3 Tips About Debt Recovery in Brazil

02-10-2018
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Author:
Maria Marquezini Cará
2 min.

Over the past few years, Brazil's economy has grown into world's eighth-largest by both nominal GDP and GDP (PPP). This rapid growth, and the opportunities it created, has led to a lot of international cooperation between Brazil and the EU and business to business (B2B) dealings have increased.

While the B2B payment habits inside Brazil are largely healthy, international business deals don’t enjoy the same level of security. This is partly because the Brazilian Real has recently depreciated in value.

If you’re in business with a Brazilian customer who isn’t paying invoices, you are likely heading towards debt collection.

In some countries, like The Netherlands, the judicial process of debt collection is relatively inexpensive and judgments can be quickly attained. Unfortunately, legal action in Brazil can be both long and expensive. This means amicable agreements and specialist collection methods are often the most efficient way to recover debt.

1. Avoid Debt Recovery in Brazil

This might sound a little obvious, but in some cases debt recovery action can be completely avoided. You just have to lay the groundwork.

  • Do research on the company you want to do business with. Look into financial data and the company’s background.
  • Make sure the company doesn’t have any pending legal processes. Depending on the state, this information can be found on court websites.
  • Make sure you have clear, signed agreements. Your success in court hinges on written proof, supporting documentation, and signatures of both parties on all important

2. Be Ready To Compromise

Remember, if your Brazilian debtor isn’t paying what they owe you, extrajudicial proceedings are probably the best option. Try and keep things amicable and avoid going to court.  While it’s not required, there are a few things you can do to help the process along.

  • Negotiate the debt
  • Put together an installment plan
  • Provide discounts
  • Extend payment deadlines

This can be a lot of work. You’ll be sending letters, making phone calls, and trying to negotiate with your Brazilian debtor, but keep things friendly. The extrajudicial phase is where you are most likely to recover your money. Show your debtor that you are polite and professional. Also, send any demand letters by registered post so when your debtor receives it you will have a notification of receipt.

3. If Necessary, Go To Court

If the extrajudicial phase did not lead to payment, your final resort is the judicial approach.

Keep in mind, judicial proceedings in Brazil can be difficult and frustrating. The judiciary system is extremely slow and bureaucratic. Some lawsuits may take three to five years to reach a final judgment.

If you feel legal action is necessary, you will have to provide the following documents:

  • A signed contract
  • Pertinent invoices
  • Receipts
  • Correspondence, post and email
  • Proof of delivery of goods/services, etc.

Additionally, all documents have to be translated into Portuguese by a licensed translator.

Final Thoughts

There is no way to avoid all risk, but if you want to conduct business in Brazil, make sure you research your Brazilian customer thoroughly, have everything documented properly and get agreements in writing.

If you still have questions regarding debt collection in Brazil or if you have a Brazilian debtor who is not paying, get in touch with us; we will be happy to help you.