Aragão & Martins 

In 2021, US exports to Brazil reached $46.9 billion, an increase of 35.5% ($12.3 billion) compared to 2020. US imports from Brazil totaled $31.3 billion, showing a 33.7% increase ($7.9 billion). The trade surplus in favor of the United States with Brazil was $15.6 billion, representing a 39.3% increase ($4.4 billion).

Regarding US exports to Brazil in 2021, the main commodity sectors were Oils, Minerals, Lime, Cement (29.9%), Chemicals, Plastics, Rubber, and Leather products (26.0%), and Machinery and Mechanical Appliances (17.3%). As for US imports from Brazil, the top commodity sectors were Oils and Minerals, Lime, and Cement (16.7%), Base Metals, Iron, Steel, and Tools (15.4%), and Agricultural Goods (14.5%).

Despite the increased trade, the United States has lost commercial space to China. In 2021, China was Brazil's leading trade partner, with trade between the two countries exceeding $135.5 billion. Additionally, the South American economy also registered a trade surplus of $40.3 billion with China, while the United States ranked as the second most important trading partner.

We believe that the problem lies in the lack of representation. America needs more companies and individuals with knowledge about both countries. With this in mind, we started our company in the United States of America.

   In this article, we will draw a parallel between Brazilian and American models, discuss legal security for companies in the United States, and the main flaws and vulnerabilities regarding Brazilian laws, as well as the reasons why Brazilian companies should consider opening branches in the United States. In this article, we will address aspects such as advantages, legal security, simplified tax system, tax collection, and last but not least, employer security with regard to labor laws. 

The global market offers various business opportunities and expansion for companies of different sectors and sizes, and legal security is one of the main concerns for companies worldwide.

The journey taken by Brazilian entrepreneurs is often criticized for its lack of legal security. Laws are often complex and ambiguous, making it difficult to predict the outcome of legal disputes. In addition, the Brazilian judicial system is frequently criticized for being slow and inefficient, which can take years to resolve legal disputes. 

Another important issue that significantly affects the legal security of companies in Brazil is corruption. Whether through sudden changes in laws or changes in doctrinal understandings, this can lead to unfair and unpredictable judicial decisions, as well as increase costs for companies that need to deal with it. To paraphrase the phrase attributed to former minister Pedro Malan: "In Brazil, even the past is uncertain.” 

Furthermore, regulations in some sectors in Brazil are often criticized for being excessively complex and burdensome for companies. This can make it difficult to enter the Brazilian market and limit the growth of companies operating in the country, where excessive bureaucracy and a complex tax process make the experience of being an entrepreneur a herculean task. 

As an example, we can illustrate private aviation. According to the Wealth-X survey conducted in 2021, the United States leads the world ranking of private jets with a total of 15,822 registered aircraft (out of a global total of 22,409). Although Brazil ranks second with 689 private jets in 2021, according to experts, this number falls far short of Brazil's capacity. According to experts in the field, the main reasons for the growth barrier are the complex bureaucracy, whether for aircraft registration or use, and the high costs due to a lack of specialized workforce. 

In this context, one option for Brazilian companies is to set up a branch in the United States. 

In the US, legal security for companies is mainly guaranteed through the United States Constitution and the judicial system. The American Constitution, written in 1789, protects fundamental rights, including freedom of speech, religious freedom, and private property. Originally composed of seven articles, the constitution now has 27 amendments, making it the shortest written constitution in effect. 

With so few written articles, the American judicial system is based on common law, which is a system based on legal precedents established by higher courts. This provides greater predictability and stability in the legal environment, as companies can rely on previous decisions to predict the outcome of future disputes. All of this is based on an independent and impartial judicial system. 

Therefore, the United States has strong legal security for companies thanks to the immutability of its constitution, the common law system, and the impartiality and independence of the judicial system. 

It is also important to consider several other reasons why Brazilian companies should consider setting up a branch in the United States. The country has a large and diversified market, a strong economy, and a well-developed financial system, which can offer great business opportunities and growth for companies in different sectors, as well as access to investment capital. 

In addition, the country has a favorable business environment, making it known for being friendly to companies, with clear and predictable legislation, a simplified tax system, and highly skilled workforce with talents in various business areas. 

It is important to note that the US tax system is known for being predictable and transparent. Laws are clear and consistently applied, offering legal security for companies operating in the country. 

The US tax system includes different types of taxes applied to companies at different levels of government, which we will discuss some of below. 

We start with federal income tax, applied to companies based on their gross income. The rates vary depending on the type of company and income bracket, similar to Brazil. For C Corporations, which represent only 6% of companies in the United States, the tax rate applied in 2022 was 21%. For other companies, in general, federal income tax rates are not directly applied to the company. Instead, the profits or losses of the company are distributed to owners or partners and taxed in their personal income tax return, which in 2022 ranged progressively between 10% and 37%. 

