Brazil: Investing

FDI in Figures

Foreign direct investment (FDI) to Brazil quadrupled between 2005 and 2010, from 162 to over 660 billion USD. In 2011, FDI flows to Brazil are expected to reach 720 billion USD. Brazil has become the leading destination for FDI towards Latin America. The country is now the fourth largest investor in emerging markets and the first in Latin America.

The attractiveness of the country for international investors is due to several factors:
- A market of nearly 200 million;
- A booming economy;
- Easy access to raw materials;
- A diversified economy, therefore less vulnerable to international crises.

The main investors in Brazil are the United States, Spain and Belgium. The sectors attracting most foreign investment are finance, the beverage industry, oil and gas and telecommunications.

Foreign Direct Investment	2008	2009	2010
FDI Inward Flow (million USD)	45,058	25,949	48,438
FDI Stock (million USD)	287,697	400,808	472,579
Performance Index*, Ranking on 141 Economies	90	87	-
Potential Index**, Ranking on 141 Economies	67	-	-
Number of Greenfield Investments***	250	271	-
FDI Inwards (in % of GFCF****)	14.7	41.5	-
FDI Stock (in % of GDP)	17.6	25.5	-

Source: UNCTAD - Last Available Data.

Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.

FDI Inflows By Countries and Industry

Main Investing Countries	2010, in %
United States	15.8
Spain	12.9
Belgium	7.6

Main Invested Sectors	2010, in %
Financial sector	16.9
Beverage industry	9.0
Oil and gas sector	8.5
Telecoms	6.9

Source: Brazilian Investment Information Network - Last Available Data.

Form of Company Preferred By Foreign Investors: Very large companies, mergers and international acquisitions. The sociedades anonimas are the legal form of company preferred by foreigners.
Form of Establishment Preferred By Foreign Investors: Joint-ventures
Main Foreign Companies: Renault, Peugeot, Carrefour, Casino, Mc Donalds, Zara, General Motors.
Sources of Statistics: Central Bank of Brazil

Why You Should Choose to Invest in Brazil

Strong Points: Brazil has Universities that perform just as well as their counterparts in the OECD and a very big manpower reserve educated to all levels. It also has extensive raw material resources. A number of sectors offer good business opportunities. The Brazilian economy is diversified and more and more manufactured goods are produced and exported. The potential of the Brazilian domestic market as well as the low cost of labor are elements which may attract foreign investors.
Weak Points: Despite being open to world trade, several administrative barriers cripple international trade. Valuing the real against the dollar automatically reduces the country's competitiveness against Asian competitors in some sectors. The Labor laws are very onerous, involving substantial costs to foreign companies and keeping a good part of the local business in the informal sector.
Government Measures to Motivate or Restrict FDI: The Brazilian government encourages and promotes FDI. Most of the barriers to foreign investor activity have been removed particularly on the stock market. A very large number of public companies have been privatized and many sectors deregulated over the last fifteen years.

Protection of Foreign Investment

Bilateral Investment Conventions Signed By Brazil: Brazil has signed bilateral agreements for the protection of foreign investment with 14 countries, but 7 of them have not been ratified by the Congress.
To see the list of countries, click here.
To see the conventions, click here.
International Controversies Registered By UNCTAD: There has not been any major controversy over the last few years.
Organizations Offering Their Assistance in Case of Disagreement: ICCWBO , International Chamber of Commerce in Rio
Member of the Multilateral Investment Guarantee Agency: No

Country Comparison For the Protection of Investors

	Brazil	Latin America & Caribbean	الولايات المتحدة	Germany
Index of Transaction Transparency*	6.0	4.1	7.0	5.0
Index of Manager’s Responsibility**	7.0	5.3	9.0	5.0
Index of Shareholders’ Power***	3.0	6.0	9.0	5.0
Index of Investor Protection****	5.3	5.1	8.3	5.0

Source: Doing Business - Last Available Data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.

Procedures Relative to Foreign Investment

Freedom of Establishment: Guaranteed.
Acquisition of Holdings: The investment regime in Brazil is a liberal regime which allows foreign investors to have a majority share in the creation of their company.
Obligation to Declare: The agency for the promotion of foreign investment in the country gives information about the authorizations necessary for setting up. All inflows of capital must be declared to the Central Bank.
Competent Organization For the Declaration: Central Bank of Brazil
Requests For Specific Authorizations: Foreign investment is restricted and requires special authorization in the nuclear, health, land ownership, fishing, post office, telegraphs, aviation, aeronautics, media communications and highway freight sectors.

Office Real Estate and Land Ownership

Possible Temporary Solutions: There are plenty of offices to rent.
The Possibility of Buying Land and Industrial and Commercial Buildings: There are no restrictions on foreigners buying land and commercial buildings, except at the borders of the country.
In October 2009, the Brazilian Chamber of Deputies approved a legislation that would further restrict foreign ownership of land along Brazil's borders and within the Amazon. On August 2010, the government issued a revised interpretation of Brazil's 1971 land ownership legislation (Law 5709) strengthening existing language limiting foreign ownership of agricultural lands in rural municipalities. The new regulations have the potential to disrupt purchases of farmlands by foreigners.
Risk of Expropriation: Risks of expropriation are very low today. Compensation is provided for in case of expropriation, especially for foreigners.

Investment Aid

Forms of Aid: The government encourages foreign investment in the form of tax exemption, aid, etc.
Privileged Domains: Companies which export more than 80% of their production in IT and communication are exempted from certain taxes (COFINS and PIS) on their exports. This regime has been extended to all exporting companies, but for three years only. There are, in addition, many public aids for SMEs that export.
Privileged Geographical Zones: Tax reductions are granted to companies who set up in economically disadvantaged regions such as the North, Nordeste and the Amazonian regions (Manaus in particular).
Free Zones: There are 8 free zones in Brazil but only that of Manaus, Zona Franca de Manaus, has managed to attract foreign investment and seen real economic development.
Organizations Which Finance: The National Investment Bank (BNDES)
The PROEX
The Instituto de Desenvolvimento de Minas Gerais (INDI).

Investment Opportunities

The Key Sectors of the National Economy: Agriculture (sugar cane, coffee, oranges, soya, bananas, walnuts, cashew nuts, corn, pineapple and pepper), beef, poultry, tobacco leaves; mineral ores, iron and aluminum.
The country is asserting itself more and more in the textile, aeronautics, pharmacy, automobile, iron and steel industry and chemical industry sectors.
High Potential Sectors: Numerous sectors in Brazil offer excellent short term opportunities: Raw materials, agriculture, agri-food industry, IT (hardware and software), energy, petroleum, gas, franchises, insurance, iron, steel, medical equipment, pharmaceutical products, mining sector, pollution control equipment, ports and airports, aeronautical industry, railways, telecommunications infrastructures and tourism.
Privatization Programs: None. Auctions of infrastructure concessions are expected for 2011-2015.
Tenders, Projects and Public Procurement: Tenders Info, Tenders in Brazil
Comprasnet, Tenders
DgMarket, Tenders Worldwide

Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors: Electricity and energy in general, but the trend is towards the opening up of natural monopolies to the private sector, subject to the supervision of a public regulation organization.
Sectors in Decline: The sectors most affected by Asian competition, especially textiles.

Finding Assistance For Further Information

Investment Aid Agency: BNDES
Agency for the promotion of investment in Brazil
FINAME
Other Useful Resources: Central Bank of Brazil
Doing Business Guides: SEBRAE
The Lexmundi guide « Doing Business » on Brazil
The Deloitte "International Tax and Business Guide" on Brazil
Brazil Commercial Guide 2010 - Buy USA

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