Pedro Innecco

I recently read an article on the FT entitled “Surfing a big wave of confidence” (FT, 08/Jul/2008) about Brazil’s privileged position in facing what seems to be a global economic crisis. In this article Lapper and Wheatley mentions the growth in Brazil’s home market, the successful results of 15 years of economic reforms, the attraction of foreign investments and the transformation being experienced by society as “income rises and inequality falls”.

However, the authors also righteously assert that Brazil is not yet a superpower and that there is yet a lot to be done – particularly with regards to the public sector, infrastructure and the bureaucracy faced by organisations. This is the last bit I would like to stir some thoughts about.

I do think massive reforms are needed in regards to corporate legislation. But while Brazil should look around and learn from the experience of other successful economies in what to do, I think it is mostly important to learn what not to do. Let me develop on this thought.

I’ve been living in Europe for over eight years, and I have noticed organisations doing things in here that they simply wouldn’t get their way with in Brazil, particularly with regards to employment laws and consumer rights. What I mean is that although Brazil has problems, they can get much worse if Brazil just open its market to foreign investments by simulating other economies, without taking into considerations the singularities of the Brazilian market.

In the Canadian documentary “The Corporation“, a psychological profile is drawn upon American corporations as if they where physical human beings. Following this premise, the documentary illustrates how organisations tend to display a psychotic and egocentric profile. The documentary asserts that the main issue with corporate legislation in the USA is that it allow organisations to act like individuals within the constitution, whilst there is no single individual that could be taken into account for all the actions perpetrated by the organisation. The bottom line is: who is the culprit when an organisation crosses the line of ethical behaviour? Now imagine a country like Brazil with all the problems it still has to overcome, full of psychotic organisations.

Well in Brazil companies are also seen as individuals. You have pessoa física and pessoa jurídica (i.e.: physical individual and juridical individual). But there are also strong laws with regards to consumer rights and employment rights, and having lived abroad for over fourteen years and being a constant traveller interested in foreign markets, I am yet to see legislations on these matters that would match those of Brazil’s. Foreign companies really find a hard time in Brazil when trying to implement some of its questionable domestic practices. I always giggled when I read on Brazilian newspapers that yet another European telecom got its ears pulled by the Brazilian ombudsman due to some of their shenanigans, like trying to penalise customers for switching mobile networks.

I the UK, I have seen two page employment contracts, in which employees would be bound by a dozen pages “employee handbook”. This often means organisations can change the contents of their “employee handbook” from time to time and the employees are automatically subjected to its terms by proxy. I have even seen extreme example of an employee handbook attempting to override the laws of the land, in whicn an organisation was cheeky enough to put a clause in its employee handbook which stated that “if a crime was committed within the organisation premises, employees were forbidden to inform the police and they should inform a member of the board instead”.

What I also love in the UK is the fixed term contracts that state that the given organisation can change the terms of its contract at any time they want without prior notice. Picture this: You sign a contract for a TV subscription service for a period of twelve months. Months after you signed the contract, the service provider decides to raise its prices in 25 percent. You can’t get out because you are bound on the terms of the original contract. In Brazil, as soon as the organisation makes a change in the contract to which customers disagree, customers would be able to pull out of the fixed-term. In the UK, you would have to go to court in order to prove your rights.

So I DO think reforms in company legislation is a must for the Brazilian economy. But as chaotic and crazy it can be for a foreign company to establish itself in Brazil nowadays, in a (not so perfect and totally incidental) way this Babel tower of bureaucracy has kept the country safe from being on the mercy of corporatism — We have enough problems already!