37. Foreign Investment

37. DIRECT FOREIGN INVESTMENT – REQUIREMENTS

SMDA – Sonia Marques Döbler Advogados

In line with practices on the international scene, Law No. 14,286/2021, known as the “Legal Framework of the Foreign-Exchange Market”, was published on December 30, 2021, and introduced new rules with regard to the regulation of Brazilian capital abroad and foreign capital in Brazil.

With the purpose of modernizing, simplifying and streamlining, thus making the Brazilian exchange market more efficient, twenty-four (24) Resolutions and fifteen (15) Circular Letters of the Central Bank of Brazil, five (5) Resolutions of the National Monetary Council, and thirty-eight (38) Laws were revoked.

With regard to Foreign Investment, we highlight the following changes.

• Foreign Capital Information Provision System – External Credit (“SCE-Credit” – the acronym in Portuguese):

• Creation of declaratory floors for debtor companies in the private sector, the value of which varies according to the type of transaction, as follows:

• Exemption from issuing Financial Transaction Registration (“ROF” – the acronym in Portuguese)² for financial transfers abroad due to the payment of royalties; and on technology services and operational leasing, rent and charter, with terms in excess of three hundred and sixty (360) days.
• Expansion of the system to allow the registration of any private placement bond in the country within the debenture direct loan modality.
• Obligation to provide information related to the financed import of goods or services with a payment term in excess of one hundred and eighty (180) days, whenever the value of the foreign credit transaction is equal to or greater than five hundred thousand US dollars (US$500,000.00) or its equivalent, in other currencies, on the date of the transaction.

• Foreign Capital Information Provision System – Direct Foreign Investment (“SCE-IED” – the acronym in Portuguese):

• Establishment of declaratory floors for providing information in connection with financial transfer related to non-resident investor or handling of funds equal to or greater than one hundred thousand US dollars (US$100,000.00) or its equivalent, in other currencies, on the date of the transaction.
• It becomes mandatory to provide information on direct foreign investment regarding interest held by non-resident investors in joint ventures and consortia.
• The foreign capital, recorded in the Shareholders Information System of the Central Bank of Brazil, ceased to be segregated by legal basis as of December 31, 2022, which was previously classified according to one of the following options (laws revoked by the Legal Framework of the Foreign-Exchange Market):

1. Law No. 4,131/62: option for the inflow of funds into the country via foreign-exchange transaction or through the entry of goods, as well as the reinvestment of the income from these capitals;
2. Law No. 11,371/06: option specific to this system, as existing in the country, duly registered in the company’s accounting books, but without the possibility of registration under another legal basis, as well as the reinvestment of the income from these capitals; and
3. Law No. 9,069/95: option for funds entering the country via transfer from a non-resident account (International Transfer in Reais), as well as the reinvestment of the income from these capitals.

• Census System:

• As of November 1st, 2023, the former “CENSUS” system was incorporated into the SCE-IED system. Thus, the information to be provided will only be the Quarterly Declaration, Annual Declaration, and Five-Year Declaration.

1in US$ (United States Dollars) or its equivalent in other currencies, on the date of the transaction.

2Existing records will be available for a term of one (1) year.

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. ENROLLMENT OF THE FOREIGN INVESTORS WITH THE CENTRAL BANK OF BRAZIL (CDNR) AND THE CORPORATE TAXPAYERS REGISTER (CNPJ) | FOREIGN DOCUMENTS

37.3.1.1. Enrollment of Foreign Investors with the Corporate Taxpayers Register – CNPJ

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 Investor with the Non-Resident Declaratory Register – CDNR

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 ACCESSORY OBLIGATIONS

SMDA – Sonia Marques Döbler Advogados

37.4.1. Periodic Obligations of the Brazilian Companies with Foreign Investments – Central Bank of Brazil (“BACEN”)

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 markets framework is based on two main federal laws: Securities Act (Federal Law no. 6,385 / 1976), which created the Securities and Exchange Commission (“CVM”), and the Corporations Act (Federal Law no. 6,404 / 76), which governs the structure, organization and responsibilities of corporations.

CVM is responsible for issuing regulations and interpretive guidance consistent with the Securities Act and the Corporations Act. CVM Administrative Rulings regulate a market participant’s liability and public offering rules related to securities offerings and/or collective investment schemes. The Securities Act also grants CVM with broad authority, including surveillance powers over markets, issuers and market intermediaries. In this regard, CVM may obtain information on markets, institutions, financial products, customers and parties involved in securities transactions; carry out investigations; impose sanctions; suspend trading of securities; and prohibit improper market conduct. 

In addition to the umbrella legal framework above, foreign capital investment in the financial and capital markets in Brazil is regulated by the special rules of Resolution no. 4,373 / 2014 from the Brazilian Central Bank (“BACEN”).

A foreign investor willing to conduct transactions within the Brazilian capital markets must be registered as a “non-resident investor” under BACEN Resolution No. 4.373/14 and CVM Instruction No. 560/2015.

