Not everything took effect at the same time

A little-discussed detail is that the agreement was divided into two parts with different timelines. The Interim Trade Agreement, which addresses market access and tariff reductions, took effect in May because it depended only on ratification by the Mercosur countries and approval by the European Union as a bloc.

The EU-Mercosur Partnership Agreement (EMPA), on the other hand, which covers political cooperation and environmental governance, requires individual ratification by each of the 27 European Union countries, including some that have expressed resistance, such as France, Poland, and Ireland.

In practice, this means that the aspect of greatest interest to those considering doing business in the region, the elimination of tariffs on thousands of products, is already underway, even as the institutional framework of the agreement continues to take shape over the coming years.

Why does Brazil remain the most logical point of entry?

Mercosur operates under a Common External Tariff (CET), which allows the bloc to negotiate with the rest of the world as a single entity. This has a direct implication for foreign companies: establishing operations in one of the bloc’s four countries facilitates access to the other three, and agreements reached by the bloc tend to benefit those already operating within it.

Brazil is home to the group’s largest economy and largest domestic market, which naturally attracts a significant number of multinationals that already use the country as a regional hub, a sort of “social proof” for those still deciding where to establish their first South American operation.

The reason for all this interest lies in the properties of these elements: rare earths are a group of 17 metals that, despite their name, are not scarce in the Earth’s crust; the challenge lies in finding them in viable concentrations and separating them, a costly and complex process.

These metals have unique chemical characteristics that no other material can replace with the same efficiency. They are found in almost everything: electric car motors, wind turbines, batteries, cell phones, screens, and even military equipment. Because the modern world depends so heavily on them, rare earth elements have become a central issue in disputes between countries.

The problem is not a shortage of these minerals on the planet, but rather the fact that everything goes through China, which extracts about 70% of the world’s rare earth elements and processes more than 90% of them, according to data from the U.S. Geological Survey (USGS). This gives the country enormous control over this market, which may pose a threat to other nations.

To avoid relying solely on China, other countries have set out to find new suppliers. That’s where Brazil comes in.

Against this backdrop, foreign companies are increasingly interested in expanding their presence in the region. South America combines a significant consumer market, a strong presence in global commodity chains, and a strategic position in trade relations with partners such as China and the United States. Among the bloc’s countries, Brazil stands out as a strategic hub for those seeking to expand their operations.

Why Brazil?
Brazil is the largest economy in Mercosur and remains the main gateway for foreign companies interested in expanding across South America. In 2025, the country recorded 2.3% GDP growth, reaching R$ 12.7 trillion in current values, according to IBGE data released by the federal government. This result was driven by growth in agriculture, services, and industry, which underscores the diversity and resilience of the Brazilian economy.

Regional integration is also a key factor. Mercosur, comprising Brazil, Argentina, Paraguay, and Uruguay, was created to facilitate trade among its members through tariff reductions and the coordination of trade policies. In practice, companies based in Brazil can use the country as a base to reach other markets in the region.

Benefits for foreign companies
Establishing a presence in Brazil can bring significant strategic advantages for international companies. In addition to accessing one of the world’s largest consumer markets, with over 200 million inhabitants, companies begin operating from within Mercosur’s leading economy, which expands their potential for regional operations.

This position also facilitates integration with established supply chains across various sectors, such as manufacturing, agribusiness, and services, and allows the country to serve as a base for expansion throughout South America.

Furthermore, the country boasts a dynamic business ecosystem, featuring startups, innovation hubs, and local companies that often become strategic partners for new investments.

The country offers scale, economic diversity, and regional integration.

The desire to have your own business can arise from the desire for more autonomy or the perception of a market opportunity, for example. In a country as diverse as Brazil, there is no shortage of promising ideas. But to turn them into reality, the path can be more complex than you might think.

The first obstacle is usually cost. Starting a business in Brazil involves a series of expenses that go beyond the initial idea. Registration fees, issuing certificates and permits are just a few examples. According to a survey by Serasa Experian, the cost of starting a business in 2024 ranged from R$ 500.00 to R$ 3,000.00, not counting indirect expenses.

In addition to costs, bureaucracy is also a point of attention. The opening process can require various registrations and authorizations. It all starts with defining the legal nature (MEI – Individual Microentrepreneur, EI – Sole Proprietor, Simple Partnership, or Limited Liability Company), followed by registering with the Board of Trade, obtaining a CNPJ from the Internal Revenue Service, state and/or municipal registrations, choosing a tax regime (Simples Nacional, Actual Profit, or Presumed Profit) and applying for operating permits. Depending on the sector, it may also be necessary to obtain environmental, health or specific regulatory licenses.

What does Brazilian law say?

Brazilian legislation, under the Civil Code (Law No. 10.406/2002), mandates the appointment of a legal representative/ attorney-in-fact for foreign companies operating in the country. This individual must have broad authority, including handling legal and tax matters, ensuring compliance with the General Data Protection Law (LGPD), and maintaining formal communication with the National Data Protection Authority (ANPD).

A legal representative is essential for obtaining the necessary governmental authorizations, registering with agencies such as the Board of Trade and the Federal Revenue Service, and ensuring compliance with local regulations.

The legal representative can be either Brazilian or a foreign resident in Brazil. For “S.A.” companies, the representative must also be a board member and hold a power of attorney for at least three years after their term ends to ensure continued legal compliance.

