37. Foreign Investment

37. DIRECT FOREIGN INVESTMENT – REQUIREMENTS

SMDA – Sonia Marques Döbler Advogados

The Central Bank of Brazil (Banco Central do Brasil – BACEN) plays a strategic role in collecting, systematizing, and disclosing economic and financial information related to the inflow of investment into the country. Through mechanisms such as the foreign capital reporting requirements—which encompass both foreign direct investment and cross-border credit transactions involving individuals or legal entities domiciled or headquartered in Brazil—the survey on Brazilian capital held abroad, and the information collected from the foreign exchange market, BACEN not only ensures the transparency of such operations, but also supports the formulation of public policies aimed at strengthening the regulatory environment in the Brazilian market.

The statistics produced by BACEN enable the ongoing monitoring of foreign participation in the national productive structure, allowing for the implementation of more effective measures to promote direct investment, aligned with Brazil’s strategic interests in sustainable economic development.

With regard to the regulatory framework governing foreign investment in Brazil, Federal Law No. 14,286/2021—referred to as the “Foreign Exchange Legal Framework”—introduced new provisions concerning foreign capital in Brazil and Brazilian capital abroad. The objective was to modernize, streamline, and reduce bureaucracy in the Brazilian foreign exchange market, thereby promoting the integration of Brazilian companies into global value chains.

Under this new legal framework, the Central Bank of Brazil is entrusted with the responsibility of monitoring and analyzing information related to (i) foreign investment in Brazil; (ii) cross-border credit transactions; and (iii) Brazilian capital held abroad, defined as follows:

1. External Credit Transactions: financial liabilities undertaken by a resident of Brazil with a non-resident creditor, including transactions in which funds do not physically enter the country, such as direct loans, issuance of bonds in the international market, private placement of securities in the domestic market, financing arrangements, import financing of goods or services, and advance payment for exports (i.e., funds received in advance from abroad in anticipation of future exports of goods or services in settlement of the debt), as well as cross-border financial leasing transactions, in which the non-resident legal owner of an asset (lessor) substantially transfers all risks and rewards of ownership to the resident lessee through the payment of installments;
2. Foreign Direct Investment: direct equity participation by a non-resident in a company incorporated in Brazil, or any other economic right held by a non-resident arising from a legal act or contract, where the return on such investment depends on the business’s performance;
3. Brazilian Capital Abroad (CBE): any assets, rights, or values of any nature held outside Brazil by individuals or legal entities resident or headquartered in Brazil, including financing, direct loans, and trade credits granted from Brazil to non-residents.

Both the registration of foreign capital with the Central Bank and the periodic reporting of Brazilian capital Abroad serve the purpose of tracking capital inflows and outflows, as well as conducting ongoing assessments of the respective positions and stocks.

37.1. FORMS OF INVESTMENT IN LOCAL OPERATIONS – IED AND ROF

FCR Law – Fleury, Coimbra & Rhomberg Advogados

The Central Bank of Brazil (“BACEN”) is a federal autarchy that is part of the National Financial System, linked to the Ministry of Economy, which controls and records the movements and inflows of foreign capital in Brazil. The entry of these capitals must be declared before the Central Bank, through the Electronic Declaratory Registry, which has two types: IED – Foreign Direct Investment and ROF – Financial Operations Registry.

The legal basis for registering foreign capital before the Central Bank of Brazil is Law No. 4,131, Law No. 9,069 and Law No. 11,371. Resolution No. 3,844 (Annex I) and Circular No. 3,689, with the changes made by Resolution No. 4,533 and Circulars No. 3,814 and 3,822, regulate the registration of foreign capital in the form of direct investment (RDE-IED). Direct investment is considered to be the participation in the capital of a Brazilian company by an investor, individual or legal entity, not resident in Brazil or headquartered abroad, paid in or acquired in accordance with the legislation in force, as well as the outstanding capital of foreign company authorized to operate in Brazil.  

Mandatorily, the RDE-IED requires that the national company that is receiving the capital contribution has to comply with certain obligations, such as, for example, being responsible for keeping the registration of transactions duly updated before the BACEN. The operations that need these records are as follows: (i) entry and exit of shareholders; (ii) increase and decrease in share capital; (iii) sale and transfer of quotas/shares; and (iv) payment of dividends.