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

The Brazilian legal framework grants foreign investors full access to investments in the financial and capital markets, under an equal treatment paradigm, except for specific taxation schemes, as well as entry preconditions that shall be complied with.

Resolution no. 4,373 / 2014 of BACEN (as amended) outlines the core requirements for the entry of non-residents investors into the Brazilian financial and capital markets. Individual or collective “non-resident investors” means individuals or legal entities, funds and other collective investment entities, with residence, headquarters or domicile abroad.

To hold any assets and/or carry out any transactions within the Brazilian capital market, foreign investors shall observe the Regulation set forth within Annex I of Resolution no. 4,373 / 2014, thereof being required to:

– Constitute one or more representatives in the country: it must be a financial institution or institution authorized to operate by BACEN and is not necessarily the one required by tax legislation; must have the power to (i) make and keep the records of the non-resident investor updated; (ii) provide BACEM and CVM with the requested information and maintain proof of compliance with contractual obligations and the movement of funds; (iii) immediately inform BACEN and CVM about the termination of the representation agreement and / or the occurrence of any irregularity of which it becomes aware; and (iv) receive, on behalf of the non-resident investor, summons and subpoenas related to judicial or administrative proceedings;

– Obtain registration before CVM: CVM Administrative Ruling no. 560 / 2015 establishes a procedure for accreditation of non-resident investors before CVM, via electronic submission of the information contained in Annex I of such Administrative Ruling to the Superintendence of Institutional Investor Relations – SIN; and

– Constitute one or more custodians authorized by the CVM: hiring through a custody agreement to register, keep in custody or maintain any and all investments made by the foreign investor. The custodian must be one of the financial institutions duly accredited with BACEN and CVM to exercise this role.

37.6. EXCEPTIONS (PROHIBITIONS AND RESTRICTIONS) TO FOREIGN INVESTMENT

Lautenschlager, Romeiro e Iwamizu Advogados

By fulfilling the enrollment and registration requirements listed and already addressed in the various previous sections, foreign investors can in general invest directly or indirectly in Brazil.

There are, however, few segments and operations where the participation of foreign investment is disallowed or subjected to certain conditions and limits, such as in the segments of radio and television, oil and gas, nuclear energy, post office and telegraph services, aerospace industry, shipping and the purchase of rural land and real estate. In the past decades limitations have been consistently relaxed, so as to enhance the competitiveness of the Brazilian marketplace in fields such as the insurance industry, medical services and air transport, which had the restrictions to the foreign capital relaxed. 

37.6.1. Restriction to foreign investments in Brazil

In addition to the monopoly of the state for certain segments (e.g., certain mail activities, exploration of nuclear minerals and certain activities connected to airspace exploration), certain few sectors remain with restrictions to foreign investment. Follows bellow comments on segments that had a recent loosening or are still subject to restrictions in terms of foreign investment.

37.6.1.1. Media

The Federal Constitution, in its art. 222, establishes that the ownership of a journalistic and radio broadcasting company and of sound and images is private to Brazilians born or naturalized for more than 10 years, or to legal entities incorporated under Brazilian laws and having their headquarters in the country, and shall, in any case, have at least 70% (seventy percent) of the total capital and the voting capital of such companies belonging, directly or indirectly, to Brazilians born or naturalized for more than 10 years, who will mandatorily perform the management of the activities and establish the content of the schedule.

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

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

Federal Law no. 12,485 / 2011, which provides for conditioned access of audiovisual communication, also establishes as requirements to be a “Brazilian producer” or “Brazilian programmer” to be constituted under the laws of Brazil, with headquarters and administration in the country, seventy percent (70%) of the total and voting capital, directly or indirectly, of native or naturalized Brazilians for more than 10 years and activity management and editorial responsibility for the content produced privately by native or naturalized Brazilians for more than 10 years.

Finally, Federal Law no. 10,610 / 2002, which regulates the participation of foreign capital in journalistic and radio broadcasting companies, as well as sounds and images, establishes that the participation of foreigners or Brazilians naturalized for less than ten years in the corporate capital of journalistic companies and broadcasting cannot exceed 30% (thirty percent) of the total capital and voting capital of these companies and will only be held indirectly, through a legal entity incorporated under Brazilian law and headquartered in the country so that companies effectively controlled, by chaining other companies or by any other indirect means, by foreigners or by Brazilians naturalized for less than ten years may not have a total participation of more than 30% (thirty percent) in the total and voting capital of the journalistic and broadcasting companies.

37.6.1.2. Mining

The Federal Constitution establishes, in its art. 176, that the deposits, in mining or not, and other mineral resources and the potentials of hydraulic energy constitute a property distinct from that of the soil, for the purpose of exploration or exploitation, and that they belong to the Union, granted to the concessionaire the ownership of the mining product.

Thus, the exploration and mining of mineral resources and the use of hydraulic energy potentials can only be carried out with authorization or concession from the Union, in the national interest, by Brazilians or a company incorporated under Brazilian laws and which has its headquarters and administration in the country, under specific conditions when these activities are carried out on the border area or indigenous lands.

