Investment Climate Statements for 2016 - Brazil

Executive Summary

Brazil is the second largest economy in the hemisphere behind the United States, and the ninth largest economy in the world. According to the United Nations Conference on Trade and Development (UNCTAD), Brazil was the eighth largest destination for global Foreign Direct Investment (FDI) flows in 2015. Brazil typically receives close to half of South America’s total incoming FDI. The United States is a major foreign investor in Brazil; according to the Brazilian Central Bank (BCB), the United States had the largest single-country stock of FDI (US$ 112 billion) in Brazil in 2014. The Government of Brazil (GOB) has made attracting private investment in infrastructure a top priority for 2016.

Brazil’s GDP fared worse than almost any other major economy in 2015, contracting by 3.8 percent and setting GDP back to 2011 levels. Economists are expecting GDP to shrink a further 3.5-4.0 percent in 2016, marking the country’s longest and deepest recession since Brazilian Institute of Applied Economic Research (IPEA) records began in 1901. In 2015, GDP per capita decreased almost 5 percent; unemployment hit a six-year high of 9 percent; inflation ended the year at 10.7 percent, a 12-year high; the Brazilian real shed a third of its value against the dollar; investment levels dropped over 14 percent; industrial output contracted by 8.3 percent; and the fiscal deficit rose to a record 10.3 percent of GDP.

Despite the difficulties from the current recession, Brazil’s large economy and vast middle class continue to make the country a destination for long-term investment, particularly in consumer products, albeit not without challenges:

  • Large Consumer Base Attracts Investment: With a US$ 1.8 trillion economy, a population of over 200 million, and a large middle-class consumer base, Brazil is a top 10 destination for global FDI. The GOB investment promotion strategy prioritizes the automobile, renewable energy, life sciences, oil and gas, and infrastructure sectors. Foreign investors in Brazil receive the same legal treatment as local investors in most economic sectors. Foreign investment is restricted in the health, mass media, telecommunications, aerospace, rural property, maritime, and air transport sectors.
  • Domestic Environment Presents Challenges: In addition to current economic difficulties, since 2014, Brazil's anti-corruption oversight bodies have been investigating allegations of widespread corruption involving state-owned energy firm Petrobras and a number of private construction companies. A separate tax bribery investigation announced in 2015 is also ongoing. Analysts contend that slowing domestic demand, a strong terms of trade shock caused by plummeting commodity prices, and – above all – negative market reactions to ongoing political uncertainties have hampered investment in Brazil. Foreign investors also cite concerns over poor existing infrastructure, rigid labor laws, and complex tax, local content, and regulatory requirements; the so-called “Custo Brasil” (Brazil Cost).

Table 1



Index or Rank

Website Address

TI Corruption Perceptions index


76 of 168

World Bank’s Doing Business Report “Ease of Doing Business”


116 of 189

Global Innovation Index


70 of 141

U.S. FDI in partner country ($M USD, stock positions)


USD 111,715

World Bank GNI per capita


USD 11,530

1. Openness To, and Restrictions Upon, Foreign Investment

Attitude toward Foreign Direct Investment

Brazil was the world’s eighth largest destination for Foreign Direct Investment (FDI) in 2015, with inflows of US$ 56 billion. The GOB actively encourages FDI – particularly in the automobile, renewable energy, life sciences, oil and gas, and transportation infrastructure sectors – to introduce greater innovation into Brazil’s economy and to generate economic growth. GOB investment incentives include tax exemptions and low-cost financing with no distinction made between domestic and foreign investors. Foreign investment is restricted in the health, mass media, telecommunications, aerospace, rural property, maritime, and air transport sectors.

