Brazilian Due Diligence

Due Diligence and the New Legal Climate in Brazil

Due Diligence

An Altegrity Company

Due Diligence and the New Legal Climate in Brazil

Brazil is one of the hottest markets in Latin America, offering some of the highest returns on investment in the region. But those rewards do not come without political, economic, and legal risks. While stable compared to other countries in the region, Brazil is undergoing significant structural and cultural change in its business world. Preconceived notions regarding corruption, taxes, and labor laws are being pitted against a government and an international business community clamoring for transparency. The result has dangerous consequences for companies looking to invest in Brazil. On the one hand, corruption and unethical business practices are still widespread, but on the other, tougher enforcement and prosecution are exposing and penalizing illicit activities more than ever. In today’s Brazil, due diligence is particularly needed to avoid the perils of a rapidly changing business environment. Brazil is ranked 72 on Transparency International’s 2007 corruption perception index, just below Senegal and sharing the spot with Mexico, India, and China. The current government of Luiz Inácio da Silva (Lula) has taken the fight against corruption seriously, and enforcement against such crimes as tax evasion and money laundering is on the rise. However, the shift to more transparency is uprooting some long-established business norms. Small bribes and creative accounting, once a normal part of any business day, are increasingly being scrutinized. Even the most reputable firms are having difficulties with the new tone in the country. Consequently, it has become more necessary than ever to conduct thorough due diligence before engaging in any business-related venture in Brazil. The Brazilian tax code is extensive and esoteric. Therefore, it comes as no surprise that companies have found many ways to avoid paying taxes. In fact, in...