Blog do MÃlton Jung

Limitation of Foreign Participation in Brazilian Companies

The Brazil Business

Updated

9 September 2012

Foreigners in Brazil can come across several difficulties, especially related to protectionism and bureaucracy. This article will point out the major limitations for foreigners in the country.

Understanding the limitation

This practice in Brazil is not very different from other countries. In order to preserve the domestic economy, the Brazilian law provides restrictions for foreign companies' participation. According to Dilma Rousseff, those laws are not protectionists practices, they are only a way of defending the economy.

The Brazilian government say that the country will not commit the same mistake of the past, when the country closed the domestic economy, what generated a delay on the national technological industry. According to Rousseff, the country will still protect national industries and jobs for locals, but the economy will not be extremely protectionist.

An example of how the government works to protect the national economy is the reduction and limitation of products and services provided by foreign companies on the national market. Another example is the percentage of stocks that one foreign can reach in a company is also limited.

What are the consequences for the country?

Theoretically, this protectionism is good for the country once the domestic economy is shielded from the external economy. The job generation and the internal growth should be more focused on the internal development, improving the technological department, for example.

What is wrong with this practice and already being corrected by the Brazilian government is that the country still does not have technological potential to compete with the international market, as in the past the limits to foreign participation was much stronger than it is nowadays, leaving Brazil behind in terms of technological development.

What are the limitations for foreign companies?

There are different limitations for each case of services provided by foreign companies in Brazil. Sometimes they are subtle, but there are cases in which Brazilians are very privileged by the government.

An important point is that some people naturalized Brazilian for more than ten years can, in almost all of the cases, have the same rights of a local. Here are the sectors in which foreign companies can work or not:

Economy sectors totally forbidden

Radio, TV and Publishing

Exclusive for Brazilians or foreigners who have been naturalized for more than ten years. It was created to preserve the national culture and job generation

Air transportation

Totally oriented only for natives, nowadays there are a few companies not established in the national territory working along with some Brazilians air transportation companies. It is important to highlight that foreign companies can not administer airports.

Health care

Another sector protected by the government only for Brazilians. It happens to protect the internal investment in researches and job generation. It is important to say that the Brazilian law grants some exceptions.

Security services are completely forbidden for any foreign company for ethic and patriotic reasons.

Economy sectors partially forbidden

Cable television is commercialized by foreign companies if an important parameter is correct: more than 51% of the voting capital must have been commercialized by locals. If this requirement is within the rules, foreign companies can start to commercialize cable television channels.

Road Transportation is provided to foreign companies, but only 20% of the voting capital can be in the foreign control. That measure is important to privilege the internal job generation.

Fishing is an exception that theoretically should be exclusivity for Brazilians or naturalized people, but by filing some requirements foreigners can practice some fishing activities in the country.

Economy sectors not forbidden

Telecommunications licenses are provided for foreign companies according to their technological and financial potential. Sometimes pricing policies and the amount offered for the license are important factors to work in Brazil as a foreign company.

Rural properties foreign companies or foreign legal person in the country can work or have rural properties in Brazil. The only exception is that the properties can not be bigger that one quarter of the municipality territory. If the foreign is married to a Brazilian, things are even easier.

Are there alternatives?

All of these rules can be objected on the Brazilian court or modified according to the government interests. These rules are changing really fast due to the politics adopted by the President Dilma Rousseff, that does not want to close the economy but does not want to let the domestic economy vulnerable to the international market.

Another important point is that if your company is planing to work in any of these sectors, it is important to know some influent Brazilians, once all the alternatives become easier when working with locals.