Other Investment Policy Reviews

Brazil has risen to become one of the world’s top ten economic powers, and its growth and social welfare policies have lifted millions out of poverty. The Organization for Economic Cooperation and Development (OECD) asserts that macroeconomic stability has been a crucial factor behind this success, but that fiscal performance has deteriorated recently while inflation has risen markedly. The 2015 OECD Economic Survey for Brazil noted, “As the tailwinds from high commodity prices have weakened, improving domestic policies will be more important than before. Over the last few years, bottlenecks have emerged, mostly on the supply side of the economy.” The OECD projects quarterly growth will turn positive sometime in the second half 2016 and begin to rise toward the economy’s long term growth potential in 2017. Once fiscal results improve and inflation starts to return to target, the OECD believes there will be clear growth pay-offs as recovering confidence supports stronger investment and consumption, particularly if coupled with policy and budget reforms that address growing structural deficits. The OECD report can be found at:

Foreign investors in Brazil receive the same legal treatment as local investors in most economic sectors. Constitutional amendments passed in 1995 prohibit all forms of discrimination against foreign capital not explicitly set out under law.

On March 1, 2016, the GOB passed Provisional Measure (MP) 714 to relax restrictions on foreign investment in domestic airline companies from a maximum of 20 percent to a maximum of 49 percent (Law 7565/1986, Article 181, MP 714/2016). The MP is pending Congressional approval. On March 19, 2011, the United States and Brazil signed an Air Transport Agreement as a step towards an Open Skies relationship that would eliminate numerical limits on passenger and cargo flights between the two countries. The agreement remains pending transmission from the executive branch to Brazil’s Congress for ratification.

To enter Brazil's insurance and reinsurance market, U.S. companies must establish a subsidiary, enter into a joint venture, or acquire or partner with a local company. Applications for banking licenses are reviewed by the BCB on a case-by-case basis. Of the top 50 banks in Brazil, 20 are owned or controlled by foreign interests. Citibank, the only U.S. retail banking operation in Brazil, announced in February 2016 its intent to sell its Brazilian, Argentine, and Colombian retail banking assets. Brazil’s anti-trust authorities are reviewing Bradesco bank’s August 2015 agreement to purchase HSBC’s Brazilian retail banking operation.

The Brazilian reinsurance market opened to competition in 2007. In December 2010 and March 2011, however, the Brazilian National Council on Private Insurance (CNSP) rolled back market liberalization through the issuance of Resolutions 225 and 232, which disproportionately affects foreign insurers operating in the Brazilian market. Resolution 225 requires that 40 percent of all reinsurance risk be placed with Brazilian companies. Resolution 232 allows insurance companies to place only 20 percent of risk with affiliated reinsurance companies. In December 2011, the CNSP issued Resolution 241, which walked back some of the restrictions of Resolution 225 by allowing the 40 percent requirement to be waived if local reinsurance capacity does not exist.

In September 2011, Law 12485/2011 removed a 49 percent limit on foreign ownership of cable TV companies and allowed telecom companies to offer television packages with their service. Content quotas require every channel to air at least three and a half hours per week of Brazilian programming during primetime. Additionally, one-third of all channels included in any TV package have to be Brazilian.

In May 2015, lawmakers revived a 2012 bill that calls for easing restrictions on the acquisition of land by foreigners to boost investment in agriculture and forestry. A 2010 decree limiting the purchase of land by foreign companies has been challenged on economic and legal grounds, including in April 2015 in the Supreme Court. Guidelines published in 2013 set limits on the total area and the percentage of land in the overall area of any municipal district that can be purchased by a foreign firm without congressional approval.

Business Registration

A company must register with the Board of Trade to obtain the National Registry of Legal Entities (CNPJ). Brazil’s Export Promotion and Investment Agency (APEX) has a mandate to facilitate foreign investment. The agency’s services are available to all investors, foreign and domestic. Foreign companies interested in investing in Brazil have access to many benefits and tax incentives granted by the Brazilian government at the municipal, state, and federal levels. Most incentives are granted based on project sector, amount to be invested, and potential job generation. Brazil’s business registration website can be found at:

Industrial Promotion

In October 2012, the GOB approved via Decree 7819/2012 Inovar-Auto, a program that offers a variety of incentives to encourage vehicle manufacturers to expand investment and production in Brazil. The European Union (EU) and Japan filed separate World Trade Organization (WTO) complaints in 2013 and 2015 that argue that some Inovar-auto tax benefits discriminate against foreign product imports and restricts trade. Meanwhile, the InovAtiva Brasil and Startup Brasil programs support start-ups in the country. The GOB also uses free trade zones to incentivize industrial production. A complete description of the scope and scale of Brazil’s investment promotion programs and regimes can be found at:

