LatinFinance - January/February 2017 - 28

INVESTOR
PERCEPTION
STUDY
BRAZILIAN LAW
Our annual survey of legal and financial executives in Brazil shows the
landmark corruption investigation is having a major effect on the way the
country does business. By Thierry Ogier

Lava Jato's legacy
emerges

razilian corporate investment and mergers and acquisitions are set to pick up this
year thanks to better corporate governance and compliance, according to a survey of over a
hundred executives that focus on the country.
The optimism comes as Brazil struggles to emerge from a prolonged recession and recover
from political fallout tied to the wide-ranging Lava Jato investigations into corruption at Petrobras, the state-controlled oil company. Brazil's economy contracted in 2016 for the second
consecutive year. Dilma Rousseff was impeached and replaced by President Michel Temer
against a background of growing popular discontent over corruption.
The opinion survey reveals the magnitude of the changes in compliance-related issues and
corporate governance in the wake of the Petrobras corruption scandal. Surveyed executives
are almost unanimous in saying that compliance will be the top issue for Brazilian corporations in 2017.
Investigations involving Brazil's top building contractors and politicians are still unfolding.
Some high-profile businessmen have been jailed, such as Marcelo Odebrecht, as well as the
former leader of the House of Deputies, Eduardo Cunha.
This dramatic backdrop is reflected in the TozziniFreire 2017 Outlook for Legal Issues in
Brazil. One hundred and thirty Brazil-focused executives completed the survey (including 109
in Brazil itself ). More than half of them (59%) work in the legal environment and 23% in the
financial markets.
Carried out by Management & Excellence (M&E) and LatinFinance, and sponsored by
Brazilian law firm TozziniFreire, the study highlights what legal and financing professionals
expect will be the biggest issues for Brazilian companies in the coming year. Legal trends are
considered precursors to economic and business trends, which has given the annual survey
the reputation of being a strong indicator of where Brazil might be headed.
More compliance, less corruption
The main finding is that corporate directors will pay more attention to compliance-related
issues and corporate governance, which is expected to lead to less corruption. In the meantime, however, some longstanding issues persist: tax and labor laws are still viewed as cumbersome and continue to drive up business costs in Brazil.
Almost all survey respondents (95%, up from last year's 90%) say that compliance-related

28 L ATINFINA NCE.COM - January/February 2017

issues will become more relevant. The main
consequence, according to executives'
expectation, will be less corruption.
"There is a growing compliance culture.
There are demands from everyone. We have
to change the way we conduct business,"
says Shin Jae Kim, a compliance partner at
TozziniFreire.
"It is a road that we have taken. You may
have some detours, but I do not think that
we will come back to the same road again."
There is more to come, according to Bruno Drago, a competition and compliance
partner at Demarest, a São Paulo-based
law firm. "This concern will tend to keep
growing in the years to come. Sanctions
are very tough. There is a great incentive
for companies to prepare themselves. The
reputational risk is even greater. I would
say nine out of 10 companies say that if they
have to invest in something, they will invest
in compliance," he says.
In addition, nearly three out of four
respondents think that training in antitrust
compliance will increase. "Somebody who
is trained knows what is illegal or legally dubious, and may report the case to the legal
department. It may also avoid future violations," says Marcelo Calliari, TozziniFeire's
anti-trust partner.

http://www.LATINFINANCE.COM

Table of Contents for the Digital Edition of LatinFinance - January/February 2017