Economic Freedom Act Reduces Government Intervention In The Brazilian Economy

On September 20, 2019, the Brazilian Federal Government enacted the Federal Law No. 13,874 (Economic Freedom Act), establishing the Declaration of Economic Freedom Rights. The Economic Freedom Act is a result of the conversion of Provisional Measure No. 881, of April 30, 2019, originally enacted with the aim of reducing government intervention in business activity.

The Economic Freedom Act intends to stimulate the economic activity through the reduction of Government intervention in the private activity and it is guided by the following principles: (i) freedom as a guarantee in the exercise of economic activities; (ii) good faith of the private party when dealing with the Government; (iii) the subsidiary and exceptional intervention of the Government in the exercise of economic activities; and (iv) the recognition of the vulnerability of the private party in face of the Government.

Please see below a brief summary of the main innovations introduced by the Economic Freedom Act. Considering its relevance, some of the matters listed below will be further analyzed in specific newsletters to be eventually published.

The Declaration of the Economic Freedom Rights

The Declaration of the Economic Freedom Rights (DEFR) establishes rules and principles to assure protection to the free initiative and the free exercise of economic activity. It also deals with the Government activity in its capacity of regulating, according to the provisions of the Brazilian Federal Constitution.

In agreement with the DEFR, all entities or individuals have the right to develop low risk economic activities, exclusively through private assets - either owned or legally used from third parties, without the need of any Government approval for liberation of the economic activity.

DEFR also brings significant innovation when it establishes that it is the right of any person, either entities or individuals, essential for the development and economic growth of the country:

isonomic treatment of public administration bodies regarding the exercise of acts of liberation of economic activity, which will be bound by the same interpretation criteria adopted in previous similar administrative decisions; ensuring that any deeds settled in corporate legal business agreements will take precedence over public policy rules, with some specific exceptions; the assurance that, in requests for public acts of liberation of economic activity, the private individual will receive, after the instruction of the process, an express deadline for the analysis of the request, meaning the silence of the authority after such deadline will imply in tacit approval of the request, subject to certain hypotheses; prohibition of demanding abusive compensatory or mitigating measures that distort its function and are not reasonable or proportionate, when performing impact studies or other releases of economic activities under urban law. Free Initiative Guarantees

With regard to public administration, the Economic Freedom Act...