In Brazil, it is historically very difficult to start a business there. The World Bank ranks it 120th out of 183 countries in terms of how easy it is to set up a business there. It's difficult due to legal restrictions that you must have two partners to form a limited-liability company, and have someone you know bear the financial costs of the start-up-- no bank loans.
However, a new law was passed in Brazil, where a single person can start a single-holder limited liability firm, with a capital requirement of $35,250. There will be some challenges along the way, such as the implementation of the law and the transition period it may take; as well as potential hostility against foreigners who will try to enter the market.
Overall, I am curious to find out the implications this law will have on Brazil's economy, with more firms entering the market and perhaps raising overall GDP for their country. Only time will tell.
http://www.economist.com/node/21543210
6 comments:
It will be interesting to see the increase in businesses started in Brazil with the new, yet still difficult environment. I think there will be a slight increase as only some people will be successful with the easier, yet still tough road ahead.
I believe that business start-ups will increase in Brazil because of this new law. I am curious as to how much it will increase.
I think business start-ups will increase due to this law, but it is likely that a large portion of these start-up businesses will fail. Due to restrictions in the country, existing laws, cultural/language barriers, and other factors, foreign entrepreneurs will have a harder time sustaining a successful business in this environment. However, this new law should give a temporary boost to the economy and local market system. Byproducts of this law, such as decline or rise in consumer demand, will have to also be monitored to determine whether this will have a positive impact on the economy.
Again I agree with Rachel that there will be many more starts up but a high percentage of them will fail and fail pretty quickly. However, this law will create greater competition, lower prices, and the invisible hand will leave only the strongest companies, with the good or service that the people are willing to pay for.
I'd agree with the above posts that it will be interesting to see how the increases will occur. I do think though that the capital requirement of over $35,000 is not feasible for small business owners and will certainly deter those interested in the venture. It will be interesting as well to see if foreign businesses can find citizens to act as powers of attorney to break into the field.
I found it interesting that the no reason was given by the government for this change. Perhaps this is in response to the 2016 Olympic Games and the government hopes that the combination of this law and the increased international attention will bring in capital. Brazil has become more and more prominent in recent years and may be trying to boost its economy (and political presence) even more.
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