Perez, Augusto

Sanchez, C. Gabriel

English

Brigham Young University Law School

Brigham Young University International Law & ManagementReviewVolume 1 | Issue 1 Article 118-16-2005Brazil Presses Forward with Economic Reform,Solidifying a Fresh StartC. Gabriel SanchezAugusto PerezFollow this and additional works at: https://digitalcommons.law.byu.edu/ilmrPart of the Comparative and Foreign Law Commons, and the Economic Policy CommonsThis Other is brought to you for free and open access by BYU Law Digital Commons. It has been accepted for inclusion in Brigham Young UniversityInternational Law & Management Review by an authorized editor of BYU Law Digital Commons. For more information, please contacthunterlawlibrary@byu.edu.Recommended CitationC. Gabriel Sanchez and Augusto Perez, Brazil Presses Forward with Economic Reform, Solidifying a Fresh Start, 1 BYU Int'l L. & Mgmt.R. 315 (2005).Available at: https://digitalcommons.law.byu.edu/ilmr/vol1/iss1/11BRAZIL PRESSES FORWARD WITH ECONOMIC REFORM, SOLIDIFYING A FRESH START C Gahriel S(ll1chez* and Augusto Perez** A BALANCED ApPROACH TO ECONOMIC RECOVERY Brazilian President Lula da Silva ("Lula") is leading a substantial public effort to maintain the economic momentum established by his predecessors and improve Brazil's attractiveness to foreign investors. His work extends across thc domestic and intcmational agenda and aims to mitigate Brazil's culture of strong governmental intervention, protectionism, and reluctance to respeet and enforce eontracts with foreign parties. The debate over Brazil's instability in financial markets has forced Lula to push economic reform to the forefront of the government's agenda. DOMESTIC IMPROVEMENTS PREPARE FOR ECONOMIC GROWTH Leading this domestic economic reform. Lula. a fonner union leader, has switched his previous leftist discourse to a morc conciliatory tone. Recognizing the advantagcs of a functioning markct economy, he has appointed Henrique Meirelles. fonner global President of BankBoston, to preside over Brazil's Federal Reservc. "Inflation is low, under control, and this is a very important * C. Gabriel Sanchez is a member of the International Practice Section at the law Ilrm of Kirton & McConkie in Salt Lake City. Utah. Mr. S.inche/ is activcly involved with invcstment projeets in Latin America. Mr. Sanchez recievnl his .I.D. from Instituto de Estudios Superiorcs de Chiapas Law School and his LL.M. from Brigham Young University's .I. Rcuoen Clark Law School. **Augusto Perez is an attorney at Gaia. Silva. Rolim & Associados. He received his LL.1\1. trom Brigham Young Univ·ersity's.l. Reuben Clark Law School and has worked on international projects with the law firms of Kirton & McConkie and LeBoeuf. Lamb. Greene & MacRae. 315 INTERNATIONAL LAW & MANAGEMENT REVIEW Spring 2005 factor. .. for sustainable growth," Meirelles said at a press conference at the Council of the Americas in New York. I To further encourage foreign investment, Brazi I 's finance minister, Antonio Palocci, has recently announced a program called "Invest Now," which consists of expedited tax refunds for federal taxes paid by businesses operating in Brazil. These expedited refunds are coupled with significant federal tax relief as well as specific tax cuts on insurance, financial operations, industrialized products, and construction investments. Additionally, an ongoing ctIort exists to shrink administrative bureaucracy, and the Brazilian Congress has passed a new law modemizing the Judiciary. To support these federal policies the Lula administration is also addressing the social welfare needs of Brazil by implementing two programs: "Zero Hunger" and "The First Job." The former is similar to the American system in guaranteeing minimum food standards and meeting basic nutrition needs. The latter grants financial benefits to businesses that hire applicants between the ages of 17 and 24. Together, these programs seek to boost the economy and support Brazil's growth by providing industry with a healthy and proficient workforce. INTERNATIONAL FOCLJS YIELDS ECONOMIC SUCCESS Lula's programs are succeeding in attracting the attention of the intema-tional community. Recently, IMF Managing Director Rodrigo Rato stated, "The I Bm~i111l11(/li(1Il LOll: U",/a COlllro/-CeIlBllllk lIead. Reuters. (April 13 2(05) III hllpJlwww. coul1cilotiheamcricas.orgicoaipliblications/NcwsiApri I/McircllcsRclitcrs.pdf. 316 1 Issue I International Updates advances made by the Brazilian