Demystifying the Brazilian crisis with Brazilian insolvency expert Thomas Benes Felsberg

Last June 26, we had the pleasure of hosting a round table event looking at the opportunities that the Brazilian crisis might provide for foreign investors.

A chat with founding partner of the 47 year-old Brazilian law firm Felsberg Advogados, Thomas Benes Felsberg, helped us understand how, despite the grim picture, Brazil today represents a unique opportunity for wise and well prepared foreign investors with a strategic outlook to enter the Brazilian market or expand their local presence.

The discovery of a range of related white collar crimes in Brazil has led to the highlighting and screening of maybe the biggest bribery and corruption scheme in Latin American – if not global - history. Supposedly ‘invincible’ Brazilian conglomerates have billions to pay in fines, and their directors are in jail for paying for favors from politicians of all parties. Such a cathartic process is proving to be painful both politically and economically, but it is having a positive effect. Indeed, in a country where legal security takes precedence over unfair competition and informal practices, compliance-conscious foreign investors have better chances to compete.

Furthermore, the current economic and social constellation means that the chances for a sustainable entrance into markets which have been virtually closed for foreign companies, such as the construction business, become more realistic.

Mr. Felsberg also stressed that an important tool for the recovery of the economy is the reform of the Insolvency Law, which was enacted in 2005. Mr. Felsberg himself is the sole practitioner appointed to the work group which is contributing to a bill that may be shortly submitted to the Brazilian Congress. Among the items contained in the proposed reform is the provision for a fast track reorganization proceeding, enabling such a proceeding to be more efficient than it currently is. Another proposal concerns the possibility for a reorganization plan to be also proposed not only by the debtor but also by the creditors, a measure that would enable reorganization proceedings to become more effective. 

Anneliese Moritz
Latin America Desk
Friedrich Graf von Westphalen & Partner mbB