Technology in Brazil

Editor’s note: Mattos Filho, Veiga Filho, Marrey Jr. e Quiroga Advogados’ technology team is second to none in Brazil. It represents some of the most influential tech companies operating in Brazil’s gigantic and ever-changing market. The team is at the forefront of legislation changes and had a major role advising on key aspects of the country’s new data protection law (LGDP). Mattos Filho’s remarkable bench in the area includes Fabio Ferreira Kujawski, who has featured in Chambers rankings for more than 10 years, being promoted to Band 1 in the area in 2020. Kujawski has more than two decades of experience. He represented Google before the Superior Court of Justice in a case of liability of online platforms for user-generated content. He co-writes the following overview with partners Paulo Brancher and Thiago Sombra, who are also ranked by Chambers, and associate Maíra Schweling Scala.

Technology in Brazil  

The COVID-19 pandemic has impacted different sectors and industries throughout 2020 and 2021 so far, especially for technology companies. The ways that the pandemic have impacted industries have sometimes proven to be entirely expected, while in other instances they have proven to be quite the opposite. Either way, digital transformation has been spreading fast worldwide; companies that were not technology-oriented or have not been developing a consistent technological support are facing major challenges to adapt to the “new normal”, and, by contrast, startups and companies with highly innovative and technological potential have an opportunity to thrive, as they are native to the digital environment.

As a consequence of the adoption of social isolation protocols, Brazil has been experiencing considerable growth in the levels of consumption of connectivity services from the beginning of the pandemic. The number of individuals with internet access is annually growing and Brazilian consumers are embracing the e-commerce environment, which made online sales grow more than 73.88% in Brazil. Due to social distancing measures, the pandemic also led to a growing demand for on-demand at-home entertainment options, benefiting streaming platforms, which throughout 2020 consolidated their position in the country or have experienced a successful entrance in the Brazilian market. During the COVID-19 pandemic, some studies show that VoD platforms have surpassed cable TV subscriptions for the first time in Brazil, which seems to show that the pandemic will indeed have a lasting impact on consumer behaviour, especially in terms of time spent on the internet and access to new platforms/technologies.

In addition to the challenges posed by the pandemic, most of the Brazilian companies have been focusing their efforts in the adoption of compliance measures for purpose of compliance with the Brazilian Data Protection Law (Law No. 13,709/18, the “LGPD”), which came into effect in September 2020. The LGPD is the Brazilian comprehensive data protection law, which was enacted in 2018 and significantly changed the data protection system in Brazil, aligning it with the European General Data Protection Regulation. Even with the two-year period for companies to comply with the LGPD, the need for change of the culture with respect to privacy and data protection might be the biggest challenge faced by them, which has been accentuated by the lack of an active authority providing guidance during the LGPD vacatio legis. Since the enactment of the LGPD, the companies had to understand the new privacy landscape introduced by the LGPD and still have a long way to ensure that personal data is an asset belonging to individuals and shall be protected in accordance with a series of rules that must be complied with.

We have listed below the main topics currently under discussion in Brazil, which we believe have (or will have in the near future) a material impact on startups, technology companies and/or the technology they offer. For the sake of clarity, such topics may or may not have a connection with the COVID-19 pandemic.

Privacy 

Under the LGPD, the Brazilian Data Protection Authority (“ANPD”) shall issue further regulations and guidelines with respect to a range of issues that are yet to be formally defined. The ANPD was formally constituted in November 2020 and is currently setting out its regulatory priorities. In January 2021, the ANPD published its “2021-2022 Regulatory Agenda”, which establishes some issues that will be regulated by the ANPD for the next couple of years, such as providing detailed rules on: data processing carried out by startups, data subjects’ rights, criteria for administrative sanctions, international data transfer, etc.

Aligned with its regulatory agenda, in February and May 2021, the ANPD also announced two public consultations for purpose of regulating: (a) the mandatory notification of data security incidents; and (b) the supervision and criteria for administrative sanctions established by the LGPD.

