
Non-Disclosure Agreement (NDA)
Definite time period
LOIs, MOUs, etc
Antitrust (?): substance test applies
Labor Decree No. 5452/43 (“CLT”);
Substance Test;
Corporate veil: a real protection?
Arbitration?
Economic Group liability
DUE DILIGENCE
Tax
Law No. 5.172/66 (Brazilian Tax Code);
Detailed tax and accounting Due Diligence in order to raise actual and
potential liabilities;
Transfer of Goodwill = Successor Liability (substance test applies).
Anticorruption / Compliance
FCPA
UK Bribery Act
Anti-Corruption Law
ANTI - CORRUPTION LAW – NO. 12,846/2013
The new Brazilian Anti-Corruption Law entered into force on February 5, 2014;
Strict liability of legal entities for:
I. offering any due and advantage to a public official, directly or indirectly,
including third parties that are related to such public official;
II. commiting acts or fraud or manipulation in public bids or contracts with
public entities; or
III. financing, funding, or sponsoring any acts that are prohibited under Anti-
Corruption Law.
DEAL STRUCTURE
TaxStructure
Brazilian vehicle - amortize premium
Foreign Company –implications to be verified abroad
Tax treaty?
34% if a Brazilian legal entity;
15% if an individual (Brazilian or abroad – not on a tax haven);
15% if a foreign company – not on a tax haven;
25% if a foreign company – on a tax haven;
CapitalGain
ARBITRATION TIMELINE
DEFINITIVE AGREEMENTS
Brazilian Supreme Court
Decision (2001)
Arbitration
Law (1996)
New York
Convention (2002)
Ratification by
STJ (2005)
SHARE PURCHASE AGREEMENT
DEFINITIVE AGREEMENTS
Approval by CADE (Administrative Council for Economic Defense) as condition precedent to
effectiveness of the transaction;
Confidentiality clause has to be for a definite period of time;
Capital gain over escrow amount?
Choice of law – case law is unclear about the enforceability in Brazil of foreign law and venue
in certain cases.
EMPLOYMENT AGREEMENTS
DEFINITIVE AGREEMENTS
Non-compete clause
Elements: term, territory, subject matter and revocable remuneration;
Non-solicitation clause
Employees and/or clients;
Right to work.
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Presented by Luis M. Alcalde
Unlocking Brazil
September 10, 2014
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Franchising Sector in Brazil
As of 2013, there were 2,703 franchise brands operating in Brazil.
In 2013, the Brazilian franchising sector grew 11.4% as compared with 2012.
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Franchising Sector in Brazil
Almost 93% of the franchises in Brazil are local franchises, of which 4.8% (121 brands) operate abroad.
According to the World Franchise Council, Brazil is the world’s third largest country by number of franchise brands, behind China and South Korea.
In 2013, 38 foreign brands entered the Brazilian market.
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Why so much franchising in Brazil?
Growth of malls In 2013, 38 new shopping malls were launched in Brazil.
Increase in female purchasing power49.3% of the workforce in Brazil is composed of women
Growth of middle class40 million new consumers since 2003
Demand for language courses and professional courses Brazilian household investments in education has more than doubled in the past 10 years
New brands
National economic stability
Low unemployment rate 4.9% as of April 2014
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Brazilian Franchise Law 8,955/94
Brazilian Law Applies to All Franchises in
Brazil
Brazilian Brand
Spanish Brand
U.S. Brand
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Overview of Brazilian Franchise Law
Franchise definition
Content + timing of Franchise Offering Circular
Penalties for violation of statute
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Franchise defined:
Franchise business is the system by which franchisor grants franchisee the right to: use trademarks or patents, associated with the right of exclusive or semi-exclusive distribution of products or services, and possibly also the right to use technology or business systems, or operational systems developed by or held by the franchisor through direct or indirect compensation, without the characteristics of an employment relationship.
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Franchise Offering Circular
Potential franchisee’s must be provided a written Offering Circular (Circular de Oferta de Franquia)
Written
Clear language
Accessible language
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Franchise Offering Circular
Must be delivered to franchisee at least ten days prior to:
Signing any franchise agreement or pre-agreement, or
Payment of any fee by franchisee or associated person or company.
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Historical summary of franchisor
Name & corporate form of franchisor
List of all companies associated with franchisor
Past two years of franchisor financials
All pending litigation against franchisor
Detailed description of franchise & ideal franchisee characteristics (education, experience, etc.)