Thus, it appears that the RDE-IED works as an electronic reflection of the contract/bylaws of the national company regarding foreign investment issues, and therefore it is of the utmost importance to always be up to date.

The information on the capital paid-in the Brazilian company must be separated by legal basis, being:

• Capital based on Law 4,131/1962 is that constituted through the entry of financial resources into the country by foreign exchange operations or through the inflow of assets, as well as the reinvestment of the income from these capitals;
• Capital based on Law 11.371/2006 is the one declared in a specific option in this system as existing in the country, duly registered in the company’s accounting, but without the possibility of registration under another legal basis, as well as the reinvestment of the income from these capitals;
• Capital based on Law 9,069/1995 is that constituted by the entry into the country of financial resources by the transfer of a non-resident account (International Transfer in Reais – TIR), as well as the reinvestment of the income from these capitals.

Regarding the Electronic Declaratory Registry, in the modality of ROF (Financial Operation Registry), the legal basis is the Law No. 4,131, of September 3, 1962, Law No. 9,069, of June 29, 1995, and Law No. 11,371, of November 28, 2006. Resolution No. 3,844 and Circular No. 3,689, provide for foreign capital in the country and its registration before the Central Bank of Brazil.

This modality has several different operations, namely: (i) direct loans; (ii) securities, which are external loans contracted through the issuance of credit securities in the international market, regardless of the term of the operation; (iii) advance export receipt; (iv) import financing; (v) financing of organizations; (vi) financial leasing; (vii) operating leasing, rent and charter; (viii) technology services (assignment of patents, industrial and trade marks, payment of royalties, etc.); (ix) other financing; and finally; (x) renegotiation, assumption and conversion.

The ROF acts as an electronic reflection of the will of the parties, where the information contained in the contract entered into is inserted into the system of the Central Bank of Brazil, whether related to direct loan or to the issue of securities.

It is important to note, finally, that without this registration and other necessary measures to complete the transaction (exchange closing, for example), the entry of foreign investment will not be allowed in Brazil.

37.2. TYPES OF VEHICLE FOR OPERATION (BRAZILIAN BRANCH OR SUBSIDIARY)

FCR Law – Fleury, Coimbra & Rhomberg Advogados

The vehicle to be used by a foreign investor or company to operate its activities in Brazil is always highly questioned. The question hangs, in most cases, between opening a foreign company branch in Brazil or a subsidiary that holds foreign capital.

As a rule, the bureaucracy involved in the process of legalizing a foreign company’s subsidiary is greater than that involving the incorporation of a Brazilian company with foreign capital. The reason is that the requirements for obtaining the operating authorization are much higher.

There are also situations in which there is a prohibition on the exercise of certain activities in the country, such as postal and telegraph services, linked to nuclear energy, and in other situations there is a restriction and the need for prior authorization of participation of foreign capital, such as for example, financial institutions, air transport, mining, etc.

In the case of opening a branch in Brazil, it is important to highlight the provisions of Article 1,134 of the Brazilian Civil Code, which establishes that “foreign companies, whatever their object, cannot, without authorization from the Executive Branch, operate in the country, even that by subordinate establishments, however, except in the cases expressed in law, be a shareholder of a Brazilian corporation”.

To apply for authorization, a foreign company that desire to open a branch in Brazil must submit the following documents, namely: (i) proof that the company is incorporated in accordance with the law of its countries; (ii) the entire content of the contract or bylaws; (iii) list of members of all management bodies of the company, with name, nationality, profession, domicile and, except for bearer shares, the value of each one’s participation in the company’s capital; (iv) copy of the act that authorized the operation in Brazil and fixed the capital for operations in the national territory; (v) proof of appointment of the representative in Brazil, with express powers to accept the conditions required for authorization; and (vi) the last financial statement. 

The responsibility for instructing and examining applications for authorization for nationalization is of the Department of Business Registration and Integration (“DREI”), whether for the installation of a branch, agency or establishment in the country by a foreign company. Only after obtaining authorization will the legalization of the foreign company branch take place.

