Currently, the Brazilian government is working on measures to liberalize its economy. The article outlines what companies have to prepare for.
Because of the forecasts of a sinking GDP the Brazilian Ministry of Economy created a package of measures aimed at increasing productivity and employment. The measures should last between 90 and 360 days. Four specific programs are planned: Simplifica, Emprega Mais, Brazil 4.0 und Pro-markets.
Simplifica means „simplify“ and describes a package of 50 individual measures to fight bureaucracy within the productive sector. According to the Minister for Productivity, Employment, and Competitiveness, Carlos da Costa, the plan has been based on requests from representatives of the productive sector itself.
“Companies are faced with a great deal of complexity and we will start a big process of simplification”, said Costa. “Brazil could grow much stronger if it weren`t for the limitations in the productive sector”.
Part of the measures is a comprehensive reform of eSocial, a digital platform for transmitting employee information (such as social security contributions, paycheck data and FGTS data) to the government.
According to Costa, eSocial is a highly complex System that requires many work hours and hinders the daily business.
“Imagine a system that is a thousand time smore complex than your tax returns. And companies have to fill this out every single month!”, said Costa. “Companies cannot deal with this eSocial anymore.”
Planned Measures to fight Bureaucracy
- E-Social-Reformulation – technical changes with fewer bureaucracy in order to reduce operating costs
- Streamlining of the basic productive processes (PPB) in the free trade zone of Manaus and in other sectors, e.g. IT
- Adaptations of Bloco K, the controlling protocol of production and industrial inventory
- Creation of the Single Construction Portal – that can be used by the municipalities
- Regulation period – regulation changes by Inmetro will be scheduled for one specific day whereas today it can publish changes daily
- Joint register for fiscal regularity – today, many different certificates are required.
As part of Emprega Mais („more work“), the government will create a new national strategy for professional qualification using a “voucher” model. The vouchers will be offered to companies and employees that invest in qualification measures. When issuing the vouchers, the government will pay attention to the specific market needs and vacancies which abandoning older, inefficient programs such as Pronatec.
The financing of the vouchers will be done partly by the government and partly through Systems S resources. System S is a group of institutions that focus on providing vocational training, research as well as technical and social support. The government will now reroute the courses that are being offered for free through System S.
It is also likely that money from the Workers Assistance Fund (FAT) will be used which has been responsible for paying social security benefits and rewarding bonuses. The effectiveness of the program depends on the employability and growth in income. If the number of vacant jobs rises, the government can lower the costs of FAT and the social security contributions. The voucher can be used for all nationally recognized institutions.
The Ministry of Economy will also implement courses aimed at reaching the capacity to work. Companies will have to fulfil a quota of employing people that have visited such courses.
Measures for promoting Quality
- New National Employment System (Sine) by creating a „Tinder“ for jobs using artificial intelligence and algorithms.
- New Qualification Strategies using vouchers for System S course providers to increase employability.
The idea behind the Pro-Markets plan is to reduce obstacles for the full functionality of the free market by implementing regulatory changes.
“Brazil is one of the worst countries worldwide on the list of obstacles for internal competition”, says Costa.
The affected sectors are sanitary institutions, medications, oil and gas, banking, real estate and some telecommunication branches. Within the pharma sector, the government is planning to publish the prices of prescription drugs with more than one brand.
According to Costa, the Brazilian market prevent new businesses from entering it because they understand the governmental price control mechanisms as too great a risk for investments.
“Brazil is suffering from too much regulation”, he says.
- Regulatory measures to remove obstacles for the full functionality of the free market in the sectors named above.
The Brazil 4.0-Plan includes measures aimed at stimulating the digitization and modernization of management processes. The government will use OECD studies to further implement technological solutions in daily business processes and in order to promote user interests.
Measures for Brazil 4.0
- Measures for digitization and modernization of management processes will address 300.000 companies based on OECD indicators and a specific innovation program
Will these measures help strengthen the BIP in 2019?
The four plans have a great potential of significantly impacting the economic activity of Brazil this year. However, their effectiveness strongly depends on the political will behind their implementation. The economic relief of Brazil could be stronger if the economic activities are increased. Nevertheless, it remains very difficult for especially foreign companies to do in business in Brazil.
Do the measures cause insecurities regarding the economic future of Brazil?
Especially multinational businesses within the productive sector still feel insecure about the coming changes. However, small and medium sizes enterprises favor the new stimulus plans.
These regulatory changes could affect your business with view to customizing or support of your ERP/SAP system. Please contact us to learn about possible necessary reactions to the changes – we are happy to assist you!