Minimum Required Disclosures
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Minimum Required Disclosures
General description of business
Activities to be performed by franchisee and requirement for direct involvement operations/management
Total required franchisee investment
Value of initial fees, premises, equipment, inventory, payment terms
All periodic fees, charges & how calculated
Complete list of all franchisees, sub-franchises and drop offs last 12 months
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Rights of franchisee outside of territory
Obligations of franchisee to purchase goods or services from franchisor or others picked by franchisor
Detail of what is offered by franchisor regarding supervision, guidance, training, manuals, location, design/architecture, know-how, intellectual property
Copy of model contract, pre-contract, annexes
Status of franchisor intellectual property before the National Institute of Industrial Property
Post termination issues re intellectual property and competition
Minimum Required Disclosures
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Term, territory, payments, fees,
intellectual property
Rights + responsibilities
Confidentiality, termination,
dispute resolution
General Content of Franchising Agreement
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Franchise Agreement Registration
Registration (averbação) with Institutito Nacional de Propriedade Insdustrial (INPI):
Makes the franchise agreement effective against third parties,
Legalizes money remittances abroad of payments for the technology provided to franchisee, and
Legalizes applicable tax deductions for royalties and other fees paid by franchisee.
Franchise Agreement registration is:
Optional for internal agreements, and
Mandatory, if foreign franchisor.
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What is Filed With INPI?
The Franchise Agreement
One original and two certified copies
Portuguese translation
Power of Attorney from party to local attorney
Some of the officials forms to be filed by franchisee
Statement of delivery of Franchise Offering Circular with acknowledgment of receipt by franchisee
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Technicalities to Execution
Executed by the parties and two witnesses
Initials of parties and witnesses must be on each page
Signature of foreign party must be notarized and legalize by Brazilian Consulate
Agreement must specify complete name and title of representative of the parties and place of execution
If representative is an attorney, the Power of Attorney must be notarized and legalized by the Brazilian Consulate
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Taxation of Franchising Royalties Sent Abroad
Withholding Tax 15% rate (or 25% of payments made to low-tax jurisdictions)
Contribution of Intervention on the Economic Order (Constribuição de Intervenção sobre o Domínio Econômico, or CIDE)
10% rate
Service Tax (Imposto sobre Serviços, or ISS)Varies from 2% to 5%
PIS/COFINS Importation (Contributions for social integration program and for financing the social security system)
1.65% for PIS-Import and 7.6% for COFINS-Import
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Non-Compliance with Franchise Offering Circular Requirements
Agreement is voidable by franchisee
Franchisee may demand return of all monies paid in connection with the franchise and recover
damages incurred
Franchisee must prove damages and harm suffered
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False Information in Franchise Offering Circular
Agreement is voidable by franchisee
Franchisee may demand return of all monies paid in connection with the franchise and recover damages
incurred
Franchisee must prove damages and harm suffered
Criminal penalties
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Implications of Franchise Definition?Brazilian courts may reclassify license relationships as franchise relationships.
Substance over form - regardless of how an agreement is titled the court will look at the:
nature and characteristics of the relationship,
parties’ intention and reason for entering into the agreement,
injury sustained by the claimant, and
performance of the agreement and awareness of the agreement defects (tacit confirmation of an annullable act).
What are the consequences?
Agreement might be annulled, with the return of the membership fee and royalties (art. 4 of Law 8,955/1994).
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Franchise vs. License
FRANCHISE LICENSE Governing law Law 8,955/94 Civil Code and Law 9,279/96
Permission to use brand name or patent
Yes Yes
Product distribution Yes No
Know-how transfer Yes No
Control of how the business operates
Yes No
Fees Reflect the brand use, technology transfer, training, and technical assistance.
Reflect the commercial use ofthe licensed good.
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Non-Compete Clauses in Franchise Agreements
Brazilian law upholds reasonable non-compete agreements in franchise context
Up to five years generally considered reasonable -two year periods common
Geographic and material limitations generally required
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Presented by Marcella Gurgel
Unlocking Brazil
September 10, 2014
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Real Estate Market Overview
Construction on 1,579 projects and 3,001 towers began in 2013
11% (181) commercial buildings and 4% (56) hotels and flats.
São Paulo and Rio de Janeiro have the most expensive office markets in Latin America
Prime rental rates of approximately $90 and $100 USD/Sq.m/month, respectively.