In turn, the opening of a subsidiary with foreign capital in Brazil goes through the same process as the normal opening of a Brazilian company. Basically, what takes a little more time is the validation and legalization of documents of the foreign investor or company, through the “Apostille of The Hague” (notarization with international validity) for the signatory countries of the Hague Convention of 1961, promulgated by the Decree 8,666/2016, which certifies public documents between the signatory countries of the convention.

If the documents are from a country that is not a signatory to the Hague Convention, before they are presented to Brazilian public bodies, for them to have legal value, they must be consularized in the country in which they were issued or in Brazilian diplomatic representation.

Bearing in mind that all documentation from foreign companies must go through the sworn translation and registration procedure before the Title and Document Distribution Center in Brazil. Only then will the foreign investor or company be able to participate as a shareholder of a Brazilian company.

For all of the above, the creation of a company based in Brazil is indicated, which may have 100% foreign capital, because, despite the tax burden being the same as that of a subsidiary, the process is less time consuming as it basically requires same procedures when setting up a company without foreign equity interest.

To conclude the step prior to the registration of the subsidiary’s corporate acts before the competent bodies, it is important to note that foreign capital must be registered before the Central Bank of Brazil, through the RDE-IED (Electronic Declaratory Registration – Foreign Direct Investment), within 30 days from the remittance of financial resources. The registration will allow the investment to be later repatriated, if applicable, and the profits and dividends generated by it to be sent abroad through the commercial exchange market.

In view of the above, the vehicle most used by foreign investors or companies to operate their activities in Brazil is through the incorporation of a Brazilian company with foreign capital, because despite the tax burden being the same in both vehicles (branch or subsidiary), the process of creating a new company based in Brazil is less time consuming as it basically requires the same procedures when setting up a company without foreign ownership.

37.3. DIRECT FOREIGN INVESTMENT – REQUIREMENTS

SMDA – Sonia Marques Döbler Advogados

37.3.1. REGISTRATION OF FOREIGN SHAREHOLDERS IN THE CENTRAL BANK OF BRAZIL AND IN THE BRAZILIAN FEDERAL REVENUE OFFICE | DOCUMENTATION

In accordance with RFB Normative Instruction No. 2,172/2024, which provides for the Individual Taxpayer’s Register (“CPF” – the acronym in Portuguese), and RFB Normative Instruction No. 2,119/2022, which provides for the National Corporate Taxpayers’ Register (“CNPJ” – the acronym in Portuguese), both from the Brazilian Federal Revenue Office (“RFB” – the acronym in Portuguese), an agency linked to the Ministry of Finance, foreign investors that intend to practice certain transactions in Brazil , whether individuals or legal entities, shall be enrolled with the National Taxpayers’ Register.

The CPF (formed by eleven numbers) and the CNPJ (formed by fourteen numbers) correspond to the databases maintained by RFB, enabling to consolidate information about investors in Brazil, in order to provide greater transparency to the Brazilian authorities, as well as help in the fight against tax evasion, corruption, and money laundering. It does not, however, require foreign investors to comply with tax obligations in Brazil.

The registration steps for legal entities headquartered abroad, which involve a more complex procedure and require more robust documentation, are detailed below.

37.3.1.1. Registration of Foreign Investors in the Declaratory Registry of Non-Residents

The Declaratory Registry of Non-Residents (“CDNR” – the acronym in Portuguese) is a registry maintained by the Central Bank of Brazil (“BACEN” – the acronym in Portuguese), which gathers information from individuals and legal entities that, under Brazilian laws, must render information on transactions involving foreign capital before the SCE – Credit system (Foreign Capital Information Provision System – External Credit) and in the RDE-Portfolio system of the BACEN.

Furthermore, the CDNR is also a requirement for legal entities not domiciled in Brazil that need to apply for a CNPJ number to carry out financial transactions, whether for the acquisition of equity interest in Brazilian companies or for the provision of information in the SCE – Credit system, in the other situations that will be discussed in the following chapter.