Limits on Foreign Control and Right to Private Ownership and Establishment

A 1995 constitutional amendment (EC 6/1995) eliminated distinctions between foreign and local capital, ending favorable treatment (e.g. tax incentives, preference for winning bids) for companies using only local capital. However, foreign investment is restricted by Constitutional law in the health (Law 13097/2015), mass media (Law 10610/2002), telecommunications (Law 12485/2011), aerospace (Law 7565/1986, updated by MP 714), rural property (Law 5709/1971), maritime (Law 9432/1997 and Decree 2256/1997), insurance (Law 11371/2006), and air transport sectors (MP 714/2016).

Privatization Program

Since 2012, the GOB has announced its intent to transfer billions in state assets to private investors through long term infrastructure concession (public-private partnership) agreements that give winning bidders the right to improve and operate airports, roads, railways, and ports for around 30 years.

In June 2015, Brazil launched the second stage of its transportation infrastructure-focused Logistics Investment Program (PIL), estimated at US$ 60 billion, which will mostly be used to provide subsidized financing for projects through the Brazilian National Development Bank (BNDES). All federal and state-level infrastructure concessions are open to foreign companies. In airport concessions, foreign companies have not only been encouraged to bid, but auction criteria have been defined in a way that effectively requires participation of foreign airport operators. In addition to the PIL, the GOB launched the next phase of the Program to Accelerate Growth (PAC) in 2015 to include annual US$ 75 billion in funds for transportation, energy, housing, and sanitation projects through 2018.

In April 2012, the U.S. Trade and Development Agency (USTDA), the U.S. Department of State, the Federal Aviation Administration (FAA), and the Transportation Security Administration (TSA) joined with Brazil's Ministry of External Relations to launch the U.S.–Brazil Aviation Partnership. This public-private partnership supports Brazil's aviation infrastructure development priorities while connecting U.S. companies to airport expansion, airspace management, safety, and security projects.

In May 2014, the U.S. Department of Transportation and Brazil’s Ministry of Transportation launched the U.S.-Brazil Transportation Partnership. Four working groups meet on a continuous basis to share best practices and promote participation by U.S. firms in ports and waterways, highways, railways, and disaster response projects.

In March 2016, USTDA and the U.S. Department of Commerce signed a Memorandum of Cooperation with Brazil on Bilateral Infrastructure Development to streamline information presented to U.S. firms on Brazil’s infrastructure concessions.

Screening of FDI

Foreigners investing in Brazil must register their investment with the BCB within 30 days of the inflow of resources to Brazil. Registration is done electronically. Investments involving royalties and technology transfer must be registered with Brazil’s patent office, the National Institute of Industrial Property (INPI). Investors must also have a local representative in Brazil. Portfolio investors must have a Brazilian financial administrator and register with the Brazilian Securities Exchange Commission (CVM).

Competition Law

Regulatory review of mergers and acquisitions are carried out by the Administrative Council for Economic Defense (CADE). In October 2012, Brazil performed its first review of a pending merger, bringing Brazil in line with U.S. and European practices. This shift to pre-merger review was a result of 2011 legislation (Law 12529) adopted to modernize Brazil’s antitrust review process and to combine the antitrust functions of the Ministry of Justice and the Ministry of Finance into CADE. This government body is responsible for enforcement of competition laws and consumer defense.

2. Conversion and Transfer Policies

Foreign Exchange

There are few restrictions on converting or transferring funds associated with a foreign investment in Brazil. Foreign investors may freely convert Brazilian currency in the unified foreign exchange market where buy-sell rates are determined by market forces. All foreign exchange transactions, including identifying data, must be reported to the BCB. Foreign exchange transactions on the current account have been fully liberalized.

