Public Affairs in Brazil
The Council recently hosted Carlos Eduardo Lins da Silva, director and partner at PATRI Public Affairs, and Carolina Lessa, director of government affairs for Latin America with the RELX Group, for a discussion of the current economic and political challenges in Brazil, and how foreign companies can adjust their public affairs strategies accordingly. Here are some of the key takeaways:
Current State of Affairs
Politics: Brazil is going through a difficult period of political turmoil, a fact made most evident by impeachment proceedings against the country’s president, Dilma Rousseff. While there is still a great deal of uncertainty about the final outcome, several factors make the current business environment particularly challenging:
Change is a constant: A change in a key government post at the top can start a chain reaction of other appointment and personnel reshuffling. Often, new appointees lack the necessary technical background to successfully delegate in their new ministry or regarding their new subject area.
Change is slow: With impeachment proceedings dominating the political landscape until at least May (and possibly through the end of 2016), stakeholders and businesses can expect little movement on other policy issues. This stagnation will be made worse by the country’s traditionally slow bureaucratic proceedings, where multiple parties vie for opposing priorities, and even Supreme Court-level decisions can be appealed.
State of disunion: Government has little control over Congress. Furthermore, party politics do not play an important role in Brazilian politics, as over 80 percent of voters do not identify with any particular party, and any one party’s popularity tends to be fleeting.
Economy: Brazil is currently experiencing the worst recession in its history, with economic difficulties further exacerbated by political paralysis. Some statistics and predictions to keep in mind when considering Brazil’s economic state:
Budgets are shrinking: The economic crisis is hurting everyone — even regions like the northeast of the country, which has experienced significant economic growth over the last 15 years. Tax rates will likely increase because there are no more budget cuts to be made at the federal or local government levels.
Risk of social unrest: Unemployment is at an all-time high of 13 percent. While Brazil does not have a significant tradition of social unrest, growing unemployment increases the chance of discontent among the population, especially youth for whom unemployment has reached over 20 percent.
Business will be slow: Few public and private sector figures are willing to make risky decisions, as it is hard to predict where new priorities will fall if the administration undergoes significant changes. Because no specific sector or industry has been blamed for driving the crisis, businesses must be patient as the government works to address the current economic issues.
Finding Opportunity in Crisis
Although these economic and political challenges make the Brazilian business environment more difficult to navigate, there are positive aspects to the crises public affairs professionals can take advantage of:
Less corruption: A reduction in interventionist policies and less government participation in economic directives could decrease the potential for corruption in both public and private sectors. While a certain degree of corruption will likely persist, many dishonest businessmen are now in jail, and the fear of reprisal is growing. The public prosecutor’s office, which successfully functions independently from the other three branches of government, has added much needed credibility to the country’s judicial system, and fewer firms are willing to take the risks now associated with white-collar crime.
Less protectionism: Brazil can no longer afford to implement protectionist trade policies at the risk of limiting the country’s economic development opportunities. Shrinking government budgets also present an opportunity for increased corporate engagement — especially for businesses that may be able to save the government money through their service offerings.
Better local relationships: Brazil is still a cheap place to do business, and foreign direct investment rates remain high. Continuing operations and production at the local level can demonstrate a company or organization’s commitment to the Brazilian market and help strengthen the government-private sector relationship in the long run — especially for foreign companies.
“Silver linings”: Several companies, including beer producers and nutrition supplement developers, have used the Zika crisis as an opportunity to build a better relationship with Brazil’s Health Ministry. While these parties do not often engage with each other, the ministry has been more open to outside help and the companies have been able to improve their public image by distributing materials on what consumers can do to prevent the spread of the virus.
Emergence of multi-stakeholder engagement model: Recent policy discussions about privacy, biodiversity, Internet infrastructure and the National Science Code were successful due to stakeholders having an equal voice in the debate. While this dynamic can initially appear to be disorganized, it creates an environment that is more open for discussion, provides an opportunity to engage subject-matter experts and encourages active listening and participation by diverse parties.
Tips and Best Practices
Indirect communication is key: Don’t be overly direct in what you want out of a business meeting. Take time to build personal relationships through small talk and common acquaintances, while slowly building up to the issues at hand. Implementing a bottom-up strategy when fostering relationships with policymakers may be more beneficial than starting at the top, as those lower in the ranks are more likely to remain in their positions for longer.
Know your market: While Brazil is made up of numerous ethnicities, the country is unified by a one language and one culture. Differentiation occurs more on a state-by-state basis, and various perspectives are formed by opportunities to travel or receive their education abroad. Unlike São Paulo and Rio de Janeiro, seeking engagement and transparency in less developed regions is more of a leap of faith. And when it comes to the local level in particular, doing your due diligence cannot be stressed enough.
Know your limitations: Hire local counsel to help you craft your public affairs strategy, and read between the lines of cultural nuances and misunderstandings. When discussing issues of regional and national importance, having someone on the ground working on your behalf is essential for creating a sense of continuity and a commitment to long-term relationships. Contract with locals when conducting due diligence, as a foreign-based service is unlikely to know where to look for “skeletons” related to tax evasion, labor violations and other scandals.
Monitor the regulations: Brazil’s regulatory environment is likely to change in the coming months. For example, the Petrobras scandal will likely lead to the oil and gas sector opening up to new competition. Knowing when these changes will occur is key to having a strategy that responds accordingly and in a timely manner.
Manage your expectations: It is unreasonable to expect 7- or 8-percent annual economic growth. While the current recession should not be seen as the “new normal,” you’re unlikely to see 2- or 3-percent growth any earlier than 2018.
Engage multiple channels: While lobbyists have a bad reputation across the board in Brazil, there are a number of other channels, digital and personal, that public affairs professionals can tap into to make their Brazilian strategy more effective:
- Use soft issues to build relationships by finding supporters and working through international organizations and NGOs.
- Mobilization through social media represents an opportunity to create a version of the multi-stakeholder model. Digital advocacy will likely become more prominent as social media usage rates in Brazil continue to grow exponentially.
- The Brazil-US Business Council, Brazilian Embassy, Chamber of Commerce, the Brazil Institute at the Woodrow Wilson Center and the Brazil Industries Coalition are excellent avenues for engaging with influencers in country. Think tanks and associations are also growing in effectiveness in terms of engaging with experts, as well as key Brazilian figures visiting Washington.