Federal Law no. 6,634 / 1979 establishes that, in the border area, companies that dedicate themselves to the research, mining, exploration and exploitation of mineral resources, except those of immediate application in civil construction, classified in the Mining Code, shall mandatorily satisfy the following conditions:

I – at least fifty-one percent (51%) of the capital belong to Brazilians;

II – at least two thirds (2/3) of workers be Brazilians; and

III – to charge the administration or management to the majority of Brazilians, assuring to them the predominant powers.

Federal Law no. 9,478 / 97 reinforces the exercise in monopoly of the Union in the activities mentioned above, however, it establishes that such activities will be regulated and supervised by the Union, and can be exercised, through concession, authorization or contract under the production sharing regime, by companies incorporated under Brazilian law, with headquarters and administration in the country.

37.6.1.3. Transport

The Federal Constitution establishes that the law will provide for the ordering of air, water and land transport, and, regarding the ordering of international transport, observe the agreements signed by the Union, taking into account the principle of reciprocity, as well as, in the ordering of water transport , the law will establish the conditions under which the transport of goods in cabotage and inland navigation may be carried out by foreign vessels.

37.6.1.3.1. Air Transport

Pursuant to the content of sections 29.6 and 29.8 above, the restrictions to foreign investment were subject to recent changes.

37.6.1.3.2. Road Freight Transport

The former Federal Law no. 6,813 / 1980 required that four fifths (4/5) of the corporate capital with the right to vote, of a company that operates road cargo transportation should be held exclusively by Brazilians. Such law was entirely revoked by Federal Law no. 11,442 / 2007, which henceforth established that a road cargo transportation company shall be headquartered in Brazil, not having any longer a restriction to the participation and control by foreign investors.

37.6.1.3.3. Cabotage

Federal Law no. 9,432 / 97, which provides for the ordering of waterway transport, establishes that foreign vessels may only participate in the transport of goods in coastal shipping and inland navigation of the national route, as well as in port support navigation and maritime support navigation, when chartered by Brazilian shipping companies and within the following hypotheses:

(i) Permitted hypotheses that depend on the authorization of the competent body – The chartering of a foreign vessel by voyage or by time, to operate in the inland navigation of the national route or in the transport of goods in coastal shipping or in port and maritime support navigation, as well as the naked hull in port support navigation:

I – when there is no or unavailability of a Brazilian flag vessel of the type and size suitable for the intended transport or support;

II – when there is a public interest, duly justified;

III – when replacing vessels under construction in the country, in a Brazilian shipyard, with an effective contract, while construction lasts, for a maximum period of thirty-six months, up to the limit:

a) the gross tonnage contracted, for cargo vessels;

b) gross tonnage contracted, for vessels intended for support.

(ii) Permitted hypotheses that do not depend on the authorization of the competent body – The chartering of a vessel:

I – of a Brazilian flag for long distance, inland, inland navigation on an international route, cabotage, port support and maritime support;

II – foreign vessel, when the provisions of Decree-Law no. 666, of July 2nd, 1969, and its amendments are not applicable, for long-distance or inland navigation on an international route;

III – foreign vessel with bare hull, with flag suspension, for coastal shipping, inland navigation on a national route and maritime support navigation, limited to twice the deadweight tonnage of vessels, of similar type, ordered by them from a Brazilian shipyard installed in the country, with an effective construction contract, plus half the deadweight tonnage of the Brazilian vessels owned by it, subject to the right to charter at least one vessel of equivalent size.

In addition, the Brazilian government may enter into international agreements that allow the participation of foreign vessels in the aforementioned navigations, even when not chartered by Brazilian shipping companies, provided that an identical privilege is conferred on the Brazilian flag in the other contracting States.

37.6.1.4. Financial Institutions

In addition to the specific regulatory procedures, as described within section 21.2. above, the opening and operating of financial institutions with foreign investment in Brazil are subject to the prior presidential approval.

37.6.1.5. Acquisition of Rural Land

As described within section 7.11. above, the acquisition of rural land by foreigners or national companies with foreign investors are subject to certain restrictions established in law. The acquisition of rural land in frontier areas is subject to additional restrictions.

37.6.1.6. Health

The Constitution prohibits the direct or indirect participation of foreign companies or capital in health care in the country, except in the cases provided for by law.

Federal Law no. 8,080 / 90, as amended by Federal Law no. 13,097 / 2015, now authorizes the direct or indirect participation, including control, of companies or foreign capital in health care in the following cases:

I – donations from international organizations linked to the United Nations, technical cooperation and financing and loan entities;

II – legal entities intended to install, operate or explore:

a) general hospital, including philanthropic, specialized hospital, polyclinic, general clinic and specialized clinic; and

b) family planning actions and research;

III – health services maintained, for non-profit purposes, by companies, to serve their employees and dependents, without any burden for social security; and

IV – other cases provided for in specific legislation.

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