Brazilian government signs measure to reduce bureaucracy for startups

Contxto – Last Tuesday, Brazilian President Jair Bolsonaro signed a provisional measure to foster entrepreneurship through reduced levels of bureaucracy.

In Summary

Brazil’s Debureaucratization Secretary, Paulo Uebel, led the initiative. Along with Bolsonaro, he aims to increase entrepreneurship and startup creation by eliminating limitations, roadblocks, paperwork and costs involved in starting a business.

Minister of the Civil House, Onyx Lorenzoni, said in the ceremony that “startups won’t need licenses” or permits to test products. The only stipulation is that they don’t endanger public safety or violate sanitary and health regulations.

In-Depth

Startups will mainly benefit from less paperwork and overhead costs. For instance, no longer will they have to save documents such as labor and tax receipts, which can eventually turn out costly. Instead, more capital and brainpower can go towards business or tech development.

Also, the more fluid dispensation of permits will make opening offices easier and less restrictive if the endeavor is considered “low risk.” On top of that, we’ll see improved measures to allow small and medium-sized companies to trade in the national exchange, making financing and funding alternatives easier for these businesses.

According to officials, Brazilian businesses won’t need to IPO abroad, either. This provisional measure allows executives to expedite an effective law for 120 days without congressional approval, as long as it addresses urgent and important matters.

These are some of the key principles behind the policy:

Freedom from bureaucracy

There won’t be any prior authorization for starting low-risk economic activities.

Freedom to work and produce

If they don’t violate labor rights, startups will be able to work and generate income whenever they find most convenient.

Freedom to define prices

Startups can fix and fluctuate their own prices based on market conditions of supply and demand.

Freedom from arbitrariness

Tax arrangements will be equal for all citizens.

Freedom to be presumed in good faith

Contracts and private agreements will resolve doubts in the interpretation of the law.

Freedom to modernize

Officials will review old laws to remove regulations impeding the development of new technologies.

Freedom to innovate

No permits will be necessary to test, develop or implement new low-risk products.

Freedom to agree

Business contracts and personal agreements will have a degree of unalterability from Judicial decisions.

Freedom not to remain unanswered

Every permit and license application will have a determination date, otherwise, it will automatically mean approval for silence

Freedom to digitize

Startups can scan and discard all paperwork to diminish storage costs.

Freedom to grow

It will be easier for small and medium-sized companies to access public markets, meaning Brazilian startups won’t need to IPO abroad.

Freedom to undertake

Judicial decisions cannot disregard legal personality unless there’s proof of bad faith from the entrepreneur.

Freedom to write contracts with international standards

Judiciaries can’t revise contracts unless strictly necessary.

Freedom from abuse

Regulators won’t be able to go beyond the limits to harm entrepreneurs, causing undue economic distortions.

Freedom from economic regulation

New regulations with high economic impact can’t be implemented without due analysis.

Freedom from corporate regulation

Limited sole proprietorships will be effectively regularized in the form of the law.

Freedom from contractual risk

The right of the parties to agree on the risk allocation as a result of contractual revision should always be lawful and respected.

Conclusion

Without taking a political posture on this one, this specific policy certainly looks promising not to mention well-planned. Reducing regulations and bureaucracy for individuals to start high-growth businesses will certainly propel Brazil’s economy and tech industry.

Now, of course, it’s also a risky undertaking since users will be the ones testing the waters with disruptive business models or emergent technologies. However, most of the time, early adopters are happy to be the guinea pigs in these cases.

There’s a fine balance between freedom and regulation that can only experimentation in addition to risk-taking can validate. One thing is certain, though. More bureaucracy means less innovation for businesses trying to experiment and learn from their mistakes.

We’ll stay tuned to see how this develops.

-VC