Brazil is currently in a privileged position in the global economic context. It may be argued that its current economic indicators have no precedents. This scenario is a result of the government’s efforts during the last 15 years in stabilising the Brazilian currency, controlling inflation, adjusting monetary and foreign exchange policies and enhancing social policies and fiscal responsibilities.
Brazilian society is aware of this progress and is contributing to the country’s growth. Brazilian businessmen have always invested heavily in the local market, building a robust industrial sector. The trade sector has overcome countless hurdles with creativity and initiative, showing a high level of capacity and sophistication. Likewise, the service sector gained a great impulse in the last decades. Such a positive economic scenario has consolidated a strong and solid financial and capital market, able to resist, up to a certain extent, the 2008 and 2009 global crisis. Finally, a civil society shows, one day after the other, its commitment to this growth process, with progress in the educational and professional sectors.
In addition to these structural developments, the recent achievements in the oil and gas sector, with the discoveries of ‘pre-salt’ reserves, put Brazil in a unique position, with a great potential for infrastructure investments and social developments. The opportunity to host the 2014 World Cup and the 2016 Olympic Games has increased the population’s self-esteem and will definitely cause massive investments and expansion of tourism, public security and infrastructure. The government’s expectation for the next few years is for GDP to increase approximately 5% per year.
This is the Brazil that foreign investors will find in the coming years: a new Brazil, that has changed for the better and which is no longer the ‘Country of the Future,’ but the ‘Country of the Present’.
Insofar as the development of the Brazilian legal market is concerned, there could be no better scenario. Despite the reduction of the revenues of Brazilian law firms during the first half of 2009 as a result of the global economic crisis, during the second half, the losses have almost been neutralised and the market has returned to the economic levels of 2008. Capital markets, corporate and M&A practices have been very active as of July 2009, with potential to have huge transactions in the coming years. Two of the world’s largest IPOs took place in Brazil during 2009: VisaNet and Santander, which show the high level of confidence in the Brazilian market.
Litigation practice is moving strongly towards alternative dispute resolution. Currently, businessmen and lawyers in Brazil trust and stimulate the settlement of disputes outside the judiciary system in view of its problems, such as court delays and bureaucracy. The number of arbitrations held in Brazil has substantially increased in recent years, and the number of judicial appeals against arbitration settlements is insignificant. Alternative dispute resolution in Brazil is clearly expanding.
The energy and natural resources sectors have also demanded an array of legal services in recent years, in light of the consolidation of the regulatory and tax benchmarks. Nevertheless, the forecast for the next few years is for the consolidation of this market and an increase in the oil and gas practice. There is also a great expectation regarding the regulation proposed by the government addressing the exploitation of the ‘pre-salt’ reserves, which will undoubtedly cause complex legal discussions on the subject and excellent business opportunities for local and foreign investors.
Economic stability has brought a decrease in the legal discussions concerning taxation matters in Brazil. It is a feature of the Brazilian legal market that companies still face several old tax discussions. Nonetheless, recent tax settlement programmes and amnesties achieved a great reduction of judicial tax litigation. Conversely, administrative tax litigations have increased as a result of the large number of tax assessments by the tax authorities claiming huge amounts.
A substantial growth is also expected for legal advice in connection with project finance, in view of the 2014 World Cup and the 2016 Olympic Games, in addition to the investments which will be necessary for the exploitation of oil and gas from the ‘pre-salt’ reserves. Other business practices will, probably, be in demand in view of the economic growth to take place in the following decade. As a result of the M&A transactions, the antitrust practice will be highly active before CADE, the Brazilian antitrust agency.
In view of the above, the outlook for investments in Brazil is favourable, as a result of both economic progress and the enhancement of the local legal framework. Accordingly, legal service providers will have an important role in assisting foreign and local investors in the development of the country, to the extent they are involved with the major transactions carried out in Brazil.