Brazil at last embraces WTO Agreement on Government Procurement
Nakagawa Baptista & Baptista Attorneys at Law
São Paulo, SP, Brazil – February 11, 2020
In line with the Brazilian interest in joining the Organization for Economic Cooperation and Development (OECD), on January 23 Brazilian President Jair Bolsonaro announced that Brazil would start procedures to implement the Government Procurement Agreement (GPA) of the World Trade Organization into domestic law. An OECD recommendation, the GPA fosters transparency and simplifies procedures to increase procurement undertakings among OECD member states.
The Brazilian Procurement Act (Law no. 8,666/93) does not formally forbid foreign companies from participating in domestic tenders. However, a series of relatively stringent and indirect requirements may apply to foreign participants. The wording of the BPA itself betrays this ambivalent approach: while article 3(§1) states there will not be any discrimination on the account of nationality. However:
- Article 28(V) of the BPA requires that a company be incorporated in Brazil, or to obtain special authorization to operate in Brazil as a condition to qualify for procurement.
- Article 33(§1) stipulates that leadership should always belong to the Brazilian counterpart in alliances (“consórcios”) with foreign companies.
- Finally, the BPA makes references to other legal texts whose interpretation should not be taken for granted, as they may also prioritize Brazilian-based services and technology.
Underneath the Brazilian blanket of regulations, state or federal agencies set up a series of rules, which for the most part require require foreign parties to set up a Brazilian branch before engaging with local investments. Despite this complexity, the Brazilian market for government procurement has a high potential, especially in the education, infrastructure, and defence and security sectors.
While a future internalisation of the GPA signals a commitment to the global integration and competition of open markets – where non-discrimination against foreign suppliers is the rule – there are still relevant regulatory caveats to consider. Sectors such as public health or national security may be subject to exceptions and further control by government agencies.