Doing business in Brazil: a guide for US companies

If you are a US company or a foreigner wondering how to open a company in Brazil, contract a Brazilian supplier, sell into the country or invest in a Brazilian business, the opportunity comes with an uncomfortable question: under which law does the contract hold, and where do I enforce it if something goes wrong. The insecurity of an international contract does not come from distance, but from the meeting of two legal systems that do not always speak the same language. This text explains what defines the security of doing business between Brazil and the United States, and with abroad in general: whether a foreigner can open a company in Brazil, how much it costs, applicable law, forum, arbitration and the path of a cross-border operation.

Key points

An international contract is not a domestic contract translated. The decisions that define its security are the applicable law and the forum, or arbitration, that will resolve any conflicts.
In the Brazil and United States axis, the counterparty is often a company incorporated in Delaware and the instrument is an MSA, the master service agreement, which calls for attention to the chosen law, arbitration and taxation.
Bringing in an investor or opening a company in Brazil as a foreigner involves, beyond the contract, the corporate structuring and the registration of the investment with the Central Bank.

The insecurity of contracting across the border

The fear is legitimate. A contract signed with a US company is usually drafted in English, under legal concepts that do not correspond exactly to the Brazilian ones, and it often points to a foreign law and forum. For the Brazilian company, that raises concrete doubts: will this contract be recognized in Brazil, can a decision taken there be enforced here, and the reverse also holds. Ignoring these questions in the rush to close the deal is signing in the dark. Answering them beforehand is what turns a risky international operation into a simply international one.

What an international contract is

A contract is international when it has elements connecting it to more than one legal system, parties based in different countries, performance abroad, goods crossing borders. That multiple connection is what distinguishes it from a purely domestic contract and what raises the central question: since more than one legal system can claim application over the same deal, the rules of the game must be defined in the contract itself. It is not a matter of translating a Brazilian template, but of designing an instrument meant to live between jurisdictions.

Applicable law and forum: the two decisions that define everything

Two clauses concentrate most of the security of an international contract. The first is applicable law: which law governs the contract, the Brazilian one, that of the US state involved, that of a third country. The second is the forum: where and how conflicts are resolved. Here there is an important nuance of Brazilian law. The freedom to choose a foreign law to govern the contract is broad when the parties elect arbitration, and more restricted when the dispute is taken to the Brazilian courts, which apply the rules of our Law of Introduction to the Rules of Brazilian Law to define the governing law. That is why the choice between courts and arbitration is not a procedural detail, but a decision that shapes the very reach of party autonomy.

Arbitration: why it is usually the path

In significant international contracts, arbitration is frequently the preferred forum, and for good reasons. It allows the parties to choose the applicable law with broad freedom, to define a neutral seat for the ruling, to elect arbitrators with technical knowledge and to conduct the proceeding in English or Portuguese, as agreed. And, decisively, a foreign arbitral award is recognized and enforced in Brazil under the New York Convention, to which the country is a party, which gives arbitral decisions an international circulation that court judgments do not always have. A well-drafted arbitration clause, defining seat, rules and language, is usually the centerpiece of a good contract between Brazil and the United States.

International sale of goods and the Vienna Convention

When the deal is about goods, a specific instrument comes into play: the United Nations Convention on Contracts for the International Sale of Goods, the so-called CISG, to which both Brazil and the United States are parties. It provides a uniform set of rules for the international sale of goods, applying automatically unless the parties expressly opt out. To it are added the Incoterms, which standardize the division of costs and risks in transport. Knowing when the CISG applies, and whether to keep it or opt out, is a decision that precedes the drafting of the export or import contract.

The Brazil and United States axis: Delaware and the MSA

In the flow between the two countries, some patterns recur and deserve attention. The US counterparty is usually a company incorporated in Delaware, the reference corporate jurisdiction in the United States, even if it operates in another state. In service and technology relationships, the typical instrument is the MSA, the master service agreement, a framework contract that defines the general terms of the service, complemented by specific statements of work. Around these instruments gravitate sensitive decisions: the chosen law, often that of Delaware or New York; the arbitration clause and its seat; the taxation of payments, with attention to withholding at source and to treaties to avoid double taxation; and, where there is data processing, the international transfer in light of the LGPD. Understanding these instruments, and negotiating them with someone who knows them, reduces the asymmetry before a counterparty used to them. Spain and other countries come in as additional possibilities, but the central axis of the practice is Brazil and the United States.