After due registration with the CDNR, foreign investors may link up with the corporate register in the SCE-IED system of the company that receives the investment, thus being able to conduct the transactions inherent in the management of the investors’ funds, such as, without limitation, payment of subscribed capital, repatriating and/or receiving profits, interest on equity, among other transfers that are associated with investments made by the investors in Brazil.

Under the Legal Framework of the Foreign-Exchange Market, the process to register individuals and legal entities in the CDNR became dependent on the type of transaction or transactions with foreign capital and on the need – or not – of the registration with the CPF/CNPJ. These situations are outlined in the tables below:

Table 1 – Summary for the creation of Legal Entity’s CDNR

Table 2 – Summary for the creation of Individual’s CDNR

CDNR registration is made on-line and shall be requested by an individual resident in Brazil, enrolled with the Account Gov.br, with gold or silver security level.

If the foreign company is already enrolled with the CNPJ, it may only inform the CNPJ number, legal nature, country of domicile and, optionally, the LEI (Legal Entity Identifier) code formed by twenty alphanumeric digits. Once this is completed, the CDNR registration number is automatically issued.

In the case of foreign legal entities not enrolled with the CNPJ, registration with the CDNR may be obtained under two different ways, depending on the type of operation and on the compulsory requirement to have a CNPJ number, as mentioned in Table 1. The procedures are:

• CDNR registration of foreign companies for which the enrollment with the CNPJ is not compulsory
  In the situations where CDNR registration derives from the need to provide information on financial transactions in Brazil, under the types of direct loan, negotiable instrument, early receipt of exports, financing to imports, technology services or other financing, the application shall be filled out with the following data: (i) corporate name and trade name (if any); (ii) country and city of the company’s headquarter; and, optionally, (iii) LEI (Legal Entity Identifier) code. Once these pieces of information are rendered, the registration may be automatically approved or, in some cases, submitted to BACEN’s analysis, which shall take place in up to twenty-four (24) hours.
• CDNR registration of foreign companies for which the enrollment with the CNPJ is compulsory
  On the other hand, when the enrollment with the CNPJ is compulsory, the CDNR registration will depend on BACEN’s analysis, upon the submission of the following data: (i) corporate name and trade name (if any); (ii) NIF (Tax Identification Number), which is optional; (iii) legal nature, (iv) CNAE – National Classification of Economic Activity, as published by the IBGE – Brazilian Institute of Geography and Statistics; (v) LEI – Legal Entity Identifier, which is optional; (vi) complete address, and (vii) CPF and email of the foreign company’s attorney-in-fact for representation before RFB.
  The applicant shall also attach the following supporting documents, duly legalized and notarized (when necessary), together with the sworn translation, made by a Brazilian public translator and interpreter, registered with the Commercial Registry: (i) Organizational documents and/or amendment thereto (or equivalent document) of the company, registered with the competent bodies or entities of the country of origin (the document shall contain the complete name and address of the company, which shall be exactly the same as in the fields informed in the form); (ii) proof of address; if the organizational documents do not contain the company’s address, the user shall attach another document to prove the address; (iii) Power of attorney granted to an individual resident in Brazil, with powers to manage the assets and rights of the foreign legal entity in Brazil and represent it before RFB; (iv) identification documents of the signatory(ies) and other documents that demonstrate their ability to represent them, when applicable; (v) Identification document of the attorney-in-fact for the foreign legal entity in the CNPJ (mentioned in item iii, above). Once these data and documents have been sent to BACEN, the latter shall analyze the accreditation request and approve or reject it within twenty-four (24) hours. In case of rejection, the user shall comply with the requirements made by said body. In case of approval of the CDNR registration, the CNPJ shall be granted by RFB within two (2) business days thereafter.

37.3.1.2. Enrollment of Foreign Investors with the CNPJ

As provided for in RFB Normative Instruction No. 2,119/2022, legal entities domiciled abroad are subject to enrollment with the CNPJ in Brazil if they:

1. hold rights over: real estate, vehicles, vessels, aircraft, bank checking accounts, investments in the financial or stock market; or equity interests constituted outside the stock market; and/or
2. carry out: external commercial leasing; vessel chartering, equipment rental and simple leasing; import of goods without exchange coverage intended for the payment of capital of Brazilian companies; or advice on securities.