government are very impressive ... These courageous policies have paid off Brazil's vulnerabilities have been reduced and the increased resilience has helped [it] to weather recent global market turbulences. GOP growth is now robust, benefiting from continued strong export performance, a pick-up in domestic demand, and rising wages and employment."2 In late November of 2004, Brazilian newspapers reported that GOP had reached its highest level in eight years. Lula's policies are succeeding in positioning Brazil in global markets as well as in the global political process: .Petrobras, the Brazilian oil company, plans to invest US$7.0 billion abroad to increase exports from and impOlis into Brazil. .Spain has congratulated the Brazilian-Hispanic Forum wherein European businessmen are introduced to investment opportunities in Brazil, such as the port of Santos and the Metro expansion in Sao Paulo. The results of these practices arc evident. In 2004 Brazil imported US$S2 billion, a 10% increase over the same period in 2003 when imports were US$47 billion.' Through the World Economic Forum, Brazil is leading a world effort to fight starvation by sponsoring a tax to fund welfare programs in Africa. Lula has united India, China, and South Africa in forming the G-20, a group of developing nations united against agricultural subsidies in the U.S. and the EU. 2 Press Release. 11'11' (Sept. 03, 2(04) II. li4118o. 3 This amount docs not include /()reign direct investment. 317 INTERNATIONAL LAW & MANAGEMENT REVIEW Spring 2005 Brazil: Environmental successes arc also part of the economic success story in ·With the February 2005 implementation of the Kyoto Protocol on Global Warming, the Brazilian methanol industry has taken eenter stage for eountries seeking early and mid-term solutions. ·China has recently announced an investment of over US$I.3 billion for the construction of a gas pipeline in eastern Brazil and may invest a further US$6 billion. • Japan recently passed a law mandating 3% methanol content for its gasoline, which may represent a substantial opportunity for Brazilian methanol sales to that eountry . • The Brazilian Environmental Ministry (equivalent to the u.s. EPA) has prepared a project to lease govern-mental forests for sustainable uses. This project will create opportunities for foreign investment to establish furniture and other forest product industries to supply domestic and foreign consumption. OPEN MARKETS CREATE UNLIMITED OPPORTUNITIES There are very few obstaeles to foreign investment in Brazil, allowing others to enjoy the same suecesses as illustrated above: 318 ·Small and medium-sized companies are growing in Brazil with sales of more than US$600 million in 2002. Companies are seeking foreign partners to export their products and services, ranging from jewelry to 'car dry cleaning,' into the U.S. and other markets. • Many sectors such as healthcare, the environment, transportation, telecommunications, and financial services arc growing rapidly and present opportunities for further expansion. ·One particular example IS the Public-Private Partnership Act (PPPA), which is designed to fund infrastructure improvements such as energy, rai lroads, Issue 1 International Updates highways, and ports. The PPPA allows public entities to go to the privatc sector for the invcstment capital required for largc intl·astructure projects. GETTINC; TilE U.S. TO LOOK SOUTH Lula and his govcrnment are implementing policies and reforms to shift the tendency of thc U.S. to look Wcst to China or East to Europe. The Lula administration is working to transform Brazil into a commercial magnet for economic partncrships. The Brazilian Congress is addressing unpopular but necessary issues such as taxes and social security reform. Brazil recently signed the New York Convention, contributing to a rise in arbitration of commercial disputes. These recent reforms have refreshed the Brazilian investment landscape by creating a more dynamic and competitive economy. Foreign investors have shown a quick and positive response to these changcs and have begun establishing a Brazilian market presence through a wide variety of investment structures, helping to boost GOP growth in 2004 to 5.2%. 319 

Brazil Presses Forward with Economic Reform, Solidifying a Fresh Start

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Brazil Presses Forward with Economic Reform, Solidifying a Fresh Start

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