In addition to federal income tax, companies in the United States are also subject to state and local taxes, which vary depending on the state where the company is located. States have autonomy to legislate on the state tax regime. These taxes can include sales taxes, payroll taxes, and property taxes. 

Let's take Florida as an example, which is one of the few states in the US that does not have a state income tax. 

At the state level, a unified tax is levied on sales and services in the state. The standard state rate is 6%, but some cities and counties add an additional tax, which can slightly increase the total sales tax. For example, the county that includes the city of Miami has an additional 1% on all sales of products and services, resulting in a total tax value of 7% in relation to the product's value. 

Businesses and individuals in Florida are required to pay property tax based on the market value of the property. The rates vary depending on the location of the property and the type of property. Using the example of Miami-Dade County, the property tax corresponds to $20.6152 for every $1,000.00 of the property's market value, equivalent to a rate of 2.06%. However, businesses may qualify for a partial or total exemption from property tax, depending on the size and purpose of the property. 

Businesses in Florida are also required to pay payroll taxes, including Social Security and Medicare. The Social Security rate is 6.2%, and the Medicare rate is 1.45%. Companies are also required to withhold payroll taxes from employees' wages and send these taxes to the federal government. 

Labor legislation in Florida is regulated by the United States Federal Law and the Florida State Law, which established minimum wage and hour values at $11.00 per hour, excluding tipped workers. The minimum wage is $8.46 per hour, but $3.02 per hour can be deducted if the worker reaches this value in tips, resulting in a final hourly wage of $5.44. 

In Florida, an employer can dismiss an employee without cause as long as they are not violating any legal rights of the employee, such as illegal discrimination or retaliation. 

Setting up a company in the United States, specifically in Florida, can have several benefits for entrepreneurs, such as a growing job market, a low cost of living, simplified taxation, and legal security. In addition, Florida has a strong economy and is one of the most attractive states for foreign investments in the US. However, each situation is unique, so it is important to consult a professional for more specific and accurate information about the benefits of setting up a company in the United States of America. 

Jarbas Ribeiro Aragão Segundo. Attorney for 11 years, graduated in law from the Social University of Bahia. Founding partner of Aragão & Martins Advogados Associados and Aragao & Martins Law Service Corporation, companies operating in the civil and business areas. Approved for a Master of Laws program at Florida International University - FIU, starting in August 2023. Founding partner of the ADV Express application. Former Technical Assistant at the Central Support and Monitoring of Alternative Penalties - CEAPA of the Bahia State Penitentiary and Resocialization Administration. Former Adjunct III in the Administrative Directorate of the Bahia State Department of Science and Technology, nominated three times by the Bahia State Government to integrate the Permanent Bidding Committee of the State of Bahia in 2010 and 2011. 

Published by Jarbas Aragão - https://www.jusbrasil.com.br/artigos/esta-na-hora-de-internacionalizar-sua-empresa/1820559530

   This is a very interesting topic, as many Brazilians have unfounded fears about expanding their horizons beyond our Brazilian shores.

Why are we so afraid?

For many of us, despite having some international travel experience, the idea of investing, establishing a business branch, or even living in another country, although common in many minds, always seems somewhat abstract.

While many Brazilians live in or visit the United States, when it comes to international investments, building wealth in dollars, and opening companies or businesses abroad, the Brazilian population still lags far behind other countries' averages. It is necessary to analyze in depth the reasons why we are so closed off to the rest of the world. However, we can mention some more obvious reasons, such as the size of the Brazilian territory and the excessive bureaucratic rules in our tax system, which has been affectionately nicknamed the "legal-tax asylum." This wrongly leads us to believe that the similar tax confusion is a replicated standard worldwide.

Some time ago, in an informal conversation with an American lawyer, we were discussing strategies and ways to show the Brazilian public how easy, simple, and non-bureaucratic it is to dollarize their wealth and the advantages of doing so. That's when I heard something that made perfect sense to me.

He said, "Jarbas, you need to delve deeper into this subject. I am Canadian, a lawyer practicing for over 20 years here in the United States, fluent in English, French, and Spanish, but there is one thing I have never been able to achieve: Brazilian clients. I have clients from all over the world due to my language proficiency, but when it comes to Brazilians, there is something that sets them apart. Brazilians only do business with Brazilians. Not out of mistrust, but because Brazilians like to understand the entire process and procedure before starting any business, and that makes Portuguese a sine qua non condition for the development of any commercial agreement."

After reflecting on this statement, I realized that my noble friend was absolutely right. Whether due to our domestic legal system or numerous economic crises, Brazilians are raised in a culture of scarcity. Whether it's a lack of clients, labor, consumption, money, or anything else, unconsciously, we don't believe in simplicity, and we don't have the inherent trust in our counterparts as a basic principle, which leads us to always assume that something is wrong or that we could be victims of a scam.

