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Brazil¡¯s advantageous geography and strong performance in mining, power and other industries have drawn substantial international investment. However, these sectors are subject to stringent environmental regulations. Chinese companies eyeing investment or projects in these areas should thoroughly understand local environmental policies, evaluate required permits and ensure compliance.

Governing laws

Brazil¡¯s environmental licensing system, integral to its National Environmental Policy, is designed to safeguard and manage environmental resources. It was first established under the 1981 National Environmental Policy (Federal Law No. 6938/81), which has ever since mandated nationwide implementation.

In 2011, the framework was refined through Federal Supplementary Law No. 140/2011, which clarified the roles and responsibilities of different government levels in environmental licensing.

Article 10 of Brazil¡¯s National Environmental Policy, amended by the Federal Supplementary Law, mandates prior approval from government environmental agencies for the construction, installation, expansion or operation of facilities that utilise environmental resources or may cause current or future pollution.

In essence, environmental licensing in Brazil ensures comprehensive oversight of projects and activities that may possibly impact the environment, requiring compliance with environmental protection standards across planning, design, construction and operation stages.

Competent authorities

The government environmental agencies play a pivotal role in the licensing process. Under the National Environmental Policy, the federal, state and municipal authorities, along with related foundations, are tasked with safeguarding and improving environmental quality, collectively forming the National Environmental System.

The Federal Supplementary Law further defines jurisdictional standards for these authorities in environmental licensing.

1. 1. Federal level. The Brazilian Institute of Environment and Renewable Natural Resources oversees environmental licensing for activities and impacts involving federal conservation agencies, indigenous lands or multiple states.
   2. Municipal level. Local environmental agencies handle licensing for activities affecting the local environment.
   3. State level. State environmental agencies manage licensing for activities outside federal and municipal jurisdictions.

Environmental licensing, being a technical and multilateral process, often requires the responsible authority to review and incorporate non-binding input from other government bodies.

These include the Chico Mendes Institute for Biodiversity Conservation, the National Indigenous People Foundation, and the National Institute of Historic and Artistic Heritage.

Licences and authorisation

Environmental licensing in Brazil consists of three main stages, with licences issued by corresponding environmental authorities.

1. 1. Preliminary licence. This licence, to be obtained during the planning phase, approves the project site and overall framework, confirms environmental feasibility, and sets environmental protection measures for the construction phase. For activities with significant environmental impact, an environmental impact assessment and report must be submitted beforehand. Other legal requirements may also apply, such as public hearings and compensation measures.
   2. Installation licence. Installation may commence once the basic environmental plan submitted by the constructor is reviewed and approved, and the environmental authority confirms compliance with the conditions outlined in the preliminary licence.
   3. Operation licence. The environmental authority approves project operations on verifying the applicant¡¯s compliance with environmental protection measures and operational requirements. Licensees are generally required to apply for renewal 120 days before expiry. Additionally, environmental authorities may impose specific renewal conditions for different licensing stages. Failure to meet these conditions will result in renewal denial.

In addition to obtaining the above-mentioned environmental licence, Chinese companies undertaking industrial activities or projects in Brazil may be required to observe other requirements on environmental authorisation or registration.

For instance, individuals or companies utilising natural resources must register under the Federal Technical Registry of Potentially Polluting Activities as per Federal Law No. 6938/1981.

Discharging wastewater into water bodies requires prior approval from the relevant authority under Federal Law No. 9433/1997; and activities involving vegetation suppression must secure prior approval from the competent agencies under Brazil¡¯s Forest Code (Federal Law No. 12651/2012).

Consequences

Environmental licensing in Brazil mandates early acquisition of necessary licences prior to the activity commencement, as well as strict observance of licensing requirements during operations.

On completion, companies are typically required to submit deactivation plans to environmental authorities and verify soil and groundwater quality. Any environmental damage caused must be remedied.

Non-compliance may result in civil liability, such as restoring or compensating for damage made to the environment or third parties. Violating companies may also face administrative penalties including warnings, fines, project demolition and licence suspension.

In critical cases, criminal liability may also apply, leading to fines, loss of tax incentives, or orders to cease operations.

Wang Jihong is a senior counsel and Xu Yibai is a non-equity partner at Zhong Lun Law Firm