On September 20, Brazilian President Jair Bolsonaro sanctioned Executive Order #881/2019, which establishes the Declaration of Economic Freedom Rights in Brazil. We will highlight the main aspects of the Declaration, published as Act #13,874/2019 after the Executive’s Order sanction.
The Declaration establishes economic freedom and good faith as an interpretation criterion for all rules regarding Brazilian public administration in what regards contracts, investments and property rights. Four principles are provided in the Declaration: (i) freedom as a guarantee for the performance of economic activities; (ii) good faith of the individual before the State; (iii) the subsidiary and exceptional intervention of the State over the exercise of economic activities; and (iv) the recognition of the vulnerability of the individual before the State. Based on this premises, the new Act represents a milestone in the Brazilian scenario for investors and for doing business in the country.
Among the eleven rights provided in the Declaration (there were originally twelve, but one item was vetoed by the President), one of the most relevant is in 3rd Article, IX. The issue of excessive bureaucracy and the delay in processing requests in public agencies is one of the obstacles that the measure aims to mitigate. This Article provides to private parties the guarantee that, in the requests of public acts of liberation of the economic activity such as authorizations, permissions, registers, if all necessary requirements are met to the instruction of the administrative process, the individual will be immediately and expressly informed of the maximum period stipulated for the analysis of its request. After the term has elapsed, the silence of the competent authority will imply tacit approval for all purposes, except in cases expressly forbidden by law.
Another relevant right for investors and companies in Brazil is the freedom to develop new technological products, services and business in the country. 3rd Article, VI gives individuals the right to develop, execute, operate, or market new products and services modalities when normative standards become outdated by virtue of internationally consolidated technological development. This article shall be further regulated, as the Declaration indicates, for setting out the procedure to be followed, its conditions and effects. One important provision to foster innovation development in the country.
Regarding the regulatory aspects of the Act, there are relevant points of parameterization of the State’s action, to cut the red tape (4th Article). The State must prevent abuse of regulatory power in such a way as to avoid the creation of market reserve by favoring, through regulation, an economic group, or professional, to the detriment of other competitors. It is also provided that the State cannot issue acts, orders or rules that (i) prevent new national or foreign competitors from entering the market; (ii) prevent or delay innovation and the adoption of new technologies; and (iii) create technical specifications that are not necessary to achieve the desired end of a public policy.
The Declaration also represents a guarantee against the slowness characteristic of Brazilian public administration. 4th Article, VI, provides that the State is not allowed to create artificial or compulsory demand for a product, service or professional activity, including the use of notaries or registrations. This represents a break with the Brazilian tradition of rigid bureaucratic demands in the field of business.
The provisions of the Declaration are immediately applicable and can be used as a facilitating instrument for ongoing claims before the Public Administration and its entities. Our team has in-depth experience in assisting international companies’ projects in Brazil. For more information regarding the matter or to receive an English version of the Act, email us at info@lickslegal.com.