Legal Services in Brazil: Business environment, market opportunities and engagement strategy

Generally stating, legal services is a highly competitive sector in Brazil, and engaging in profitable business development often depends on persistent and long term relationship building as an inherent trait of the country’s business culture.

Traditionally, there is a vast area of legal specializations, all of which contain extensive and complex law structures that undergo frequent amendments. Furthermore, new sub-areas are emerging to show growing demand as in response to the more recent dynamics of the country’s economic and market’s development.

As an overview of the commercial structure, corporate accounts and large economic groups sit in the country’s financial hub – the city of São Paulo – and also, on a lower scale, in the city of Rio de Janeiro. Such centralization of accounts is generally consistent in cases of larger ventures held throughout other regions, whilst smaller accounts are negotiated through local offices.

International investment opportunities in Brazil are found within a vast range of segments from which different areas of legal services can benefit from. Throughout recent years, large investments have been particularly applied into the sectors of infrastructure and civil construction, creating high demands for quality legal advise from independent law firms for contract management. However, although through a short term analysis we may identify the stabilization of growth in governmental funding disbursement – which limits new players into larger governmental contracting schemes – and also, considering current crisis in former due diligence practices towards the realization of ROI from large national contractors, public biddings may still be a strong possibility for foreign practitioners provided with strategic local alliances and engaged support from well established groups of interests, including the execution of articulations for technical cooperation from diplomatic officials at institutional levels.

According to the report released in February of 2013 on Perspectives of Investment from BNDES (National Bank for Economic and Social Development) – which strictly follows federal development financing policies – disbursements will considerably benefit the sectors of oil & gas, logistics, and aerospace industries, respectively. In this sense, market entrance for legal services related to such public biddings may be well planned and executed for large and medium sized law firms.

Alternatively, smaller businesses may explore more fragmented market opportunities such as legal disputes and out-of-court negotiations in the financial, consumer, and labour areas. Higher demand seems to be arising in these areas due to the particular effects of lower than estimated economic growth. The underachieved predictions, combined with recent – and quite sudden – eased access to credit have been contributing to the increase of delinquency rates from companies and individuals, and therefore augmenting litigations.

Lastly, it seems fortunately important to highlight the opportunities within the momentum of corporate tax planning and restructuring. This is a market move currently well observed through large leading consulting groups already present in the country such as Ernst & Young, PwC and KPMG, for example. Such legal services may be served by offices specialized in tax legislation.

But foremost, relationship building lies at the core of structuring any engagement strategy within the legal services and business community in Brazil. Besides mapping out and segmenting market opportunities based in the particular interests of the law firm, it is essential to carefully map and analyse specific related institutions – such as the Brazilian Bar Association and other influential organizations. Ultimately, identifying local law firms according to regional market strategies serves the purpose of developing a network of potential partnerships.

The one information source that seems to be especially relevant is the annual publication by Exame SA Advocacia, which concentrates not only a comprehensive sector analysis, but also ranks the 500 largest and most influential law firms in the country, along with including details on size, contact information and areas of commercial activity.

Governmental subsidies to foreign companies in Belgium looking for access to European markets

On March 5th 2012, in Curitiba Brazil, Thierry Muschang, a Luxembourg PwC Director, presented the beneficial aspects of the project for attracting foreign companies to the Belgium / Louxembourg region, constructed in partnership with IDELUX, a government agency that was represented at the meeting by Joel Marinozzi, the Business Development Manager from the Economic Development Division, while in a mission in Brazil. The meeting was organized by the local Center for International Business (CIN) at the Federation of Industries of the State of Paraná (FIEP) and had the support of the Consulate General of Belgium in São Paulo, Brazil.

Located at the heart of Europe, the region of Belgium/Luxembourg means a strategic gateway to the European markets, very competitive in the international logistics point of view. This advantage is enhanced by the local government subsidies offered to foreign companies and specially start-ups who wish to install a regional office and/or a regional manufacturing distribution warehouse.

