Weird Laws in Brazil That Kill Entrepreneurship and Business
Unusual Laws in Brazil
Since 1988, Brazilian authorities have created 5 million new norms and laws. This article about weird laws in Brazil shows just a small sample of them.
There is not a single book with all Brazilian laws. A lawyer tried to compile all the tax legislation in one volume. It became a behemoth of 41 266 pages printed in A0 paper (the largest type existent). The weight of the publication was 7 tons. More than an elephant.
In case the sheer absurdity of the size made you forgot: the entire book was only about tax law.
It also affects entrepreneurs daring to venture into Brazil:
- Labor law
- The Civil Code
- Consumer rights
- Corporate and business law, etc.
All of them are among the most complex codes in their areas on the entire planet. This is the reason Brazilian subsidiaries of global companies often have legal departments larger than their headquarters.
Brazilian firms spend, on average, 1958 hours per year only calculating their tax obligations. A time better used to develop new products or improve their services, but it is wasted untangling the odd game rules.
The World Bank compiles the Ease of Doing Business rank. It measures business regulations and how they affect small and medium-sized companies in 190 countries. New Zealand has the first position.
Brazil is in 124th place, below much poorer nations like Papua New Guinea, Eswatini, Lesotho, and Senegal.
Why is Brazilian Tax Law Is So Complex?
The average answer to this question is better than what most economists would say.
Laws are complicated because the Brazilian government is always hungry for money. The quickest and easier way to satiate this hunger is by creating new taxes.
In 1966, the national tax burden was 15% of the GDP. Only 35 years later, in 2001, this number jumped to 33%. It took less than a generation for the government to double the amount taken from everything produced in the country. Of all this money, 40% is used to pay debts, 40% goes for public payroll, and 18% for social security. The remaining 2% is shared by the rest — education, healthcare, infrastructure, etc.
Brazilian laws are expensive, obscure, and even ridiculous. Since you are not an entrepreneur there — if you are, you have my admiration — below are some examples of weird laws in Brazil to laugh about.
Weird Laws in Brazil Creating Jobs That Do Not Exist Nearly Anywhere Else
Imagine if in your country a law turned mandatory to employ an attendant in every elevator. His function would be only to press the floor buttons.
It sounds absurd, right?
Not in Brazil, where there is something similar. Not with elevators, but with gas stations. There, you cannot refuel your own car without help. Even if there are 4 pumps available and only one busy attendant (called frentista), you need to wait in line.
I traveled to 51 countries during the last decade and I saw nothing like it. It is literally illegal for you to pump gas into your vehicle because of a law created in 2000 and sanctioned by president Fernando Henrique Cardoso. The reason for it? To preserve the health of drivers and keep the jobs of gas station attendants.
If the law’s purpose was to keep a job that makes little sense and instead increases the costs of fueling a car, congrats! Your idea succeeded, Mr. Rebelo.
Another profession that only exists in Brazil is the despachante de trânsito.
What does he do? He ensures your car documents, inspections, and fees are up to date.
Why would someone hire an expert for something so trivial?
Because dealing with the local traffic departments (DETRAN) is falling into a limbo of bureaucracy, winding corridors, and hours, maybe days, wasted.
Weird Laws in Brazil That Prohibit the Importation of Used Vehicles
In Brazil, only imports of zero-km vehicles are allowed.
As a Brazilian that lives in Poland, that creates an extraordinary discrepancy for me. In Poland, a middle-class citizen can buy a used, but in a good state, BMW or Mercedes — imported from neighboring Germany — for affordable prices.
This makes the average age of the registered cars in Poland (14 years) much higher than in Brazil (10 years). Since Brazilians cannot import used cars from richer countries, they need to use only local models, often ripped from accessories available in Europe or the USA. Some of the economical cars available in Brazil, like the Renault Kwid or Fiat Mobi, would not be even sold in European countries because of safety concerns.
This prohibition, however, affects more than the market for second-hand cars. It also hits the industry and agriculture.
A Brazilian farmer has a restricted second-hand market of agricultural vehicles such as combines and tractors. Either he finds the money to purchase expensive new vehicles or resorts to agricultural cooperatives, where consortiums member purchase equipment and share it between their farms.
Congressman Marcel van Hattem filed for regulatory changes to liberalize vehicle imports.
The Weird Law Establishing That an Hour Has 52.5 Minutes
They compiled the Brazilian labor legislation in something called CLT, an acronym for Workers Law Consolidation in Portuguese.
Sounds like stuff created by collectivist bureaucrats during the 40s, right?
Because this is exactly what it is. The CLT is from 1943, conceived by the dictator Getulio Vargas. It has 922 articles and over 500 binding legal precedences.
It is a gold mine of odd stuff.
Article number 71, for example, provides that between 22:00 and 05:00, each hour has 52 minutes and 30 seconds. The intention behind this norm is to ensure that employees with night shifts earn an additional 7 minutes and 30 seconds per hour worked.
The collateral effects, however, are prone-to-error procedures and complicated processes to calculate salaries.
Two-Years of Prescription for Labour Lawsuits + In Dubio Pro Operario
Period of prescription is the maximum time after an event that legal proceedings based on that event may be initiated. In other words, how long after an event you can sue (or be sued by) someone.
In most western countries, the period of prescription for labor lawsuits is a matter of weeks. Germany, for example, has fourteen days.
The Brazilian labor law, on the other side, establishes two years. This forces firms to keep documents, vouchers, receipts, timesheets, and even CCTV recordings for this entire time. The cost of keeping such a vast archive is considerable.
Considerable, but necessary. The Brazilian labor law uses an exotic inversion of the universally accepted principle of In Dubio Pro Reo (meaning guilty until proven otherwise). There, it becomes In Dubio Pro Operario(the employee is always right until proven otherwise).
If a firm suffers a lawsuit in the two years after a certain event (eg: employee termination), it is the company that should present all the documents to prove innocence. Otherwise, they are guilty.
Conclusion about Weird Laws in Brazil
I use the laws mentioned above as an example when someone asks me:
Why did you decide to open a business in Eastern Europe instead of in your home country?
But they are just drops in an ocean. The Brazilian labor law has almost 1000 articles. A book compilation of the tax legislation weights 7 tons.
Since 1988, Brazilian legislators have created, on average, 4163 new laws or norms —
Per Day.
Some affected people I know — people brave enough to start a business in Brazil. One example is the (former) owner of the only cinema in my hometown. He received a fine for not exhibiting enough national movies. The product of a law created to favor Grupo Globo, a media giant that produces over 80% of all national films and has enormous influence among politicians.
However, national films are such a public failure that is often better to pay the fine.
One day he, as well as thousands of small business owners, just gave up doing business in Brazil. Some leave to other places far more attractive for entrepreneurs. Others become employees at large corporations.
Do you have any other examples of weird laws in Brazil? Tell us in the comments!
If you are an entrepreneur or is planning to start a business, here are some other articles that may be useful to you:
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Levi Borba is CEO of expatriateconsultancy.com, creator of the channel Small Business Hacks, and best-selling author. You can check his books here, his other articles here, or his LinkedIn here.
1 COMMENT
Well, I’ve registered as a MEI (individual micro-enterprise), and when trying to file my income tax, learned that:
1) In Brazil, what is taxed is the revenue, not the profit,
2) That’s why you have to maximize your profit in relation to the revenue,
3) And only accountants can verify your profit and artificially “enlarge” it up to the limits of your “revenue minus expenses”. Not because they are so smart professionally, but because they simply have the right to do so.
But when I say that this practice creates a parasitic class, I am considered an idiot who has no idea of how it all should be done and of the great wisdom of Brazilian institutions.