Brazil, with its booming economy, is the largest recipient of foreign direct investment (FDI) in Latin America, even more so due to the World Cup scheduled for 2014 and the Olympic games for 2016. The country, however, continues to suffer from the corruption plague.  Brazil ranks 73 out of 182 on the Corruption Perception Index (CPI).  According to the International Finance Corporation of the World Bank, 70% of companies responding identified corruption as a major hurdle to doing business in Brazil.

International companies have reported demands for payment of bribes (extortion) from Brazil government officials.  The U.S. Justice Department and the SEC have an ongoing investigation of Embraer, the third airplane manufacturer in the world, after Boeing and Airbus, for its activities in Brazil.

The good news, Brazil is trying to focus on fighting corruption and staying clear from the U.S. Foreign Corrupt Practices Act (FCPA), as too much business, and reputation is at stake. The Supreme Court in Brazil is prosecuting a few dozens of the country’s best-known politicians and lobbyists for corruption in a vote-buying scheme.  The trial is high profile and is focusing attention on corruption in Brazilian society.  It has been dubbed as the “trial of the century.”

Last year, a massive scandal was uncovered in the Brazilian ministry overseeing Brazil’s new $66 billion infrastructure plan.  Brazilian officials allegedly demanded 5 percent kickbacks on highway construction projects and then pushed carts down the hallways to hand out the cash.  The transport minister and most of his staff resigned or were fired in July of last year, and a new, supposedly more scrupulous group is now in charge.

Brazil has recently taken steps to combat government corruption. The Brazilian Congress is considering a bill, which would substantially strengthen its foreign bribery law.  Under the bill, companies could be held civilly liable for acts of their directors, officers, or employees, and would include harsh sanctions with fines between 0.1 and 20% of a company’s gross revenue for the previous year, and companies could earn credit for voluntary disclosures and compliance programs. 

In 2010, Brazil also enacted legislation disqualifying anyone convicted of a serious crime from running for political office at any level for eight years.  Brazil’s Comptroller General also maintains an on-line “Transparency Portal” that monitor federal accounts and contains information concerning government spending and transfers of government funds.

My advice for any businesses, or professionals, entering Brazil is to understand that despite the fact the Brazilian government, including federal, state and local government authorities, have a proactive compliance program in place, one must adopt a comprehensive anti-corruption strategy in advance of entering the country. Make sure to have very strong and publicly available anti-corruption policies in place. Brazilians are starting to demand ethical business practices amongst all stakeholders. Organizations that publicly disclose their anti-corruption policies will build goodwill and will let all of their business partners know that they will not participate in any under-the-table schemes and payouts.

I am often providing international business ethics and FCPA training and auditing analytics to companies in the BRIC, ASEAN, and CIVETS countries. Let me know if you need any assistance - marcusg@marcusgoncalves.com