Still in the context of the new system established by the Legal Framework of the Foreign-Exchange Market, CDNR registration and delivery of the pertinent documentation exempt the investing company from resubmitting such documents.

However, within a period of ninety (90) days, the foreign company shall submit to RFB the documents that demonstrate its corporate structure, until reaching the individual(s) characterized as “ultimate beneficial owner(s)”*.

*Note: This obligation is dismissed for some companies, such as publicly-held companies.

In accordance with the Brazilian law, the following are deemed ultimate beneficial owners (“UBO”): (i) individual who, ultimately, directly or indirectly, owns, controls, or significantly influences the entity; (“Significant influence” is presumed when the natural person holds twenty-five percent (25%) of the capital of the foreign legal entity, directly or indirectly); or (ii) individual on whose behalf a transaction is carried out, or (iii) the individual who, directly or indirectly, holds or exercises the preponderance in the corporate resolutions and the power to elect a majority of the managers of the foreign legal entity, even without controlling it.

It is worth noting that to be valid in Brazil, all documents produced abroad shall be notarized and apostilled (for those issued in countries that are signatories to the Hague Convention) or legalized at consular offices abroad (for documents issued in non-signatory countries of the Hague Convention). Furthermore, they shall be translated by a sworn translator in Brazil.

If the information referring to the ultimate beneficial owner is not presented to RFB along with the relevant documentation, within ninety (90) days, the registrations with the CNPJ of both the Brazilian company and the foreign company may be suspended and, as a consequence, they will be prevented from carrying transactions with banks, including with regard to operating checking accounts, making financial investments and obtaining loans in Brazil, among others. On the other hand, this does not prevent transactions for the return of the investment to the country of origin and for the fulfillment of obligations assumed before the suspension took place.

37.4. RELATED ANCILLARY OBLIGATIONS

SMDA – Sonia Marques Döbler Advogados

37.4.1. Periodic Obligations of Brazilian Companies with Foreign Investments with the Central Bank of Brazil

BACEN requires that Brazilian companies that meet the requirements defined by law to comply with certain ancillary obligations as a way of monitoring foreign investments in Brazil and debts contracted with companies domiciled abroad.

The non-submission, the late submission or the submission of false, incomplete or incorrect information to BACEN may subject the company to a fine of up to two hundred and fifty thousand Reais (R$250,000.00).

Under the new Legal Framework of the Foreign-Exchange Market, the following declarations and information shall be rendered to BACEN:

Table 3 – SCHEDULE OF ANCILLARY OBLIGATIONS – BACEN

37.5. REQUIREMENTS FOR INDIRECT FOREIGN INVESTMENTS
Lautenschlager, Romeiro e Iwamizu Advogados

37.5.1. Overview of Laws and Regulations

The Brazilian capital market structure is based on two main federal laws: the Securities Law (Federal Law No. 6,385/1976), which established the Brazilian Securities and Exchange Commission (“CVM”), and the Corporations Law (Federal Law No. 6,404/1976), which governs the structure, organization, and responsibilities of corporations.

The CVM is responsible for issuing regulations and interpretative guidelines in line with the Securities Law and the Corporations Law. CVM regulations govern the responsibilities of market participants and the rules for public offerings of securities and/or collective investment schemes. The Securities Law also grants broad authority to the CVM, including oversight over markets, issuers, and intermediaries. As such, the CVM may collect information on markets, institutions, financial products, clients, and parties involved in securities transactions; conduct investigations; impose sanctions; suspend securities trading; and prohibit improper market conduct.

In addition to the general regulation mentioned above, foreign capital investment in Brazil’s financial and capital markets is governed by the special rules of Joint Resolution No. 13/2024 of the Central Bank of Brazil (“BACEN”) and CVM, which replaced the former BACEN Resolution No. 4,373/2014.

A foreign investor intending to operate in the Brazilian capital market must be registered as a “non-resident investor” in accordance with Joint Resolution BACEN and CVM No. 13/2024 and CVM Resolution No. 13 of November 18, 2020.