Market research: Business environment in Brazil

Economy: Brazil is a developing country, currently facing great economic growth. Middle class is changing its consuming habits as a response to income increase and easier access to credit, but still suffers from great economic inequality and great shortage of qualified technical manpower, especially in the ITCs and engineering sectors. This enhances the obstacles to the appropriate infrastructure expansion needed in order to meet its economic growth, but it also represents an opportunity for foreign investors and specialized technical manpower. Abundant natural resources and strong agribusiness, mineral and energy sectors.

Most industrial economic activity, which includes automobiles, steel, petrochemicals, computers and steel, is focused around the southeastern states of Rio de Janeiro, Minas Gerais, and São Paulo. Brazil’s agricultural sector is well diversified and the country is a world leader in producing sugarcane, coffee, soybeans, and orange juice. [1]

There are a number of promising areas for foreign exports and investment, including: agricultural equipment; agriculture; aircraft and parts; airports; computer software; e-commerce; highways; insurance; iron and Steel; IT hardware; medical equipment; mining; oil and gas; pharmaceuticals; pollution equipment; ports; railroads; safety and equipment; telecommunications and tourism. [2]

Foreign trade overview for 2011.1, compared to 2010.1 [3]

  • International trade in Brazil reached a record USD 223,6 bi. A 30,1% growth over the same period in 2010.

  • Basic goods exports increased 44%, semi-manufactured 29,6%, manufactured 19,1% and industrialized 50,3%

  • Destination markets: Exports to Asia showed a 37,9% increase, along with 23,9% for Latin America and the Caribbean, and 31,4% for the European Union.

  • For imports, the acquisition of raw materials and industrial supplies and materials represented 45,5% of total, while 21,5% where of capital goods. This shows strong correlation with productive investments.

  • Consumer goods imports increased 31,1%, fuel and oil 39,2%, capital goods 27,5% and raw material and industrial supplies and materials 24,8%.

Society and Culture

Brazil is a democratic and federation structured society, with a population of over 190 million people of vast ethnic and cultural diversity. Increase of minimal wage and expanded coverage of income transfer policies in past years have contributed to the recent changes in its distribution pyramid. [4]

Demography [5]

  • Metropolitan areas concentrate major population groups with large demographic density disparity between regions.

  • Lower fecundity and birth rates indicate the reduction of children and teenage population, while the increase of life expectancy shows older population growth. According to UN statistics, life expectancy in Brazil reaches 72,9 years.

Education

  • In 2009, the population between 18 and 24 years old with 11 years of schooling was extremely low, at 37,9%. In the same year, 48,4% of students aged between 18 and 24 were at a graduation level of study.

  • In 2009, the illiterate population was still at 9,7% (14,1 million people). From this group, 32,9% were 60+ years old and 52,2% lived in the northeast region of the country. It is also a fact that Brazilian women are more literate than men.

Households

  • There was a total of 58,6 million households in Brazil. 85% (49,8 million) located in urban areas, averaging 3,3 people per household (2009).

  • Only 62,6% of urban households were connected to the water supply and sewage systems, and offered waste management services. (North: 13,7%; Northeast: 37%; Southeast 85,1%)

  • 49,1% of households had a landline while 83,1%  of households had at least one person with a mobile phone. This is a reflection of the high cost of landline phone services and the absence of such service in many locations.

  • Internet access: 31,5%. Computer possession: 39,3%. An important note is that internet access needs great investments regarding service offer and accessible prices.

  • Two million children aged between 5 and 15 were under some type of labor; 44% of them located in Brazil.

  • 48,5% of low income families where situated in northeast (2009).

People

  • The elderly population of 60+ years old accounted for 11,3% of the population. 55,8% of this group were women, and 30,7% had less than one year of schooling.

  • In 2009, 48,2% of the population declared being of white race (mostly European ethnicity); and a growth of indigenous population in rural and urban areas.

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[1] US Department of Commerce. Doing Business in Brazil. Access on August 31, 2011.

[2] Ibid.

[3] MDIC. Balança Comercial. Access on August 24, 2011.

[4] Portal Brasil. Business Environment in Brazil. Access on August 24, 2011. pp. 28-29.

[5] IBGE. Síntese de indicadores sociais. Access on August 24, 2011.