Can a foreigner open a company in Brazil, and how much does it cost

The reverse path, that of a foreign company that wants to operate in Brazil or of an outside investor who puts money into a Brazilian business, has its own steps. Yes, a foreigner can open a company in Brazil. As a rule it involves the incorporation of a subsidiary or the entry into the capital of a local company, the appointment of a legal representative resident in the country, and the registration of the foreign direct investment with the Central Bank, a requirement that provides security and later allows the remittance of profits and the repatriation of capital. As for how much it costs, there is no single figure: it depends on the structure, the number of steps and the complexity, so the amount is defined once the scope is set. Structuring this entry correctly from the start avoids obstacles that, corrected later, cost time and money.

Frequently asked questions

Can a foreigner open a company in Brazil?

Yes. A foreigner, whether an individual or a company, can open a company in Brazil, as a rule by incorporating a subsidiary or entering the capital of a local company, with a legal representative resident in the country and the registration of the investment with the Central Bank. Conducting that structuring is a corporate and international matter developed at Grisostolo Advocacia.

How much does it cost to open a company in Brazil?

There is no single figure: the cost depends on the type of structure, the number of steps and the complexity of the operation. So the amount is defined once the scope is set. In a conversation, it is possible to size what your case requires, from the incorporation to the registration of the investment, before any decision.

Is Brazil a high-tax country, and how are cross-border payments taxed?

Brazil has a high and complex tax burden, and cross-border payments may involve withholding at source, with the possible relief of treaties to avoid double taxation, depending on the country. Assessing the taxation of an operation between Brazil and the United States, lawfully, is part of the firm's international and tax work.

What law applies to an international contract with a Brazilian party?

It depends on what the parties define and on the forum. In arbitration, the freedom to choose the applicable law is broad; before the Brazilian courts, the Law of Introduction to the Rules of Brazilian Law sets its own rules to identify the governing law. Choosing the right combination of law and forum is a strategic decision the firm advises on.

How does a US company do business in Brazil?

It usually involves a counterparty incorporated in Delaware, an instrument such as the MSA in service relationships, and clauses on applicable law, arbitration and taxation, plus, where relevant, the incorporation of a Brazilian subsidiary. Drafting and negotiating these instruments with knowledge of the US standard is a front on which the firm works, including experience with contracts such as the MSA.

Do international treaties have the force of law in Brazil?

Yes, once incorporated into the legal system by the process set out in the Constitution, treaties become part of domestic law. That is the case of the New York Convention, on arbitration, and the Vienna Convention, on the international sale of goods, both applicable in Brazil. Interpreting how these treaties apply to each deal is part of the firm's international counsel.

How the firm works on this subject

Deals that cross the border usually translate into the following areas of legal work:

Drafting of international legal documents: international contracts, MSAs and statements of work, with clauses on applicable law, forum and arbitration.
Consultative and preventive advisory: structuring of the cross-border operation, analysis of applicable law, arbitration, CISG and taxation, with attention to the international transfer of data.
Constitutive and corporate advisory: entry of a foreign company into Brazil, subsidiaries and registration of foreign direct investment.
Arbitration and litigation: defense of the company's interests when the international conflict arises.

It is with this set that Grisostolo Advocacia is concerned in its international practice, focused on the Brazil and United States axis and open to operations with Spain and other countries.

About to do business with the United States or abroad?

If you deal with a US company, export, import, want to open a company in Brazil or bring in a foreign investor, it is worth understanding the applicable law, the forum and the structure before signing. We can talk about your case.

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This text is informative in nature and does not constitute legal advice. Each international operation depends on the analysis of the jurisdictions, the treaties and the parties involved.