37.5.2. Entry of Foreign Investors into the Financial and Capital Markets (Indirect Investment)

The Brazilian legal framework provides foreigners with full access to investments in the financial and capital markets under the principle of equal treatment, subject to specific tax regimes and entry requirements.

Joint Resolution BACEN and CVM No. 13/2024 outlines the main requirements for the entry of non-resident investors into the Brazilian financial and capital markets. “Non-resident investors” include individuals or entities, funds, or other collective investment vehicles with domicile, headquarters, or residence abroad.

To hold any assets and/or conduct transactions in the Brazilian capital market, foreign investors must comply with the Regulation set forth in Annex A of CVM Resolution No. 13/2020, and are required to:

• Appoint one or more representatives in Brazil (with exceptions): the representative must be a financial institution or an institution authorized to operate by BACEN, including clearinghouses and service providers under BACEN supervision within the scope of the Brazilian Payment System. Such representative must (i) register and keep the investor’s records updated; (ii) provide information requested by BACEN and CVM and keep evidence of compliance with contractual obligations and fund movements; (iii) immediately inform BACEN and CVM of the termination of the representation agreement and/or any irregularities; and (iv) receive, on behalf of the non-resident investor, service of process in legal or administrative proceedings; and
• Obtain registration with the CVM: through its representative, the foreign investor must register with the CVM by submitting the information provided in Annex A of CVM Resolution No. 13/2020.

The newly enacted Joint Resolution BACEN and CVM No. 13/2024 introduced, among other updates, the possibility of exempting natural person non-resident investors from appointing a representative under certain conditions: (a) investments in securities using their own funds; (b) investments in financial assets through a non-resident account in BRL held in their name in Brazil, using their own funds; and (c) investments in financial assets not made through a BRL non-resident account, limited to monthly contributions of up to BRL 2 million per intermediary. Moreover, the new resolution also exempts natural people from registering with the CVM, requiring only the submission of certain information via the electronic system made available by CVM or by the authorized market operator with a formal agreement with the CVM for this purpose.

37.6. EXCEPTIONS (RESTRICTIONS AND LIMITATIONS) TO FOREIGN INVESTMENT
Lautenschlager, Romeiro e Iwamizu Advogados

Subject to the fulfillment of the registration and enrollment requirements listed and previously discussed in various sections above, foreign investors are generally allowed to invest directly or indirectly in Brazil.

However, there are a few sectors and transactions in which foreign investment participation is either prohibited or subject to specific conditions and limitations, such as in the broadcasting (radio and television), oil and gas, nuclear energy, postal and telegraph services, aerospace industry, transportation, and acquisition of rural properties and land.
Over the past decades, these limitations have been consistently relaxed, removed, or reduced in order to increase the competitiveness of the Brazilian market in areas such as insurance, medical services, and air transportation, where restrictions on foreign capital have been eased.

37.6.1. Restriction to foreign investments in Brazil

In addition to sectors subject to state monopoly (e.g., certain postal services, nuclear mineral exploration, and activities related to aerospace exploration), a few industries remain subject to restrictions on foreign capital. Below are comments regarding sectors that have recently undergone regulatory easing or that remain subject to restrictions on foreign capital participation.

37.6.1.1. Media

The Federal Constitution, in its Article 222, establishes that the ownership of journalistic companies and broadcasting companies for sound and audio-visual media is restricted to native-born Brazilians or naturalized citizens for more than 10 years, or to legal entities incorporated under Brazilian law and headquartered in Brazil. In all cases, at least 70% (seventy percent) of the total and voting capital of such companies must be owned, directly or indirectly, by native-born Brazilians or naturalized citizens for more than 10 years, who must necessarily manage the company’s activities and determine the programming content.

Changes in the corporate control of Brazilian journalistic and broadcasting companies with up to 30% (thirty percent) foreign capital must be reported to the National Congress.

The Federal Constitution also guarantees priority to Brazilian professionals in the execution of national productions in electronic social communication media, regardless of the technology used to provide the service.

Federal Law No. 12,485/2011, which governs audiovisual communication on a conditional access basis, also establishes that to qualify as a “Brazilian producer” or “Brazilian programmer,” a company must be incorporated under Brazilian law, have its headquarters and administration in the country, have at least 70% (seventy percent) of its total and voting capital owned, directly or indirectly, by native-born Brazilians or naturalized citizens for more than 10 years, and its management and editorial responsibility over the produced content must be exclusively held by such individuals.