Excess supply and declining occupancy rates are projected Brazilian commercial real estate market.
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Real Estate Market Overview
2014 World Cup and 2016 Olympic Games
Airport privatization
Shopping centers
Source: FIPE ZAP, <http://www.zap.com.br/imoveis/fipe-zap/>.
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Why did Global Logistics Properties invest R$3.2 billion in Brazilian Real Estate?
In March 2014, Singapore based GLP bought 34 Brazilian properties from its competitor BR Properties for R$3.2 billion.
GLP owns and leases modern logistics facilities across the globe, and stores products for companies including Carrefour, Ponto Frio and Riachuelo.
Reasons for the investment:
Low real estate price,
Increase in Brazilian consumption,
Increase of online Brazilian retail sales,
Absence of high-quality Brazilian logistics infrastructure, and
Long term growth opportunities in Brazil.
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Real Estate Investment
Direct Investment Acquisition and sale of real property
Build-to-suit transactions
Indirect Investment Asset-backed securities and issuance of CRI (Certificados de Recebíveis Imobiliários)
Private equity funds (Fundos de Investimentos em Participações) (FIPs)
REIFs (Real Estate Investment Funds) – Law no 8,668/93
Legal concept of trust is not recognized in Brazil.
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Commercial Lease Agreement Law 8,245/1991
Lease termination
Indefinite term
Definite term
Sale of property to third party
Assignment and sublease
Judicial rent review
Tenant’s right of first refusal
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Deliver the property in good condition, fit for the intended use
Guarantee, during the lease term, the peaceful use of the property
Pay the taxes and fees, and certain insurance premiums, unless otherwise provided in the agreement
Landlord Obligations
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Pay the rent
Use the property in accordance with the purpose disclosed in the lease agreement and maintain it in a good condition
Return the property in the same condition received at the beginning of the lease
Pay the ordinary condominium, swage, trash, water, electric and gas bills
Tenant Obligations
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Necessary and useful improvements
The landlord may request the following:
Security deposit
Surety
Surety insurance
Commercial tenant’s right to renew the lease agreement
Statutory civil and/or criminal penalties
Commercial Lease Agreement Law 8,245/1991
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Eviction + Rent Adjustment ProceedingsRent Adjustment Action (Ação Revisional de Aluguel)
Judicial review of rent amount to adjust for market conditions.
Eviction (Ação de Despejo)An eviction claim is a request to recover leased property for a variety of reasons ranging from breach of the lease agreement to the nonpayment of the condominium fees.
Eviction Order (generally provides tenant 30 days to vacate the property)
How to avoid the termination of the lease agreement, if the basis of the eviction claim is non-payment?
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Purchase Agreement
Generally, brokers facilitate transactions by approaching prospective buyers and sellers.
Letters of intent and term sheets
Purchase and Sale Commitment (Promessa de Compra e Venda)
Due diligence
Inheriting liability
Ownership of real estate is only transferred upon the registration of the adequate transfer instrument.
Brazilian insurance companies do not offer title insurance.
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Real Estate Finance
Bank Loans Brazilian Housing Finance System (Sistema Financeiro de Habitação)
My House My life Programme (Programa Minha Casa Minha Vida)
Capital Markets Brazilian Commercial Real Estate Funds
Public Share Offerings
Real Estate Securitization
Common forms of security granted over real estateMortgages
Fiduciary sales
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Restrictions on Foreign Ownership
Ownership of urban real estate in Brazil by foreigners is generally permitted
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Restrictions on Foreign Ownership
Ownership of rural property in Brazil by foreigners is heavily restricted.
Ownership by foreign individuals: must be a resident of Brazil
Ownership by foreign legal entities: must have authority to do business in Brazil
Restrictions on quantity and percentage of land owned by foreigners
Restrictions on ownership of land near national borders
Restrictions on land use
Acquisitions violating the limitations set forth in Law 5,709/71 and Decree 74,965/74 are considered null and void.
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Restrictions on Foreign Ownership
Are Brazilian legal entities controlled by foreign capital subject to the same restrictions?
Paragraph 1 of article 1 of Law 5,709/71
Constitutional Amendment number 6/1995
Brazilian Attorney General’s Office (Advocacia Geral da União) opinions
2012: São Paulo Court of Appeals (Tribunal de Justiça de São Paulo) granted a Writ of Mandamus ruling that the restrictions did not apply to Brazilian entities controlled by foreigners.
