- Brazil is slowest country to open business among the Brics
- February 17, 2012
- Law Firm: Siqueira Castro Advogados - São Paulo Office
The waiting period to open a company in Brazil has dropped 20% in the last five years, but it is still one of the longest in the world, says the World Bank.
Today, the process takes 119 days; in 2007, it took 152. Despite the improvement, only four countries make businessmen wait longer: Equatorial Guinea (137 days), Venezuela (141), Republic of the Congo (160) and Suriname (694 days).
Such bureaucracy pushes Brazil down to the 179th position in the global ranking of 183 companies. It is the last among the emerging countries known as Brics, which includes India (29 days), Russia (30), China (38) and South Africa (19 days).
The World Bank considers the largest city in each country; in Brazil, it is São Paulo.
"To start a business in Brazil, registries at all three government levels [federal, state and local] are necessary, and in many cases one document is necessary to follow up to the next level," says Jorge Zaninetti, a lawyer and partner in the tax department of the Siqueira Castro office.
The World Bank says Brazil demands 13 procedures - fewer than the 17 required five years ago - to start a business, such as a registry at the Internal Revenue Service and at the Board of Trade, as well as at the Social Security Office and an authorization by the local government.
All requests to each department are made separately in most cities, which slows the process and makes it more expensive.
"In other countries, companies usually need authorization at only one of the government levels, which unites all procedures," says Zaninetti. Opening a business in China costs seven times less than in Brazil.
The World Bank says only one legal procedure is needed to start a company in Canada or New Zealand. Authorization is given after one day in New Zealand and after five in Canada.
If the company to start business in Brazil is foreign, the necessary procedures jump to 15, because foreign businessmen must have all necessary documents to be legal in the Brazil and enroll the company at the Siscomex [Foreign Commerce Integrated System] and at the Internal Revenue Service.
Foreigners intending to head companies in Brazil must supply the company's address - which depends on the executive holding the legal documentation to stay in the country.
A "market" is thereby created to solve the impasse, with Brazilians becoming partners in the first stage to supply an address. After the company is opened, the address is changed.
"Many accounting offices offer this 'service'. It is not illegal, but offices charge for it," says Martim Machado, partner of the Campos Mello Advogados office. "It's difficult for foreigners to understand how slow and complex the whole process is. They don't give up, but they need to change and extend deadlines."