Lastly, Federal Law No. 10,610/2002, which regulates the participation of foreign capital in journalistic and broadcasting companies, provides that the participation of foreigners or Brazilian citizens naturalized for less than 10 years in the share capital of such companies may not exceed 30% (thirty percent) of the total and voting capital, and such participation must occur indirectly, through a legal entity incorporated under Brazilian law and headquartered in Brazil. As a result, companies effectively controlled, whether through chains of ownership or other indirect means, by foreigners or Brazilian citizens naturalized for less than ten years, may not hold more than 30% (thirty percent) of the total and voting capital of journalistic and broadcasting companies.

37.6.1.2. Mining

The Federal Constitution, in its Article 176, provides that mineral deposits, whether being exploited or not, other mineral resources, and hydraulic energy potentials are, for the purposes of exploration or development, considered separate property from the land and belong to the Federal Government. The concessionaire is, however, guaranteed ownership of the mined product.

Accordingly, the exploration and mining of mineral resources and the development of hydraulic energy potentials may only be carried out under authorization or concession granted by the Federal Government, in the national interest, and exclusively by Brazilian individuals or legal entities incorporated under Brazilian law, with headquarters and administration in Brazil, subject to specific conditions when such activities take place in border areas or indigenous lands.

Federal Law No. 6,634/1979 establishes that, in border areas, companies engaged in the exploration, mining, and development of mineral resources — except those with immediate application in civil construction, as classified in the Mining Code — must comply with the following requirements:

1. at least 51% (fifty-one percent) of the capital must be owned by Brazilians;
2. at least two-thirds of the employees must be Brazilian citizens; and
3. the management or administration must be majority Brazilian, with predominant decision-making powers held by Brazilians.

Federal Law No. 9,478/1997 reinforces the monopoly exercised by the Federal Government over the above-mentioned activities. However, it also establishes that such activities shall be regulated and overseen by the Government and may be carried out, under concession, authorization, or production-sharing contracts, by legal entities incorporated under Brazilian law, with headquarters and administration in the country.

37.6.1.3. Transport

The Federal Constitution provides that the law shall regulate air, water, and land transportation and that, with respect to the regulation of international transportation, it must observe international agreements entered into by the Federal Government, in compliance with the principle of reciprocity. Regarding the regulation of water transportation, the law shall establish the conditions under which the transport of goods via cabotage and inland navigation may be carried out by foreign vessels.

37.6.1.3.1. Air Transport

As described in Sections 29.6 and 29.8 above, restrictions on foreign capital in airline companies have recently been relaxed.

37.6.1.3.2. Road Freight Transport

The former Federal Law No. 6,813/1980 required that four-fifths (4/5) of the voting share capital of companies engaged in road cargo transport be held exclusively by Brazilians. That law was entirely repealed by Federal Law No. 11,442/2007, which now only requires that companies engaged in road cargo transport have their headquarters in Brazil. There are no longer any restrictions on foreign ownership or control in this sector.

37.6.1.3.3. Cabotage

Federal Law No. 9,432/1997, which governs the regulation of waterway transportation, establishes that foreign vessels may only participate in the transport of goods in cabotage and inland navigation within national territory, as well as in port support navigation and maritime support navigation, when chartered by Brazilian shipping companies and under the following conditions:

(i) Permitted scenarios subject to authorization by the competent authority – Chartering of a foreign vessel, by voyage or time charter, to operate in inland navigation within national territory or for the transport of goods via cabotage or in port and maritime support navigation, as well as bareboat chartering in port support navigation, is allowed:

• I – when there is no availability of a Brazilian-flagged vessel of the appropriate type and capacity for the intended transport or support;
• II – when there is a justified public interest;
• III – when replacing vessels under construction in Brazil, in a Brazilian shipyard, under an effective contract, during the construction period, for a maximum of thirty-six months, limited to:
  • a) the contracted deadweight tonnage, for cargo vessels;
  • b) the contracted gross tonnage, for vessels intended for support operations.