December 2012: opinion 461/2012-E of the Brazilian National Justice Council (Conselho Nacional de Justiça)
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Taxes + Fees
ITBI (Real Estate Transfer Tax)Rate of 2% of the declared value of the transaction
Deed of Sale (Escritura Pública de Compra e Venda)1% to 1.5% of the declared value of the transaction to be paid to the registry
Real Estate Registration (Registro do Imóvel)2% of the declared value of the transaction to be paid to Real Estate Registry
LaudêmioApplied to some beachfront properties - 2% to 5% of the declared value of the transaction paid to the Registry of Federal Heritage (Secretaria do Patrimônio da União)
Capital Gain Tax 15% rate for individuals and 34% rate for legal entities
Municipal Property Tax (Imposto Predial e Territorial Urbano - IPTU)Rate varies by municipality (generally, 0.6% of the value of the property)
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Compulsory Purchase
The Brazilian Federal Constitution guarantees the right to own property, and requires:
Payment of just compensation
Deprived party is given notice and has an opportunity to be heard
Expropriation as a penaltyFailure to use the land according to its social function (Municipal and Federal authorities)
Cultivation of psychotropic plants considered illegal under Brazilian Law
Eminent Domain (Desapropriação)Public need
Public utility
Social interest
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Presented by David M. Wilson
Unlocking Brazil
September 10, 2014
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Employee
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Labor rights are outlined in the Brazilian Constitution, as well as laws, decrees, provisional measures, ordinances and regulations, international conventions and treaties (ratified by the Brazilian government), company policies, Supreme Court decisions, Superior Labor Court decisions and customs
Labor: it’s more than just the 13th salary
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Ok, but they aren’t employees; they are…
In Brazil, it does not matter what the parties call the relationship, regardless of whether there is a written contract.
Courts will weigh factors, including:
The regular payment of salary
Required personal rendering of service
Subordination (direct control by employer, hours worked, benchmarks)
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The worker is considered the weaker party in the relationship.
In labor-related conflicts, whenever there is a doubt regarding evidence, the Court’s decision will generally favor the worker.
The law most favorable to the worker will be applied.
The conditions most favorable to the worker will be presumed.
Actual facts prevail over written documents.
Protected salary (generally cannot lower an employee’s salary)
Nondiscriminatory practices
Brazilian Law Favors Employee
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Brazilian Law Favors Employee
The Brazilian constitution provides the right to sue as an individual guarantee.
Settlement methods exist (e.g., arbitration and union conciliation commissions), but settlement does NOT extinguish the right of the individual’s claim!
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13th Salary
Mandatory “Christmas bonus” equal to 1/12 the salary for each month of that year
Vacation
Every 12 months employees are entitled to 30 calendar days paid vacation, in addition to the 13th salary
Overtime
Daily and weekly calculation
Base rate + 50%
100% for work on Sunday or a public holiday
Min wage currently
R$724 per month
Reading email on cell
phone may trigger
overtime compensation
rights!
Employee Rights
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Termination (For Cause)
A dishonest act
Improper conduct
Regularly doing business on behalf of himself or for a third party
Criminal conviction
Inadequate discharge of duty
Habitual drunkenness
Considered a social problem by some courts and not a just cause
Violation of trade secrets
Act of disobedience or insubordination
Abandonment of employment
Injurious act to the honor of any person during working hours (except in self defense)
Persistent gambling
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Rights Upon Termination
Employment is NOT “at will” (must have cause for termination)
Advanced notice required (generally, 30 day min)
Payment of salary owed
Vacation
13th Salary
FGTSEvery month the employer must deposit amount equal to 8% of employee’s salary into an individual social security fund (FGTS).
Upon termination, the employee may withdraw the amount.
If termination is not “for cause”, employer must pay a penalty equal to 40% of the amount and an additional 10% penalty to the government.
