Foreign investment

LOOKING FOR GOOD OPPORTUNITIES, FOREIGN INVESTORS TURN TO BRAZIL

Despite political and economic uncertainty, the market is optimistic over the positive agenda

A t a time in which Brazil is seeking to implement pension and tax reforms to balance its public accounts and adopt a positive agenda to stimulate the economy, foreign investors are viewing the country as a treasure trove of opportunities. In the first quarter of 2019, for example, airport and port tenders have sparked international interest.

Historically, Brazil’s legislation poses no barrier to foreign investment. It is, in fact, the opposite. It counts with a series of measures that encourage the influx of foreign resources into the country. There are tax exemptions and advantages that make Brazil competitive in comparison with other countries.

“We have, in Brazil, a legal framework including the tax regime that is very encouraging to foreign investors, when compared to national ones”, partner Tatiana Morais Penido explains.

For at least the past decade, the country has attracted the attention of foreign investors in a more effective manner. This is the result of Brazil’s economy, independent of periods of crisis. “For any strategic player, having a presence in Brazil is important because of the size and potential of the consumer market. The same thing happens with investment funds: having an operation here is important because the country has an economy with a significant number of mergers and acquisitions”, states partner Pedro Whitaker de Souza Dias.

Today, the Brazilian landscape is one of a safe environment, from a legal standpoint, due to the Arbitration Law (Law No. 9,307) and the improvement in open capital rules, both of which came into effect in the past two decades.

Complementary reading

Lei de Arbitragem


Read more: here.

Investors looking for safety

I f Brazil’s new opportunities are whetting foreign investors’ appetites, it is important to note that there are still significant challenges to overcome in order to make the economic landscape even more favorable. The attitude of tax authorities and interface with other authorities are at the core of this issue.

Brazilian legislation offers tax advantages relating to the beginning and end of the investment cycle, like the potential tax benefit of including goodwill when acquiring businesses and certain capital gains exemptions accrued by foreign investors. Therefore, there is a set of rules that attract foreign investment to the country. However, over the past few years, tax authorities have been arguing and interpreting the matters in a way to question these advantages, directly impacting the expected returns of these transactions. This can lead to making the tax landscape, which used to be considered friendly to foreign investment, to be viewed as hostile by these investors.

A series of initiatives are being discussed to simplify the tax system and provide greater legal certainty in the interpretation of tax law, like Law No. 12,973/2015, which restated the inclusion of goodwill, but was not entirely effective to resolve the conflict surrounding the theme. Provisional Measure No. 881/2019, dubbed the Economic Freedom law, currently being discussed in Congress and which seeks to facilitate the opening and functioning of companies and cut the red tape involved in business development, received some proposed amendments that are interesting, in this sense, while the tax reform proposals in discussion can become real advances to be used and important contributions to make Brazil more competitive on the global stage.

According to partner Flavio Mifano, “several measures under discussion are positive, but what we really need to change is the tax culture in Brazil. Our culture is still very contentious”.

Complementary reading

MP de Liberdade Econômica

Read more here.


Lei 12.973/2015

Read more here.