By Robert Eugene DiPaolo
In our previous article we discussed the several steps required to establish the most common type of company used in Brazil, a sociedade limitada. At this point, you may be feeling some what bewildered or overwhelmed with all the steps you need to take, the numerous applications you need to file and the hoops you need to jump through to organize a company in Brazil, and understandably so.
However, while the process can at times seem unnecessarily complicated and quite Byzantine, with advanced planning, proper guidance and a healthy dose of patience, doing business in Brazil can be a rewarding experience and an exciting adventure.
While your attorney will coordinate the formation of your sociedade limitada or sociedade anônimas and assist you with the various steps required to set up a business, there is another person or facilitator, available to assist you with getting things done in Brazil. This person is known as a Despachante.
The term despachante is derived from the Portuguese adjective meaning “efficient”, which I confess may seem some what ironic at this point in our discussion about doing business in Brazil. If you look up the word despachante in a Portuguese/English dictionary, it’s generally defined as a “shipping agent”, a “document agent” or a “customs agent”; however this term is more broadly used to refer to the middleman or facilitator of business transactions of all sorts.
In his book The Testament, much of which takes place in Brazil, but which I must confess I have not read, John Grisham provides a colorful description of the term despachante. Mr. Grisham writes that despachante is “a Portuguese term for a personal dispatcher, expediter, buyer, or runner. No official document is obtained in Brazil without waiting in long lines. A despachante knows the city clerks, the courthouse crowd, the politicians, and the customs agents. He knows the system and how to grease it to get things done. The job requires a quick tongue, patience, and a lot of brass.
For a small fee, a despachante will obtain permits and passports or do your voting, banking, and mailing – the list has no end. No bureaucratic obstacle is too intimidating. A ‘despachante de aduana’ will assist you with imports, exports, and transportation involving customs houses. Some of the services of an honest despachante may seem fraudulent by U.S. standards, but acceptable by Brazilian standards. The services of an unscrupulous despachante may seem fraudulent even by Brazilian standards.”
As you might imagine, despachantes come in all shapes and sizes, and perform a variety of services, some completely legal, some perhaps not so legal and many of which are some where in between, depending on your perspective and tolerance for shades of grey. But having decided to do business in Brazil, you will need to become some what more comfortable with shades of grey and a certain amount informality in terms of getting things done.
Using a despachante is even recommended by various U.S. governmental agencies. For instance, the Alcohol, Tobacco Tax and Trade Bureau within the U.S. Department of the Treasury, suggests the following. “It might be helpful to receive assistance from a ‘despachante’ or freight forwarder.
Despachantes are often large organizations providing a wide range of services to anyone wanting to expedite their dealings with the government. Despachantes often clear goods through customs faster and they eliminate the need for permanent staff in the importing firm to handle such matters.” So, there you have it, a warm recommendation for using a despachante from the U.S. government, or perhaps merely a realistic concession to the realities of doing business in Brazil.
The irony in all of this is of course that much of what the despachante does is to grease the wheels of an otherwise inefficient and bureaucratic system in order to get things done. This can include indirect payments, which as we have discussed violate the law in Brazil as well as in the U.S. So, even if you are not the one directly making the payments that are often necessary to get things done, you are undoubtedly benefiting from all the payments despachantes have made on behalf of other clients over the years that enable them to effectively work the system, make the right contacts and get things done on your behalf.
That said, despachantes have become an essential part of the process of getting things done and maneuvering the layers of governmental bureaucracy in Brazil, much as real estate brokers have become an essential part of finding and renting an apartment in New York City. You might not like it, but in the end, you have no choice. Okay, you do have a choice, but it’s a choice between getting things done and battling against a system that has been in place since the Portuguese landed in Brazil.
In NYC, real estate brokers have managed to insert themselves between you and the apartment you want to rent, so that they can collect a fee equal to 15% of your apartment’s annual rent. This fee however does not reflect the effort a broker must expend to help you find a suitable apartment; it reflects the cost of being the exclusive broker for certain properties. Call it what you want, but it’s a well hidden bribe, wrapped inside what has become a well accepted, though despised system for securing an apartment in Gotham City.
In the same way, some despachantes in Brazil build the necessary ancillary transaction fees into the cost of their services. Other despachantes however may suggest that you provide them with a little something extra that they can slip in with the required application fees to facilitate the processing of your application. With this in mind, you will want to be sure to use a reputable despachante service, one with which you feel comfortable working. You can find such a reputable despachante with the assistance of your lawyer, through the U.S. Department of Commerce, the American Chamber of Commerce in Brazil and the various Brazilian Consulates.
As a foreigner in Brazil where business is all about personal relationships, it’s practically an imperative that you work with a despachante to cut through the layers of red tape necessary to do business in there. In short, your despachante will become your new friend, your new best friend with lots of old friends, both of whom can help you get things done in Brazil.