A few weeks ago, the Chamber of Deputies of Brazil passed the Provisional Measure (MP) on Economic Freedom, which is supposed to be the best free market law in decades to the country. The Declaration of Economic Freedom Rights, as the MP became known, was published by the President in April, and it must be passed into law until August 27. Next, the Senate will pass the MP and the President of the National Congress will promulgate it and convert it into ordinary law.

The principles that guide the MP are: (i) presumption of freedom on the exercise of economic activities; (ii) presumption of good faith on the private entities; and (iii) subsidiary, minimum and exceptional intervention of the Government in the economy. Only these principles are enough to cause a significant change in the legal scheme of Brazil which has a long history of intervention in the economy.

On a debate promoted by the Superior Court of Justice, many speakers talked about the importance of legislate on obvious rights in Brazil. The Economic Freedom Rights is enacting into positive law some of the most obvious things ever provided by the Constitution but not respected by the Government. 

For example, under article 170: “free exercise of any economic activity is ensured to everyone, regardless of the authorization from government agencies, except in the cases set forth by law” but companies, even the smallest ones, need licenses of health surveillance, fire department, etc. The MP guarantees that any person can promote low risk economic activity, in which private property is used exclusively, without the requirement of public acts for authorizing the economic activity.

Furthermore, the MP brings important innovations; below are some examples of such provisions:

(i) freedom to set the price of products and services as a result of changes in supply and demand without restriction by any authority, except in case of emergency or public calamity situations, when so declared by a competent authority;

(ii) isonomic treatment of the public administration in relation to the exercise of acts of authorization of the economic activity, which shall be bonded to the same criteria of interpretation adopted in previous decisions;

(iii) possibility of implementation, tests and offerings, whether for free or not, of new products or services without the need of previous authorization of the public power; such procedures should be done with restricted groups on private property and may not involve restricted materials or offer risks to the public health or national security. This measure is designed especially for startups that make their initial steps; it will allow them  to validate their products or services on an experimental basis without the bureaucracy related to authorizations and licenses, for instance.

(iv) guarantee that the agreements on corporate business shall prevail over public order regulation, with some specific exceptions.

Another innovation in Brazilian law was the introduction of regulatory impact assessment in proposals for the issuance or amendments to the normative acts of the federal public administration. Those proposals must be preceded by a regulatory impact assessment that comprises a systematic process of evidence-based analysis which, following the definition of a regulatory problem, seeks to assess the possible impacts of the alternatives available to reach the intended objectives, with the purpose of guiding and supporting decision making.

Finally, the MP made changes in civil law by enacting into positive law the pacta sunt servanda brocard. This change is a consequence of a presumption of good faith between the contracting parties as expose in article 2 of the provisional measure. The new rule establishes that “in private contractual relations, the principle of minimum intervention of the State at whatever instance shall prevail, and contract review prompted other than by the parties shall be an exception to the rule.” in contrast to the legal doctrine of the country that in most cases has contracts changed by the judiciary.

The MP brings significant advances in civil, business, economic, urban and labor law with an important positive change in connection with economic activity as a whole. The result of these changes should be noticeable over the coming months.

About the Author

Vinícius Cruz

Vinícius Cruz studies management and civil engineering at Universidade Tiradentes in Sergipe. He is also local coordinator for Students for Liberty in Brazil and creator of the Instituto Aguiar, an organization to promote high school student empowerment in his hometown.

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