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Agents + DistributorsAgent Distributor
Activities subject to some control by supplier Activities subject to only minimal control by supplier
Does NOT take title to goods Takes title to goods, buys and sells for own account
May handle products of other suppliers; but, is less likely to do so than distributor
May handle products of other suppliers
Generally compensated on a commission basis Earnings based on resale profit margin
Usually does not warehouse goods Usually warehouses and physically delivers goods
Usually does not use own capital Uses own capital
Bears no risk of failure of payment Bears economic risk of failure of payment by customer
May have power to contract on behalf of the supplier
Has no power to bind the supplier contractually
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Agents + Distributors
Agent Distributor
Creation Statutory requirements Contract law
Compensation Commission Sells on own account
Termination Enumerated “just cause” reasons Contract law
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Governing Law for Agents
Under Brazilian law 4.886/65, amended by Law 8.420/92, a commercial representative is:
one that acts as an intermediary promoting a product or service, looking for customers, negotiating proposals and orders and forwarding them to the seller with whom it has a contractual relationship.
The Civil Code (Law 10406 of 10/01/2002)refers to Commercial Representation as "Agency".
Agents
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Agent AgreementsMandatory Provisions
Term of the agency
Obligations of the parties
Description of the products or goods that are the object of the agency
Description of the territory
Exclusivity
Payment structure (commission and time of payment)
Termination
Commercial Representative must register with the Regional Council of Commercial Representatives
Agents
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Agent Agreements
The agreement with the representative need not be registered with the government.*
This allows for confidentiality of compensation and other commercially important information.
This is an important distinction when compared to license and royalty agreements, which may require registration with the Brazilian Central Bank.
Agents
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Agent Termination
Brazilian law requires that all disputes between a foreign company and its commercial representative be venued in Brazil and judged in accordance with Brazilian law.
Article 35 of the Brazilian Civil Code provides a list of “just cause” reasons for the termination of a commercial representative agreement.
If the relationship is terminated for cause, no indemnification is owed to the commercial representative. However, if the relationship is terminated for reasons other than those listed in Article 35, Brazilian law may require an indemnification payment to the commercial representative.
Agents
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Agent Termination (For Cause)
Art. 35 provides a list of just reasons for termination of an agency agreement, these include:
neglect of the agent in the accomplishment of his obligation(s) under the contract,
engaging in acts which result in loss of commercial credit of the represented,
conviction for a crime considered injurious to the represented.
The represented company may retain the commissions due to the agent if there is just cause for the termination of the agreement, so long as retaining the funds is made with the purpose of recovering damages caused by the agent.
Agents
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Agent Termination (Without Cause)
Generally, an agent is entitled to no less than 1/12th of the total amount received during the time of agency.
If the agency is for a specific term, the agent is generally entitled to an amount equal to the monthly average compensation received multiplied by the remaining months left in the agency contract term.
Plus, investments made to open the market.
Agents
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Distributor Relationships
Primarily regulated by Brazilian contract law
Unlike commercial representative relationships, there are few statutory provisions governing distributorships
Distributors
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Governing Law for Distributors
Brazilian contract law is primarily derived from the Civil Code
As long as the parties comply with the provisions of the Civil Code related to commercial contracts, they are generally free to define their business relationship as they see fit
Distributors
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Distributor Termination
Distributor relationships allow greater flexibility in defining "just cause" for termination.
Disputes over distributorship terminations can be made subject to arbitration procedures, which Brazilian courts may be more likely to enforce than clauses calling for the application of foreign law or a foreign venue.
Distributors
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Agent + Distributors
Agent Distributor
Creation Statutory requirements Contract law
Compensation Commission Sells on own account
Termination Enumerated “just cause” reasons Contract law
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Best Practices
Care must be exercised to not blur the distinctions between an employee, a commercial representative, and a distributor.
Long term exclusive contracts should generally be avoided.
In Brazil, short term contracts may be considered contracts for "indefinite terms" after the first renewal, by some courts.
Foreign companies should fully understand the facts and Brazilian law before creating or terminating a commercial representative or distributorship relationship.
Minimum sales requirements should generally be established in the agreement.
Standards for product service and maintenance should generally be set out in the agreement.
Generally, regular and adequate reporting should be required.
Other key points to address often include termination and causes for termination, distribution points and control over distribution in case of termination.
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Best Practices
To avoid the inadvertent creation of an employment relationship, foreign companies must be mindful of how they interact with their commercial representatives and distributors.
Regardless of how the relationship is described by the parties, Brazilian courts will look to the actual behavior of the parties.
Brazilian courts consistently hold that subordination is a key factor in the existence of an employment relationship.
If the court determines that the parties' relationship is an employment relationship, the foreign company will be subject to Brazilian labor laws including liability for social and welfare contributions and possibly other taxes.
