Problems in enforcing contracts in Brazil
In the book of Enoch (2: para.23), God affirmed: “My Word is My Deed.” In an ideal world, human beings would be as honest and integral as God and there would be no need for contracts: everyone would take the other’s Word as a solid and reliable guarantee of performance. But once we walk through the inflamed gates of the commercial world, contractual arrangements form the status quo. As a growing economic powerhouse,
Efficient contract enforcement encourages businesses to engage with new customers and new markets. Yet in
Trials can last for years; multiple appeals are common—increasing costs and uncertainty (in Brazil, 88% of commercial cases are appealed, in Argentina 13%, Peru 17%, and in Mexico 30% - World Bank 2007 figures). Recent changes in the Code of Civil Procedure set time limits on appeals and eliminate the suspension of the court process when the judicial decision is appealed before the judgment in order to introduce new evidence or call on experts (interlocutory appeals).
The Supreme Court in
Whereas US courts tend to validate “choice of law” clauses, Brazilian courts tend to favour Brazilian Law. Clearly, such a paternalistic stance undermines contractual flexibility and is arguably “anti-market” in nature. This damages the country’s international commercial appeal by increasing what economist Ronald Coase calls “transaction costs” – which are those costs incurred in the negotiation process.
Thus, as part of a larger reform package, it would probably be a good idea to set up specialized commercial courts in