Arbitration involving state entities in Brazil has a long history. This paper analyses how this type of arbitration arose in Brazil, what were the strategies that Brazilian courts and legislative bodies employed to make it work and how do they compare to the rest of Latin America. This paper shows what were the key legal issues associated with resolving commercial conflicts with state parties in Brazil, how they were regulated and, most importantly, why arbitration became so relevant for state parties in Brazil, while other countries in Latin America avoid using the method.