Although it is permissible to contract with an individual to act as a commercial representative, it is generally advisable to contract with an entity.
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17 Days
-Document preparation (8 days)
-Customs clearance and technical control (4 days)
-Ports and terminal handling (3 days)
-Inland transportation and handling (2 days)
24 Days
-Document preparation (15 days)
-Customs clearance and technical control (4 days)
-Ports and terminal handling (3 days)
-Inland transportation and handling (2 days)
20 Days
-Document preparation (8 days)
-Customs clearance and technical control (4 days)
-Ports and terminal handling (5 days)
-Inland transportation and handling (3 days)
Source: World Bank, Doing Business 2013
Importing a container of goods to Brazil requires 8 documents, takes 17 days and costs $2,275
Importing a container of goods to China requires 5
documents, takes 24 days and costs $615
Importing a container of goods to India requires 11 documents, takes 20 days and costs $1,200
Baseline:-medium size business-ship to economy’s largest business city-private, LLC-non hazardous goods-dry cargo, 20-foot full container
* All US exports are also subject to US export controls *
General Import Process + Timeline
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Brazilian Import Process
Register with the government registration systemSecretary of Foreign Trade SECEX, SISCOMEX system
Subject to significant variability
Obtain import license, if requiredAutomatic
Non-Automatic (process may take several months)
ANVISA, IBAMA, MAPA, DECEX, CNEN, ANP, ANEEL, DPF, COMEX, MCT . . .
Radar
Simplified
Ordinary
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II-Import Dutyvaries based on product
& Country of origin
(NCM, HS)
0-35% Import Duty0-5% raw materials,
20% finished consumer
goods, 35% autos and
luxury items
0-35%
12%
avg
Import Duty 6%
IPI-Industrial Product
TaxVaries based on product
(CNM) up to 300%
tobacco
20% avg VAT 16% VAT 19%
PIS-Social Integration
Program Contribution1.65%
COFINS-Social
Security Financing
Contribution
7.6%
ICMS-State Tax 7-25%*
SP 18%
*Current legislation & recent Supreme Court decisions may impact the applicable ICMS rate.
Import Taxes + Duties
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Ex-tarifário Program
Tariff reductions generally reduce the applicable tariff from 16% to 0-2%, II and may also reduce IPI
Resolução CAMEX 35/2006
The importer must file for the Ex-tarifário
A certificate or statement from the appropriate body, technical reports, public consultation among other things may be considered to determine the existence of a similar domestic good
If no similar good is produced domestically, an importer may qualify for reduced or eliminated tariffs
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Ex-tarifário Program
Even if a domestic good performs a similar function, an importer may qualify for the program if:
Higher quality product or service
Higher productivity of equipment (may consider part of an integrated system that increases overall productivity)
Increased efficiencySupplies required
Consumption of energy or raw materials
Reduced delivery time
Other specific performance factors may be considered depending on product
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Manaus Free Trade Zone – ZFM
Western Amazon – AO
Free Trade Areas – ALC
General Process
Cert of importer eligibility on the SISCOMEX
Classification of imported goods HS / NCM
Submit Invoice
Register Transaction on SISCOMEX
Import Licenses
Free Trade Zones
ICMS credit to importer
PIS/COFINS/II/IPI reduction
IRPJ reduced 75% until 2013
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Employee Considerations: The Other SideBusiness visa
Permanent visaLegal entity administrator
Private investor
Foreign bank representative
Temporary visaLabor visa
Technical visa 1 year / 90 Days
Apprenticeship / professional training
Touring vessel
Permanent Establishment Issues
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Employee Considerations: The Other Side
Business Visa
To attend meetings, make commercial contacts
90 days, may be extended additional 90 days in 12 month period
Permanent Visa
Legal entity administrator
5 years, R$ 600k registered with Central Bank of Brazil, or R$150k & plan to generate at least 10 new Brazilian jobs within 2 years*
Temporary Visa
Technical Visa 1 year / 90 Days
3 years experience in the functional field
Specific for customer, or training plan
Resume
Criminal background check
File with Ministry of Labor in Brasilia
When enter Brazil, register with Federal Police to obtain RNE
If d/n register, then daily fine
Permanent Establishment Issues
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Thank You!
Luis M. AlcaldeOf [email protected]
David M. [email protected]
Rafael Villac Vicente de [email protected] (55 11) 3218-8443