EuroFinance

Operating within Brazil’s intricate regulatory environment presents significant challenges for businesses. With many regulatory bodies and a complex tax system, managing compliance in Brazil requires careful navigation. The country’s tax system is often cited as one of the most convoluted globally, adding another layer of complexity for financial leaders. At the 2024 EuroFinance Global Treasury Americas Miami Conference, industry experts emphasised that managing treasury activities in compliance with applicable laws and regulations is a crucial responsibility.

Leandro Wendt, CFO at Agricola Alvorada, a company that provides agriculture-related services, sheds light on these challenges, noting, “Brazil has the most complex tax system in the world. You need dedicated teams and legal advisors to stay up to date with regulations.” Agricola Alvorada, operating across various states, faces numerous complexities related to interstate sales and import regulations. Wendt emphasised the need for a well-coordinated approach involving specialised teams and advisors to manage these complexities effectively.

The role of technology and internal controls

Effective management of compliance in Brazil often hinges on leveraging technology and robust internal controls. At Agricola Alvorada, Wendt highlighted the use of technology to streamline operations. The company employs credit engines and compliance robots to enhance productivity and manage credit assessments efficiently. This technological approach helps minimise manual processing and improve compliance management.

Fabiano Faustino, former CFO at Unimed Uberlândia, emphasises the importance of integrating technology with Enterprise Resource Planning (ERP) systems for effective compliance management. “While ERPs are crucial, they often need to be complemented by additional systems for tax compliance,” Faustino noted. He advises investing in both technology and internal training to stay updated with regulatory changes, stressing that “the ERP usually is the main system, but there is a necessity to complement it with other systems.”

External compliance challenges

Managing external compliance is particularly challenging in a region where regulations are frequently updated and vary by location. Cesar Falla Olivo, corporate treasurer and finance manager at Grupo Gloria, a company primarily involved in the food and beverage industry described the difficulties of operating across multiple Latin American countries. “Each country has its own restrictive laws, and changes occur frequently,” Cesar Falla Olivo explained. Grupo Gloria’s operations in eight countries require constant communication with legal and accounting departments to navigate these diverse regulatory environments effectively.

Wendt concurs, highlighting that external compliance issues often pose more significant challenges than internal ones. “External worries me more because fines or mistakes often become apparent only after a delay,” he says. This sentiment underscores the importance of having a proactive and well-trained team to manage external compliance challenges.

Navigating retroactive changes

One unique aspect of Brazil’s regulatory environment is the potential for retroactive changes in tax laws. This adds complexity to compliance, as businesses must address both current and historical regulatory issues.

“The past can change, they can do retroactive stuff. I think you need to strengthen your internal controls, train your team, focus on leadership, be aware, be up to date to the most that you can hire or partner with”, Wendt said.

Wendt emphasised the need for strengthening internal controls and continuously training teams to handle these challenges. “You need to be vigilant, keep your team updated, and work closely with knowledgeable stakeholders,” Wendt advised. He acknowledged that there is no simple solution, but a strong internal controls system and routine updates can help manage these complexities.

Faustino recommended investing in internal training and technology to track regulatory changes effectively. “It’s essential to stay informed and ensure your team is well-trained to handle new regulations,” he said. While consultancy and legal support are valuable, the ultimate responsibility for compliance rests with the company.

Olivo underscored the importance of comprehensive record-keeping and continuous training to manage retroactive changes. “You need to track everything in your system and keep your team trained to handle new laws and prove compliance with historical data,” he advises. This approach helps ensure that businesses can adapt to new regulations while maintaining accurate records of past compliance.

Continuous improvement and adaptation

Managing compliance in Brazil requires a multifaceted approach that includes dedicated teams, advanced technology, and proactive internal controls. Leandro Wendt’s approach at Agricola Alvorada reflects a commitment to navigating Brazil’s complex tax system through the use of technology and specialised advisors. Similarly, Fabiano Faustino’s emphasis on internal training and technology at Unimed Uberlândia highlights the need for constant vigilance and adaptation to changing regulations. Cesar Falla Olivo’s experience at Grupo Gloria illustrates the challenges of managing compliance across multiple countries and the importance of continuous communication and adaptation.

As Brazil’s regulatory environment continues to evolve, businesses must remain agile and well-prepared to address both current and future compliance challenges. By investing in technology, training, and strong internal controls, companies can better navigate the complexities of Brazil’s regulatory landscape and ensure long-term success.