Brazil signed the Organisation for Economic Co-operation and Development (OECD) Convention on Combating Bribery of Foreign Officials in International Business Transactions in 1997. Since then, the country has been working diligently to enact legislation to fight bribery in international business and has subjected itself to the peer review process of the Working Group of the OECD Convention.
Despite significant strides, there’s still a long way to go. Large protests in 2014 and 2015 against government corruption throughout Brazil added visibility and a sense of urgency to the country’s antibribery efforts, while a recent corruption case involving Brazil’s own national oil company, Petrobas, underscores that work remains in implementing and, more importantly, enforcing antibribery laws.
Given the critical role played by Brazil in the global economy, the current and potential success of these efforts can impact other countries and businesses around the world. Brazil actively trades with more than 100 countries and had an estimated $189.7 billion in exports and $143.9 billion in imports in 2016. Much of that involves trade to and from China and the United States.
The expansion of the country’s foreign trade means the issue of foreign bribery is becoming increasingly relevant for Brazilian companies, while the pervasiveness of bribery and corruption means non-Brazilian companies must consider the added risks of doing business within the country. The anticorruption efforts also are important for Brazilian regulators and policy makers in their attempts to maintain the attractiveness of Brazil as a favorite trading partner and location for foreign direct investment (FDI). In addition, the process and methods used in Brazil can help shed light on some of the obstacles and problems facing other countries and governments in their attempt to align antibribery regulations with international standards. In this era of global business, companies must have a deeper awareness of these matters in order to make better-informed investing and risk management decisions in any country.
BRAZIL IN THE GLOBAL ECONOMY
With the ninth-largest economy in the world, Brazil is an attractive destination for inbound foreign direct investment—especially considering the size of its consumer market, its growing middle class, and the fact that it hosted the 2014 FIFA World Cup and the 2016 Summer Olympics—two notable events that required huge investments.
Moreover, according to data published by the Brazilian Geography and Statistics Institute, Brazil presents a prime opportunity for investors because of the market potential of its current population of approximately 205 million—almost half of which is younger than 20 years of age. Additionally, Brazil has a stable economy with controlled inflation and modern telecommunications and bank infrastructures.
According to the World Economic Indicators from the World Bank, Brazil received more than $50 billion in net inflows from foreign direct investments in 2008, which made it the 13th largest recipient of FDI in the world and one of the largest recipients of FDI in Latin America. In 2015 alone, foreign direct investment in Brazil reached $75.1 billion, an increase of 48% in FDI since 2008.
The total foreign direct investment in Brazil was $531.4 billion at the end of 2014. And with $111.7 billion of the total foreign direct investment in Brazil, the U.S. was considered to be the biggest foreign investor in the country, followed by the Netherlands with $71.4 billion and Spain with $59.5 billion.
FIGHTING CORRUPTION IN BRAZIL
According to the most recent Corruption Perceptions Index (CPI) from Transparency International, Brazil ranked 79th among 176 countries in 2016 with a CPI of 4.0. (The CPI ranges between 0 and 10; the lower the CPI, the greater the corruption degree in the country.) Table 1 shows Brazil’s CPI by year along with its respective ranking among the countries in the index.
By Maria T. Caban-Garcia, CPA