Pilitcla Risk In Brazil

political risk in brazil

International clients of brokers and insurers that are attracted to Brazil by its stable political and economic environment face levels of bureaucracy, taxes, crime andcorruption that typically are far greater than in their home markets, experts say.

Many companies come to Brazil because the business environment is more familiar than the other BRIC countries(Brazil, Russia, India and China), said Keith Martin, Rio de Janeiro-based director of international trade and investments with Aon Risk Solutions, a unit of Aon Corp. It also has a more stable public andprivate sector and a better-proven legal framework than some other BRIC countries, he said.

However, it is not without issues, said Mr. Martin. Myriad complex tax rules, corruption and a slow legalprocess are hurdles to overcome, he said.

The levels of bureaucracy and lack of transparency of rules make Brazil a difficult country to do business in, said Corina Monaghan, New York-based vp atAon Risk Solutions' political risk practice. “The complexity of tax rules is a real shock for investors, and compliance is difficult because there is a lot of over-complication and rules that are notcommon in the U.S.,” she said.

The huge opportunities for foreign companies in Brazil's growing economy have to be weighed up against the country's relatively high taxes and labor costs, said CarlosCaicedo, analyst and head of the Latin American team at London-based political risk consultancy Exclusive Analysis Ltd.

“Foreign companies need to be aware of the high costs of labor and taxes inBrazil. The tax system is antiquated and has grown into a monster, with many layers of taxes,” he said.

Labor laws are generous to workers and distort the labor market, said Mr. Caicedo. There is alarge “informal” job market in Brazil because “favorable employee rights” discourage employment on a full-time basis, he said.

The tort system, which is similar to that in Continental Europe,...