Discusses the legal requirements for selling to the host government, including whether the government has agreed to abide by the WTO Government Procurement Agreement or is a party to a government procurement chapter in a U.S. FTA. Specifies areas where there are opportunities.
According to the GOB procurement law (8,666), price is the overriding factor in selecting suppliers and the GOB may not make a distinction between domestic and foreign-owned companies during the tendering process. When two equally qualified vendors are considered, the law’s implementing regulations provide a preference to Brazilian goods and services.
In most cases, to sell to the GOB, one must have a local presence or partner to participate in the bidding process. Just as in other countries, the selection of an agent requires careful consideration. Brazil permits foreign companies with established legal entities in Brazil to compete for procurement financed by multilateral development bank loans.
In several cases, those wanting to sell goods or services to the government of Brazil (GOB) should be registered and approved as official suppliers. Some exceptions and different rules may apply based on the specific characteristics of a given industry. Sector-specific information can be found within the industry chapters that follow.
Brazil is not a member to the WTO GPA 1994, which prescribes a common framework for government procurement, nor is it a party to a free trade agreement with the United States. As such, in public procurements, Brazil offers “margins of preference” whereby companies offering domestically produced goods are awarded contracts even if the cost of their goods are higher than those offered by producers of goods made outside Brazil. “Margins of preference” vary by product and cannot exceed 25 percent; therefore, it is very important for U.S. businesses to understand the specific details and procedures of Brazilian legislation when bidding on public tenders in Brazil.
Law 8,666/93 alsoestablishes the general rules for public tenders and administrative contracts regarding public works, services, purchases and leases. There are five types of bidding procedures under the law: competitive bidding, request for quotation, invitation to bid, contest bidding and auction.
Foreign companies that do not operate in Brazil must, as much as possible, fulfill 8,666 requirements by submitting equivalent documents certified by the Brazilian Consulates in the U.S. and translated by certified public translators. Additionally, foreign companies must have a legal representative in Brazil with power of attorney to respond administratively and judicially.
Winning bids in Brazil are chosen based on one of the three principles: lowest price, best technology or a combination of both. The determining principle(s) will be established in advance of the bid. In the case of a tie between bidders in identical conditions, preference will be given, successively to goods and services that are produced or rendered by businesses incorporated in Brazil; produced in Brazil; or produced or provided by companies that invest in research and technology development in Brazil.
Including Brazilian goods and services in your company's bid, or subcontracting with a Brazilian firm, may improve your company’s chance for success. Similarly, a financing proposal for the project that includes credit for the purchase of local goods and services will be more attractive. Where appropriate, bids should include presentations on financing, engineering, equipment capabilities, training and after-sale service that will originate and be carried out within Brazil.
According to the Brazilian Constitution of 1988, the federal government has exclusive power to legislate and establish general rules for all types of public tenders and contracts carried out by government agencies, federal bodies, states, federal districts, public enterprises and corporations, and municipalities. The most important public procurement statutes today in Brazil are:
- Law 8,666/93: Set general bidding rules for procedures and government contracts.
- Law 8,987/95: Cover rules that delegate the provision of public services to private sector companies through permissions and concessions (Concessions Law).
- Law 9,478/97: Determine that goods and services acquisition contracts by the government-controlled petroleum company, Petrobras, must be processed using a simplified tender process for which only prequalified vendors are eligible. Law 9,478/97 is regulated by Decree 2,745/98.
- Law 10,176/01: Outline computers and automation purchase rules for either the form of goods or services, computer software, specific digital electronic equipment or telecommunications equipment.
- Law 10,520/02: Establishe rules on reverse auctions where government contracts are offered online to the lowest bidder (Pregão Law).
- Law 11,079/03: Govern rules for Public Private Partnerships (PPP) law.
- Law 12,349/10: Establish the “Margins of Preference” guidelines. A product decree is released for each granted by the government as a “margin of preference”. Each decree has an expiration date.
- Law 12,598/12: Set special public procurement rules for defense products.
Many governments finance public works projects through borrowing from Multilateral Development Banks. Please refer to Project Financing section in the Trade and Project Financing chapter for more information.