This imperceptible culture deeply ingrained in our psyche compels us to always delve deeper into any transaction to overcome, one by one, the barriers we have previously created. This sets us apart, for example, from American culture, where any negotiation or agreement is always based on the principle of trust.

Adding to all of this the fact that, according to research conducted in 2022, only 1% of Brazilians are fluent in English, we can conclude that without full language proficiency, it becomes nearly impossible, if not a herculean task, for Brazilians to carry out any international transaction in English. Good communication allows us to express not only our thoughts but also our feelings and emotions, as well as understanding such sentiments from the other party.

However, it is important to note that the process of diversifying wealth, whether through purchasing properties abroad, expanding your company, or any other chosen method, is indeed very easy to accomplish, to the point of being unbelievable that everything works so smoothly.

Brazil has one of the world's best technologies when it comes to internet banking development and security, as well as banking applications for smartphones. As an example, international transfers can be credited to the recipient's account in just two hours in some banks.

Superficially, I will now explain the pathways to acquiring property abroad. It is important to note that each case is different, and the best way to embark on an investment journey of this kind is to hire qualified professionals to assist and ensure no mistakes are made.

Currently, the purchase of residential properties in Florida is the darling modality among Brazilians, and the volume of acquisitions has been growing significantly in recent times, leading Brazilians to rank fifth among foreigners who acquired the most properties in America in 2022, arousing great interest from banking institutions in this target market.

To acquire a property, besides the option of an outright purchase through international transfer, there is also the option of bank financing. A foreigner is perfectly eligible to obtain a mortgage in America. The process is relatively simple, requiring the presentation of a copy of the passport to the bank (lender), proof that the debt-to-income ratio does not exceed 43%, and that the rental income generated by the property is sufficient to meet the mortgage agreement.

Despite the low competition among banks and the dominance of a few banks in Brazil, the economic environment in the United States is more conducive to business, resulting in over 90 banks operating only in Florida, according to Forbes.

After credit approval from the bank, it is time to find the property. Florida has numerous real estate agencies and brokers (approximately 216,000) of different nationalities, where it is easy to find a trusted professional who speaks Portuguese.

After choosing the property and formalizing the purchase proposal between the parties, it is necessary to make a formal mortgage application to the chosen lending institution, providing the property details.

During this phase, the escrow agent comes into play. The escrow agent is the person or company responsible for holding the payment funds and the property while the transaction is not yet finalized or while a disagreement is being resolved. It is a role of great responsibility, in which all documents from both parties must be carefully verified to ensure no obstacles to the purchase. Generally, this role is performed by a lawyer or a notary in civil law jurisdiction. The escrow agent has a fiduciary responsibility to both parties in the escrow agreement.

Next, a professional inspection and appraisal of the property are carried out to assess its condition. Additionally, the lender will request an appraisal to determine the property value and ensure it meets loan criteria.

With a positive appraisal and inspections, the lender will finalize the mortgage approval. Subsequently, the loan documents will be reviewed and signed.

Even so, questions often arise about this crucial process. It is worth noting, for informational purposes only, that in 2022, the Brazilian GDP reached approximately $1.98 trillion, while the United States of America, during the same period, reached the astonishing value of $25.46 trillion. In the meantime, I highlight the corresponding values for the top 10 American states in terms of GDP in 2022:

California ($3,104,993)

Texas ($1,919,867)

New York ($1,571,690)

Florida ($1,462,687)

Illinois ($882,683)

Pennsylvania ($863,610)

New Jersey ($742,373)

Ohio ($694,402)

Georgia ($638,679)

North Carolina ($628,204).

Despite the pandemic, the vacancy rate in Florida in 2022 was 7.2%, with a total of approximately 287,000 properties sold. The average time on the market for a sale to be completed is around an astonishing 14 days. The total volume of real estate sales in Florida in 2022 was $237.5 billion, equivalent to 12% of Brazil's GDP produced in the same year.

As demonstrated, Florida has a robust economy, stable laws, a simple tax system, and broad property protection. Simple processes like foreclosure, which in Brazil can take years, are concluded in Florida in about one week to 15 days.

Obviously, this is just a small sample of one of the existing forms of international investment. However, these are important facts to be aware of, aiming to familiarize Brazilians with foreign investments and assist in building a diversified wealth portfolio.

We emphasize that this article is not a buying recommendation or an investment analysis. It is always important, before any commercial transaction, to seek qualified professionals who are licensed and trustworthy.

Published by Jarbas Aragão - https://www.jusbrasil.com.br/artigos/investimento-no-exterior-o-receio-e-o-medo-do-desconhecido/1872712749