BRAZIL
Brazil Darcy Teixeira Junior and Andre Maruch, TozziniFreire Advogados
1. Overview of FDI in the jurisdiction
1.1 Which countries are the principal sources of FDI into your jurisdiction? In recent years, the most important sources of FDI in Brazil have been the United States, the United Kingdom, Spain, China, Germany, Japan and France. The total investment received by Brazil in 2012 was around $65 billion.
1.2 What are the key sectors in your jurisdiction which attract, or the government is seeking to attract, FDI? The Brazilian government has implemented several official programmes over the last few years to foster specific sectors of the national infrastructure. It has set up public auctions for the management of airports, ports, roads and railways by private companies. Recent discoveries of huge deposits of oil on the Brazilian coast will require investment in infrastructure, the naval industry, oil refinery and professional education. Further, major international events to be held in Brazil such as the Fifa World Cup and Olympic Games, in 2014 and 2016 respectively, will require investment in some specific sectors such as public transportation, security and hotels.
1.3 Is the government generally supportive of FDI? Which government, and regional, bodies are responsible for driving FDI in your jurisdiction? The Brazilian economy is receptive to FDI, which is demonstrated by the steady growth of foreign investments in the country and a modern legislation that guarantees reliability and safety to investors. The central bank issues rules on the formalities that must be complied with regarding FDI. In addition, the Ministry of Development is in charge of enhancing foreign trade through customs regulations.
2.1 Investment vehicle
2.1 What are the most common legal entities and [pass-through] vehicles used for FDI in your jurisdiction, and how long do they take to become operational? Brazilian law offers several kinds of entities to run a business. The most popular ones are the limited liability company (Limitada) and the corporation (Anônima). The shareholders of these companies enjoy limited liability and, therefore, do not have their personal assets exposed to occasional failures of the business (except for certain circumstances in which the disregard doctrine applies).
The Limitada provides for a more flexible operation, with fewer administrative burdens, which makes it suited to less complex businesses. On the other hand, the Anônima is regulated by more complex and rigid rules of management and operation, and is recommended for more intricate enterprises. The Anônima may also be used to gather funds from a wide range of investors when registered as a publicly-held company with the Brazilian Securities Commission (CVM). However, both entities may be used for small or big businesses, regardless of the amounts involved.
These companies usually require 30 days to be created.
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2.2 What are the key requirements for establishment and operation of these vehicles which are relevant to FDI? The creation and operation of companies controlled by foreigners do not generally differ from the ones controlled by Brazilian citizens, as Brazilian law prohibits any kind of discrimination related to the origin of the capital.
The officer of any Brazilian company must be resident in Brazil. A Brazilian company that desires to appoint a foreigner as officer must apply for their permanent visa. To do this, the foreign shareholders need to invest R$600,000 ($258,300) for each officer. This amount may be lowered to R$150,000 if the company creates at least 10 new jobs within the following two years.
Any investment in a Brazilian company must be made through the execution of exchange agreements in order to allow the proper banking transfer and its registration with the Brazilian central bank.
3. Investment approval
3.1 For foreign investment approval (including national security review) explain the following: a) The regulator/s’ name, factors it must consider when making its decisions, and how much discretion it has; b) Any investment caps and other legislative restrictions; c) Which party must notify and when/if notification is mandatory or voluntary; d) What information must be included with notification and what is the review fee; e) How long does the review and approval process take, and are there any fast-track options; f) Is there the ability to consult on a named or unnamed basis; g) Does notification/review occur pre- or post-closing, and are there any pre- or post filing requirements unique to FDI; h) What is the position if no response is received on an application for approval and are there any rights of appeal from disapprovals? Brazilian law provides that foreign capital is subject to the same regulations applicable to national capital. Therefore, due to the free inflow and outflow of proceeds, no approval is required for foreign investments regarding exchange issues. Any foreign investment must be registered with the Central Bank in a declaratory fashion.
3.2 Briefly explain the investment restrictions for any special/restricted sectors. Foreign investment is generally allowed in Brazil, and no specific authorisation from the Government is required.
There are a few exceptions:
• Foreign capital is not allowed in nuclear energy activities. • Foreign capital is not allowed in health care services, except when specifically permitted by law.
• Foreign capital is not allowed in post office services. • Foreign participation is limited to 30% in Brazilian press and broadcasting companies.
• Opening of new branches of foreign financial institutions and increases in the percentage participation of foreign individuals or legal entities in the corporate capital of Brazilian financial institutions are prohibited, except
22 IFLR REPORT | FOREIGN DIRECT INVESTMENT 2014
WWW.IFLR.COM
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