Today Brazil is the world’s sixth largest economy and it has now overtaken the U.K. Brazil GDP growth will accelerate to 3.21 % this year. With a population of over 200 million people, Brazil’s GDP ($ 2.5 trillion) is larger than other South American countries combined.
Brazil (officially called the Federative Republic of Brazil) is comprised of 26 states and one federal district. As the head of government and chief of state, the president holds executive power for a four year term and may be re-elected for a second four year term. The bicameral parliament (Congresso Nacional) consists of the Federal Senate (the upper house) with 81 seats) and the Chamber of Deputies (the lower house) with 513 seats. The country can be regarded as being very bureaucratic with a high number of laws and regulations. Social and environmental legislation is well developed and Brazilian labor law provides for some social welfare and unemployment support. Nevertheless, there remain shortcomings in the health and education systems, as the government has had to cut social welfare spending in order to service the public deficit.
Increasingly, multinationals are viewing their South American government affairs programs holistically and some have chosen to run their entire South American government affairs programs from Brazil. Most multinationals establish their government affairs teams in Sao Paulo or Rio, but many need to cobble together ways to have an adequate presence in all three Brazil’s major cities (Brasilia, Sao Paulo and Rio).
State enterprises such as the Brazilian Petroleum Corporation (Petrobras) and the Brazilian Electric Power Company) have very active lobbying organizations. All states and many large cities maintain permanent representation offices in Brasilia.
Business groups are organized in umbrella federations at the state level and confederation at the national level such as the Sao Paulo State Federation of Industries and the National Confederation of Industry. Other businesses are organized as national associations by sector e.g. the Brazilian Association of Radio and Television Companies, the Brazilian Electro-Electronic Industry Association, the Brazilian Aluminum Association.
Professional groups, such as associations of medical doctors, lawyers, pharmacists, and engineers are usually more active regarding the regulation of their profession, but occasionally attempt to influence more generalized economic and social legislation. There is also a steady growth of urban social movements and groups concerned with issues such as AIDS, racial prejudice, consumer rights, ecology, homeless people, Indians, mortgages, street children, tenants.
The Advocacy Process
There are three basic approaches to advocacy in Brasília: the interest group sends its own representatives to Brasília, when the legislative agenda warrants; the interest group has its own representatives permanently installed in Brasília; or the group contracts with lobbyists in Brasília to represent its interests. Professional lobbyists systematically monitor the activities of Congress and the executive branch regarding legislative agendas and procedures. Visits by groups and individual interests to key members of Congress are organized frequently.
The Government Affairs Practice
Government affairs is increasingly being recognized as having an important role to play on the Brazilian political scene. Although awareness of government affairs is growing within the Brazilian culture, there are still a lot of companies that are not used to going to public hearings in Congress and do not understand the importance of talking to Congressmen about their issues. In Brazil, interests are discussed mostly from the top down, and the voice of the people from the bottom up does not really have much effect on the way government officials act.
Because the government affairs discipline is new, there are only a limited number of seasoned practitioners. The majority of government relations professionals in Brazil are young (generally within the 25-35 age range). Many companies even those with government affairs professional on staff use law firms, consultants or lobbying firms to help them. Lobbying itself is not subject to any rules in Brazil. Because of a lack of all mandated disclosure, it is particularly important to work with reputable firms. Companies often have relationships with “fixers’ or consulting firms in which “somewhat has a lot of relations in government and can call someone up for a favour.”
On the surface the regulatory environment in Brazil closely mirrors that of the U.S. or Europe. Companies petition officials to grant permission for new products to enter the market, and these officials respond through transparent channels. In Brazil, however, business does not always unfold according to plan. Multinationals often find themselves frustrated with Brazilian regulators who are overworked and not always as sophisticated as hoped. Another problem is the constant introduction of new regulatory norms that companies have to follow. These norms need to be well interpreted which can cost money and time. Working with local trade associations can help non-Brazilian companies gain credibility with the Brazilian government and with potential in-country corporate partners.
Many of the most pressing government affairs challenges in Brazil today revolve around the issue of how level a playing field foreign companies face. The country’s new Buy Brazil laws for government procurement that was passed by both houses of the Brazilian Congress in December 2010 can create a serious barrier for multinationals based elsewhere in the world. While the individual government ministries have considerable latitude in determining how the Buy Brazil laws are implemented, these laws can provide domestic manufacturers as much as a 25 percent margin of preference. In other words, if a Brazilian company bids 124 real and a non-Brazilian company bids 100 real offer would be deemed to be the low-cost offer.
Working with Associations
Companies can take a broad-based approach to advocacy in Brazil, including developing association relationships. Local associations have the best contacts with government agencies.
For government affairs practitioners, Brazil is an exciting place to work. The profession still in infancy there has recently been elevated and enjoys a much higher profile than ever before. Government affairs professionals are in demand- and their role is increasingly being viewed as strategic within companies.
Although Brazil has a large number of social challenges to resolve, there’s a sense that some of the ‘cost of Brazil’ may be tackled as the nation prepares for the World Cup and the Olympics. Bureaucracy continues to hamstring multinationals, but they’re finding creative ways of reducing this burden by shipping to different ports or expanding in states with favorable tax outlooks. And even though government regulators may demand endless (and seemingly irrelevant) paperwork, the regulatory process in Brazil is showing some signs of improving. On the plus side, government officials and regulators are friendly, open and increasingly willing to engage in a productive dialogue.
Within Brazil, there’s a sense of optimism, a widespread belief that even though past hopes for becoming an economic superpower have been dashed, this time things will be different. Today, Brazil has a better chance at modernizing and becoming a global player. Millions of relatively poor people now find themselves in the lower middle class or the middle class. If, in parallel to this, the country is able to make the necessary investments in infrastructure and control the size of the government as well as inflation, the development of the country will be more sustainable.
Brazilian people have very open, passionate and sometimes quite pragmatic perspectives on issues, with a different point of departure than Europeans and Americans. There is a growing sense that Brazil’s magic moment may have finally arrived.
Last but not least the key point to consider when engaging in government affairs in Brazil is that business is seen as any other sort of social interaction, and as a result people feature more prominently in decisions than profit-margins. Deals are won and lost upon the strength of relationships and the ability to nurture a sense of chemistry. Brazilians are essentially looking for two things; someone they like and trust as well as someone who is competent in business. The most important of these is to build a strong relationship first which will then naturally lead to trust. Time must be invested in getting to know people on a personal level in order to allow for open and honest discussions in business.