Covid-19 pandemic and its impact on Brazil’s compliance landscape

Back to Anti-Corruption Committee publications >>

Leopoldo Pagotto
Freitas Leite, São Paulo
pagotto@freitasleite.com.br

Eric Nakahara
Freitas Leite, São Paulo
enakahara@freitasleite.com.br

Covid-19 has dramatically transformed the world in just a couple of months. The facts are reasonably similar everywhere: market collapse due to negative economic prospects; unemployment growth; and many companies are at risk of bankruptcy. Brazil is no exception and is attempting to amend its regulations to respond more effectively to the virus threat.

However, some of these changes could have a massive impact on the anti-corruption legal framework. Public procurement, donations, anti-corruption legislation and transparency are the main topics of interest which would be affected. On top of these amendments, it is worth mentioning the resignation of Judge Moro.

Public procurement

The first piece of Covid-19-related legislation, known as the ‘Coronavirus Law’ (Law No 13,979/2020), was published on 6 February 2020. Among other measures, the rules for procurement were streamlined to allow a more rapid response and provide supplies as quickly as the crisis demands.

In the face of Covid-19’s harsh consequences, the Coronavirus Law was amended by the Provisional Measure No 926/2020 on 20 March 2020 to expand the applicability of its provision on public procurement procedures. Not only does the amended Coronavirus Law allow for the expedited acquisition of health-related inputs, it also extends this rule to any product or service necessary to deal with the crisis: no lengthy public biddings are required in view of the emergency. Moreover, it dismisses the requirement to present certain tax and labour certificates, and authorises contracts with companies declared ineligible or suspended from contracting with government, if they are the only suppliers of certain goods or services. In some cases, it is even possible for the public entities not to perform a price survey before entering into an agreement.

While the measures may be welcomed, there have been several instances of allegations of over-pricing and fraud in contracts signed under the legal exceptions of Coronavirus Law.

Donations

Donations of goods and services by private entities or individuals were also regulated by a decree, dated 6 April 2020. The decree clarifies the rules and proceedings for the federal government to receive donations bound to non-financial obligations toward the donor. If the goods or services are being donated by a company and it is bound to an obligation, a Donation Agreement, entered by a governmental branch, must be signed.

Anti-corruption legislation

The Covid-19 pandemic also brought changes to the anti-corruption legislation. The Provisional Measure No 928/2020, published on 23 March 2020, provides that limitation periods in administrative and sanctions proceedings against individuals and private entities under the Brazil’s Anti-corruption Law are suspended during the state of emergency.

Transparency

Changes were also made to the rules on access to information. Article 6-B of Provisional Measure No 928/2020 tentatively states that deadlines to address requests to access information would be suspended for governmental bodies or agencies in which officials were subject to quarantine, tele-working or equivalent measures. However, Brazil’s Supreme Court suspended the application of Article 6-B, arguing that it interfered with the constitutional right to access information.

Resignation of Judge Moro as Minister of Justice

The Minister of Justice, Sergio Moro, resigned on 24 April 2020. Moro was a former judge, who gained notoriety for leading the investigations into the ‘Car Wash’ corruption scandal and sentencing rich businessmen and influential politicians such as former President Lula, to prison. Moro stated that he resigned essentially because President Bolsonaro wanted to change the head of the Federal Police without justification.

Conclusion

Brazil’s ethics and anti-corruption framework is changing because of Covid-19, either through direct government action or political issues.

A more flexible approach in public procurement may increase the risk from an anti-corruption compliance perspective. Companies should take action to mitigate these risks to avoid legal issues in the future, including by making sure that the public entities they intend to do business with have formally complied with the proceedings related to the public biddings.

Compliance departments should be able to design new procedures for entering into emergency contracts, considering among other topics: prices set by the authorities; whether the object of the agreement seems suitable to meet the emergency situation described; and transparency of the procedure. Acting together with public bodies in such a delicate context is risky not only because procedures are not as strict as before, but also due to the potential to affect public opinion severely.

Back to Anti-Corruption Committee publications >>