(ii) Permitted scenarios not requiring authorization from the competent authority – Chartering of a vessel:

• I – with a Brazilian flag for long-haul, inland, international inland, cabotage, port support, and maritime support navigation;
• II – with a foreign flag, when the provisions of Decree-Law No. 666, of July 2, 1969, and its amendments do not apply, for long-haul or international inland navigation;
• III – foreign charter boat, with flag suspension, for cabotage, inland navigation within national territory, and maritime support navigation, limited to twice the deadweight tonnage of vessels of similar type ordered from a Brazilian shipyard with an effective construction contract, plus half the deadweight tonnage of Brazilian-flagged vessels owned by the chartering company, provided that the right to charter at least one vessel of equivalent capacity is maintained.

Furthermore, the Brazilian government may enter into international agreements allowing the participation of foreign vessels in the above-mentioned navigation services, even when not chartered by Brazilian shipping companies, provided that the same privilege is granted to Brazilian-flagged vessels in the other contracting states.

37.6.1.4. Financial Institutions

In addition to the specific regulatory procedure described in Section 21.2 above, the establishment and operation of financial institutions with foreign capital participation are subject to prior presidential authorization.

37.6.1.5. Acquisition of Rural Real Estate

As described in Section 7.11 above, the acquisition of rural real estate by foreigners or by Brazilian entities with foreign investors is subject to certain legal restrictions. The acquisition of rural properties located in border areas is subject to additional restrictions.

37.6.1.6. Healthcare

The Constitution prohibits the direct or indirect participation of companies or foreign capital in the provision of healthcare services in Brazil, except in cases provided for by law.

Federal Law No. 8,080/1990, as amended by Federal Law No. 13,097/2015, now allows the direct or indirect participation, including control, of companies or foreign capital in healthcare services in the following cases:

I – donations from international organizations linked to the United Nations, from technical cooperation entities, and from financing and loan agencies;
II – legal entities established to install, operate, or manage:

a) general hospitals, including philanthropic hospitals, specialized hospitals, polyclinics, general clinics, and specialized clinics; and
b) family planning actions and research;

III – non-profit healthcare services maintained by companies for the care of their employees and dependents, without any cost to the public social security system; and
IV – other cases provided for in specific legislation.

Security

After many years of legislative process, Senate Bill No. 135/2010, which sought to update the Statute of Private Security and the Security of Financial Institutions, was replaced by House Substitute Bill No. 6 and subsequently approved by both Legislative Houses. The resulting text led to the enactment, with vetoes, of Law No. 14,967/2024 by the President of the Republic.

The bill aimed to modernize the regulation of private security companies in Brazil, expand the scope of authorized services with new rules for the use of firearms and security oversight, and also included a provision prohibiting the participation of foreign legal entities in the voting share capital of private security companies specialized in the transportation of cash, goods, and valuables.

However, the presidential vetoes specifically targeted the provisions that prohibited foreign participation in the sector, on the grounds that such restriction would be unconstitutional for violating the principles of equality, free enterprise, free competition, and the free exercise of economic activity.

The presidential veto must be reviewed by the National Congress and, as of October 2024, is pending inclusion on the legislative agenda. If upheld, the vetoed provisions will be definitively excluded from the Law. If overridden, the vetoed text will be reinstated, and the President of the Republic will be required to promulgate it.

Sonia Marques Döbler Advogados

Rua Maria Paula, 123 – 19º andar
Ed. Main Office
BR-01319-001 São Paulo – SP
Tel (11) 3105 7823

Fabiana Nitta

[email protected]

Guilherme Yago Motta

[email protected]

www.dobler.com.br

Fleury, Coimbra & Rhomberg Advogados

Rua do Rocio, 350 – 10º andar – Vila Olímpia
BR-04552-000 São Paulo – SP
Tel (11) 3294 1600

[email protected]
www.fcrlaw.com.br

Lautenschlager, Romeiro e Iwamizu Advogados

Av. Paulista, 1.842 – 22º andar – Torre Norte
BR-01311-200 São Paulo – SP
Tel (11) 2126 4600

[email protected]
www.lrilaw.com.br