Beyond legal and regulatory responsibilities, the representative plays a crucial role in tax compliance and in managing interactions with public and tax authorities. In X’s case, the absence of a legal representative led to severe operational limitations. This underscores the importance of appointing a qualified legal representative to ensure regulatory compliance and safeguard the company’s operations and interests in Brazil.

For foreign companies looking to establish themselves in new markets, such as Brazil, corporate governance becomes a competitive differentiator. Adopting good governance practices is essential for building a solid foundation of trust and credibility, which are fundamental factors for long-term business success.

Brazil has a complex regulatory environment and a diverse market, requiring foreign companies to adapt quickly and effectively. Good governance practices can facilitate this process, promoting a better understanding of the local scenario and more efficient integration.

Among the most important points of corporate governance are:

1) Transparency

Corporate governance promotes transparency and accountability, important elements for attracting investors and strengthening the company’s image in the eyes of the market and society. Companies with well-structured governance tend to have better financial and operational performance.

2) Protection of shareholders’ interests

Good corporate governance ensures that the interests of all shareholders are preserved. It ensures transparency, accountability and fairness in decision-making, preventing the abuse of power by company executives.

3) Risk management

Effective corporate governance includes the identification, assessment and mitigation of risks, ensuring that the company is prepared to face uncertainties and minimize negative impacts.

By fulfilling their legal obligations, board members strengthen the company’s legal position, as well as contributing to building a solid foundation that promotes the long-term sustainability of the business.

Let’s find out more about the legal duties that every board member must fulfill.

1) Duty of care

The duty of care is inherent in the role of every board member and represents a fundamental obligation that permeates all their actions. This principle imposes the need for diligence in the exercise of responsibilities, requiring board members to act in an informed manner.

Applying the duty of care not only safeguards the interests of the organization, but also strengthens stakeholder confidence, promoting sound corporate governance.

2) Duty of loyalty

The duty of loyalty is an essential pillar in the role played by board members. This principle requires board members to act ethically, avoiding any conflict of interest that could compromise integrity or harm the organization. Board members must prioritize the interests of the company over any personal interests, ensuring that their decisions are guided by the pursuit of collective benefit.

This commitment to loyalty reflects the moral and ethical responsibility inherent in the exercise of board duties.

3) Duty of commitment

By taking on the duty of commitment, directors are committed not only to the company itself, but also to its stakeholders, shareholders and employees. This implies a constant willingness to stay informed, up-to-date and ready to face the dynamic challenges of the business environment.

The legal representative acts on behalf of the foreign company, assuming responsibilities and acting in direct line with the company’s strategic decisions. This involves signing contracts, carrying out financial transactions and fulfilling tax obligations on behalf of the company. In addition, they play a key role in communicating with local authorities, clients and business partners, ensuring a solid and reliable presence in the Brazilian market.

Here at Pryor Global, this legal representative is also called attorney-in-fact. Their work is essential to ensure the successful operation of the foreign company in Brazil, protecting its interests and guaranteeing legal compliance in all aspects.

Choosing a qualified attorney is essential, as they will represent the foreign company’s interests before the authorities and third parties. It is therefore essential to carry out careful research and ensure that the attorney selected has solid experience and comprehensive knowledge of Brazilian laws and business practices.

For foreign investors, however, it is essential to be familiar with some aspects of Brazil, especially those related to legislative complexity, which require an in-depth understanding. In addition, it is necessary to consider the country’s economic, cultural, and social dynamics, which significantly influence investment strategies.

In this context, how does foreign capital enter the country?

According to the Foreign Capital Law, foreign capital includes goods, machinery, equipment, and financial resources intended for the production of goods or services in Brazil, without any initial outlay of foreign currency. These resources belong to individuals or legal entities resident, domiciled, or headquartered abroad.

Foreign capital must be registered through the RDE – IED (Central Bank’s Electronic Declaratory Registry – Foreign Direct Investment) module, which is part of the Central Bank’s Information System – Sisbacen. It is essential to register all foreign investment with the Central Bank of Brazil (BCB). This registration is indispensable for procedures such as remitting profits abroad, repatriating capital, and formalizing the reinvestment of profits.

1. Legal representative

The appointment of a legal representative for the foreign investor is a requirement. This professional will play a key role in the process of establishing and operating the company in the country. They will be responsible for representing the foreign investor’s interests before the Brazilian authorities and ensuring compliance with all the legal and tax obligations necessary for the company to operate.

Therefore, appointing an attorney is a crucial step and must be made with care and consideration.

2. Legal nature

Choosing the legal nature of the company is an important step in the process of opening a business in Brazil. It consists of defining the company’s legal structure and the partners’ responsibilities under Brazilian law. To make this decision, you need to consider the objectives of the business, the type of activity to be carried out, the number of partners involved etc.

It is important to understand that the legal nature selected will have a direct impact on issues such as taxation, corporate structure, and legal obligations.

3. Tax regime

The most common tax regime options in Brazil include National Simples, Actual Profit, and Presumed Profit. Each has its own rules and tax rates, as well as specific requirements. The choice of tax regime should be based on the nature of the company’s activity, its estimated revenue, corporate structure, and other relevant factors.