Politics, Business & Culture in the Americas
Web Exclusive

How a New Program Is Cutting the ‘Brazil Cost’ for Entrepreneurs

Reading Time: 4 minutesStarting a business in Brazil takes an average of 100 days. São Paulo mayor João Doria wants it to happen in 48 hours.
Reading Time: 4 minutes

Cris Castello Branco/Sebrae-SP CC 2.5 Brasil

Reading Time: 4 minutes

Marcelo Sasso worked in the finance department of a São Paulo advertising firm, and was good at his job. So good, in fact, that friends and acquaintances often came to him for advice. This raised a question: Why not start his own financial administration and consulting company?

For starters, the risks were daunting. The country was facing an economic crisis, and Sasso had a daughter to support. Plus, there was Brazil’s infamous red tape: Opening a business would take him an average of 100 days, according to the World Bank’s “Doing Business” study. Brazil ranks 175 out of 190 countries, just after Kuwait, in the report’s “starting a business” category.

But then his accountant gave him some good news: The São Paulo city government had launched a program called Empreenda Fácil, or “Easy Business,” to reduce the time it takes to open a business to just seven days. 

The program turns what used to be an arduous pilgrimage to various government agencies, all with long wait lists and slow processing times, into one visit to an online portal that integrates federal, state and municipal organs into one place.

Sasso went for it.

“I decided to be brave,” he said. “That’s what entrepreneurship is, right?

Sasso was not the only one to take advantage of the new program. His was one of some 18,000 applications Empreenda Fácil has received since it was launched on May 8, just over a month ago.

São Paulo, Brazil’s most populous city and its undisputed business capital, saw an average of 250 new businesses opened per day under the old system, according to the city government. The new, faster route will likely encourage business creation, said Professor Letícia Menegon, the coordinator of the Center for Development and Entrepreneurship at the Superior School of Advertising and Marketing (ESPM) in São Paulo.

“This can have a significant impact,” Menegon said of Empreenda Fácil. “We’re beginning to shape up to the international standard.”

In this first phase, the program is processing only applications involving businesses that do not require specific licensing. These make up about 80 percent of enterprises in São Paulo. The second phase will include businesses that require extra layers of scrutiny and approval, like hospitals. The third phase will speed up the process for closing businesses. The long-term goal is for an entrepreneur to take no more than two days to open a business.

Automation is key to the program’s success, said Márcio Shimomoto, the president of the São Paulo accountants’ union, SESCON. Because starting a business is so cumbersome, entrepreneurs like Sasso often hire accountants to manage the process.

“In Brazil, every time you depend on a civil servant for something, it’s going to take a long time,” said Shimomoto. “If you do it on the internet, you take out a significant wait time.”

The program is one of several rolled out by São Paulo’s mayor, the businessman-turned-politician João Doria. The entrepreneur ran on the promise he’d manage the city like a business. Many hope that his political ascent will bring long-needed reforms and reduce the custo Brasil, or Brazil cost – a common expression referring to the high operational costs of doing business in Brazil due to bureaucracy.

Empreenda Fácil is an important part of delivering on that promise.

“This modernization gives the city international visibility,” Doria said at a press conference, adding that São Paulo’s efforts to reduce bureaucracy would likely improve Brazil’s “Doing Business” ranking.

Many voters are convinced. Despite facing serious criticism for painting over the city’s signature street art and violently removing homeless drug users in a part of the city known at Cracolândia, Doria is popular among São Paulo residents, and his pro-business stance has earned national recognition. He also benefits from being a fresh face in Brazilian politics, which in recent years has been turned upside-down by a corruption investigation that’s left almost no established politicians with clean hands.

Just six months into his first term in elected office, he’s already cast in some quarters as the next president of Brazil. His political outsider status helps, Menegon said.

“I believe Doria can pull off these reforms because he’s not beholden to anyone,” Menegon said, referring to his position as a political outsider. “This allows him to put his foot down about necessary changes.”

But making São Paulo and Brazil more business friendly will take more than cutting red tape, Menegon explained. Small businesses are at a financial disadvantage: They lack access to capital, even as Brazil’s development bank, BNDES, serves the interests of large companies with political connections. Then there’s the judicial uncertainty that results from judges who give inconsistent interpretations of the law. Those are significant structural obstacles that would require extensive reforms that no one – including Doria – is ready to undertake yet.

Still, Empreenda Fácil is an important step, both for getting businesses off the ground faster and for sending a message to investors that the environment is shifting and São Paulo is becoming a better, safer place to invest.

“The Brazil cost is a massive iceberg. Reducing bureaucracy in opening a business is just the tip of that iceberg,” Menegon said. “But you have to start somewhere.”

And this is a good start, said software developer Rodrigo Galhardo. When he started an IT business in 2011, the process was “arduous and costly,” he said. There were multiple trips to the notary and several snags within the bureaucratic machinery – first, his business address could not be the same as his home address; then, his company name was too short and too similar to an existing company’s. In the end, opening a business cost him 2,000 reais ($600) and took three months.

“With the way this process used to be, I’m not sure I would open another business,” he said, explaining he could do his work as a freelancer instead.

Sasso’s case, under the program, took about 30 days – weeks longer than the program’s promise, but months shorter than was the rule.

And things are getting better. São Paulo Secretary of Innovation and Technology is working with entrepreneurs and groups like the accountant’s union to identify areas for improvements so all applications can be processed within the seven-day deadline. A São Paulo-based accounting firm, TMS Information Solutions, confirmed they’ve opened businesses in 48 hours under Empreenda Fácil.

“I usually proceed with caution when I hear government promises,” said Sasso. “But it was much quicker than I expected. It was a relief.”

He’s now got a schedule full of clients – and plans to expand soon.

Kaiser is a journalist based in Brazil

Tags: Brazil, Entrepreneurship
Like what you've read? Subscribe to AQ for more.
Any opinions expressed in this piece do not necessarily reflect those of Americas Quarterly or its publishers.
Sign up for our free newsletter