Legal framework for startups and entrepreneurship 

On June 1st, 2021, the Brazilian President approved the Legal Framework for Startups and Entrepreneurship (“Framework”), which establishes a regulatory environment to stimulate the development of innovative companies, as well as creates incentives for investors of technology-based businesses, especially startups. Among the highlights, the Framework provides a definition for “startups” (i.e., a formally incorporated and tax-paying tech-based company with a history of up to six years since its registration before tax authorities and up to BRL 16 million of annual gross revenue), as well as establishing a simplified process for startups to bid for government contracts, angel investor’s rights and the possibility of creation of regulatory sandbox environments by Brazilian public authorities applicable to startups. The original version of the Framework was subject to significant changes throughout the legislative process, which has been criticized by some actors in the Brazilian startup ecosystem. Despite not addressing important issues (such as tax and labour-related measures), the Framework was overall welcomed by industry players, as it puts startups in the spotlight in Brazil.

Brazilian strategy for AI 

In April 2021, the Ministry of Science, Technology and Innovation published the “Brazilian Strategy for AI”, which will serve as a basis for the development of AI regulation in Brazil at a Federal level. In general, the main goal of the Strategy seems to be balance ethical use of the technology while boosting research and innovation in the AI sector. The Strategy aims to reap the benefits of AI while curbing its potential harms, by means of establishing six objectives, as follows: develop ethical principles that will guide a responsible use of AI, remove barriers to innovation, foster collaboration between researchers and public and private sectors, develop AI skills, stimulate investment in technologies, and spread Brazilian tech overseas. We believe that this was the greatest initiative developed by the Brazilian Government to encourage entrepreneurship in the AI sector.

Online contracts 

In recent months, there has been a resumption of the legal debate on the possibility of contracting in electronic media, without a physical support. As a rule, online contracts are permitted by Brazilian laws, provided that (a) the law does not require any other specific form, (b) the manifestation of the party’s will is unequivocal, and (c) the integrity, authenticity and validity of the contract can be demonstrated.

Because of the adoption of social distancing measures to prevent the spread of the COVID-19 pandemic, the execution of contracts by electronic/digital media became a necessity, rather than a convenience. In this scenario, we have noticed a proliferation of laws and regulations in the last months to: change some processes that require the formalization of documents by means of wet signatures, create new categories of electronic/digital signatures to be adopted in the interaction with and between public entities, as well as establishment of new requirements for purposes of formalization of documents in electronic/digital means both by public and private entities. Some of these laws and regulations were passed at a rapid pace and could be enacted without a thorough analysis of the prior laws, regulations and court precedents on the matter. It is important to monitor the way such legal framework on electronic contracts will coexist and will be applied in Brazil. 

Freedom of speech on digital platforms 

The legal debate in Brazil regarding content moderation by platforms has become central, especially in the current age of fake news. The Bill 2,630/2020 (also known as “fake news bill”) is currently under analysis by the Brazilian National Congress and its goal is to prevent the dissemination of disinformation on the internet. Because it establishes some controversial measures for combating disinformation and increasing transparency on the internet, the Bill has been fiercely debated in Brazil by different players.

The discussion around content moderation is complex and one of the aspects that stands out is the conflict between users' privacy and freedom of expression. Under Article 19 of the Brazilian Internet Act, internet service providers (ISPs) are only held liable if they fail to remove third-party content after receiving a valid court order. The legal discussion about whether content regulation should be the responsibility of the courts or of the platforms themselves may impact the entire business model of companies providing online content, who, if responsible, would have to take on the role of regulators. The Supreme Federal Court is about to judge the constitutionality of Article 19 of the Brazilian Internet Act, which should be a landmark decision in defining the business models to be adopted by companies providing online content.

5G technology 

In February 2021, the Brazilian Telecommunications Agency (“Anatel”) approved the draft bid notice for the fifth and latest generation of mobile connectivity in Brazil (5G technology). 5G technology has the power to revolutionize both the way that people relate to each other and how devices connect and foster the creation of an environment for innovation, social and economic development. The rollout of 5G technology will be made possible via a wide range of radio frequency spectrum bands, to be auctioned by Anatel. The draft of the 5G bid notice was submitted for analysis by the Federal Audit Court. Upon approval, Anatel will then be responsible for conducting the bidding process, which Anatel expects to occur in the second half of 2021.