Formal Trade Barriers

Brazil has been a First Republic of United States of Brazil since November 15, 1889 and became a constitutional democratic state. During that period of time coffee barons in the San Paolo area were very powerful, and many of them were acting as dictators on their plantations. In 1930, Getulio Vargas became president and took away power from the coffee barons of San Paolo, “he passed new laws that gave poorer people the right to support the political party of their choice” (Scoons, 2007, p. 13).

Getulio Vargas became more dictatorial under the opponent’s pressure, and he was ruling until 1945, then again from 1950-1954. From 1964 through 1985, Brazil was under a military regime from a group of military generals, which brought Brazil’s economy into a complete fiasco. Democracy returned only in 1985 and the current constitution became effective in 1988 and created 26 states and one federal district. In 1994, the new President Fernando Henrique Cardoso was elected, and ruled Brazil successfully for 2 terms.

In 2002 Cardoso gave up his presidency, and Luiz Inacio Lula da Silva replaced Cardoso until the present time. According to country-data. com, Brazil is a Federative republic “with broad powers granted to federal government” made up of executive, legislative, and judicial branches. The president is the only person who can exercise executive powers. The Legislative branch is the National Congress, similar to the one we have in the US, and it consists of the Senate and the Chamber of Deputies.

The Legislative branch provides equality for all citizens under the law and the right to vote. Because states and municipalities have a significant autonomy and have power over internal affairs, responsibilities from the national government were removed. And finally, the Supreme Federal Tribunal is the “Highest court Federal Supreme Court (Supremo Tribunal Federal--STF), whose eleven justices, including chief justice, appointed by president to serve until age seventy. Each state has own judicial system” (country-data. com, 1997).

Brazil has nineteen political parties that are represented in Congress, but the main political party is the Brazilian Democratic Movement Party. Extensive government regulations- before 1990 there was huge debt and steady trade deficit, where the imports began to cost more than exports because the foreign exchange rate was devaluated due to depression. As a result, very high import duties were established reaching up to 150% in some cases. On top of this situation, imports were restricted and replaced by similar domestic production.

Thus, this increased domestic manufacturing and reduced petroleum imports. Import license – Baker & McKenzie noted that “… imports to Brazil are subject to government control from at least three levels of authority: the Secretary of Foreign Trade (SECEX) who supervises registration and licensing, the Central Bank of Brazil which approves payments for financed imports, and the Federal Tax Authorities, which supervises valuation for customs purposes” (Baker&McKenzie, 2006).

SECEX has the power to deny an import license if they have a reason to believe that this will negatively affect free trade, such as price manipulation , dumping unfair competition ,or even “refuse to issue import license if  it’s shipped from countries that discriminates against  Brazilian products” (Baker&McKenzie, 2006, p. 4). High tariffs- “As of September 5, 2008, the import duty for malt beverages, spirits, and denatured alcohol was 20%, with a duty of 27% for wines. Tobacco products (cigarettes, cigars, etc.) maintain an import duty of 20%” (Tax and Trade Burea, 2010).

Foreign ownership limitations- Brazil have restrictions in telecommunication services. According to federal Decree Law № 2. 617 of July 1988, public telecommunication services must be owned by Brazilian entities, meaning 49% limit on foreign ownership. In addition, restrictions will apply in areas such as “oil and gas developments, domestic vessel transportation, and air transportation” (Baker&McKenzie, 2006).

Promoting Global Business Brazil has a diversified economy and was rated at least the number tenth largest global economy, with services, industry, manufacturing, and agriculture all accounting for the GDP. Agribusiness varies in the way it is measured and may contribute up to 30% of GDP in Brazil. Brazil mainly produces raw sugar, oranges, and coffee also being the chief producers of it; soybean, beef, poultry, and corn coming second in production around the world.

Brazil also plays a major role in producing steel, minerals, aircraft, automobiles, and auto parts. To attract FDI in Brazil developed “The Industrial Property Law (“the IP Law”) which is the primary law in the area of patents, trademarks, industrial designs and geographical indications, and regulates registration thereof with the Brazilian Patent and Trademark Office (“INPI”)” (Baker&McKenzie, 2006, p. 19) Intellectual Property

Brazilian Patent and Trademark Office (INPI) is the main Administrative office of Patents and Trademarks. The IP Law follows a “modern statute that meets most recent requirements of the World Trade Organization (WTO) legislation related to industrial property rights (commonly referred to as TRIPS) “ (Baker&McKenzie, 2006, p. 20). Under the statute, the grant of industrial property rights, such as trademarks, patents and industrial designs, takes place at the moment of the registration.

The registration is approved after the INPI examines whether the application is in accordance with local requirements, and if the applicant is a foreign corporation, INPI requires that a corporation should be represented by a  local attorney and furthermore would be represented in case of  possible lawsuits concerning industrial property rights. According to my research, intellectual property rights in Brazil still have a great gap in comparison to many other countries. The intellectual property system is not properly used and it’s very hard to enforce contracts. Court fees are extremely high; in some cases going as high as 30%.

In order to attract new innovations, venture capital legal relationships should be established between copyright holders and the society. Laws should support the market economy. Action Plan In our case, we have to explore more about government rules and regulations towards foreign franchise investments, especially in the area of “Foreign ownership limitations”. Discuss further tax regulations for Brazil vs USA, and licensing procedures. It will be necessary to protect trademark names in order to have higher earning profits. We have to learn more about” the IP law” focusing on the area such as three dimension sign trademarks.