All incoming foreign loans must be approved by the BCB. In most cases, loans are automatically approved unless loan costs are determined to be “not compatible with normal market conditions and practices.” In such cases, the BCB may request additional information regarding the transaction. Loans obtained abroad do not require advance approval by the BCB, provided the Brazilian recipient is not a government entity. Loans to government entities require prior approval from the Brazilian Senate as well as from the Finance Ministry’s Treasury Secretariat, and must be registered with the BCB.

Interest and amortization payments specified in a loan contract can be made without additional approval from the BCB. Early payments can also be made without additional approvals, if the contract includes a provision for them. Otherwise, early payment requires notification to the BCB to ensure accurate records of Brazil’s stock of debt.

In March 2014, the Federal Revenue Service of Brazil consolidated the regulations on withholding taxes (IRRF) applicable to earnings and capital gains realized by individuals and legal entities resident or domiciled outside Brazil. The regulation states that the cost of acquisition must be calculated in Brazilian reais. Also, the “technical services” definition was broadened to include administrative support and consulting services rendered by individuals (employees or not) or resulting from automated structures having clear technological content.

Upon registering their investments with the BCB, foreign investors are able to remit dividends, capital (including capital gains), and, if applicable, royalties. Remittances must also be registered with the BCB. Dividends cannot exceed corporate profits. The remittance transaction may be carried out at any bank by documenting the source of the transaction (evidence of profit or sale of assets) and showing that applicable taxes have been paid.

Under Law 13259/2016 passed in March 2016, capital gain remittances are subject to a 15-22.5 percent income withholding tax, with the exception of the capital gains and interest payments on tax-exempt domestically issued Brazilian bonds. The tax rate is determined by capital gains: up to US$ 1.5 million is taxed at 15 percent; US$ 1.5 million to US$ 2.9 million is taxed at 17.5 percent; US$ 2.9 million to US$ 8.9 million is taxed at 20 percent; and more than US$ 8.9 million is taxed at 22.5 percent.

Repatriation of a foreign investor’s initial investment is also exempt from income tax under Law 4131/1962. Lease payments are assessed a 15 percent withholding tax. Remittances related to technology transfers are not subject to the tax on credit, foreign exchange, and insurance, although they are subject to a 15 percent withholding tax and an extra 10 percent CIDE (Contribution for Intervening in Economic Domain) tax.

3. Expropriation and Compensation

There have been no known expropriation actions in Brazil against foreign interests in the recent past, nor have there been any signs that the current government is contemplating such actions. Some claims regarding land expropriations by state agencies have been judged by Brazilian courts in U.S. citizens’ favor; however, compensation has not always been paid, as states have filed appeals to these decisions.

4. Dispute Settlement

Legal System, Specialized Courts, Judicial Independence, Judgments of Foreign Courts

Contract disputes in Brazil can be lengthy and complex. Brazil has both a federal and a state court system, and jurisprudence is based on civil law. Federal judges hear most disputes in which one of the parties is the State, and rule on lawsuits between a foreign State or international organization and a municipality or a person residing in Brazil. Five regional federal courts hear appeals of federal judges’ decisions.


Brazil has a commercial code that governs most aspects of commercial association, except for corporations formed for the provision of professional services, which are governed by the civil code. In 2005, bankruptcy legislation (Law 11101) went into effect creating a system modeled on Chapter 11 of the U.S. bankruptcy code, which allows a company in financial trouble to negotiate a restructuring with its creditors outside of the courts. In the event a company does fail despite restructuring efforts, the reforms improve creditors’ ability to recover their debts. In the World Bank’s 2015 Doing Business Report, Brazil is ranked 62nd out of 189 countries for ease of “resolving insolvency.”

Investment Disputes

Article 34 the 1996 Brazilian Arbitration Act (Law 9307) defines a foreign arbitration judgment as any judgment rendered outside the national territory. The law established that the Brazilian Federal Supreme Court must ratify foreign arbitration awards. Law 9307 also stipulates that the foreign arbitration award is to be recognized or executed in Brazil in conformity with the international agreements ratified by the country and, in their absence, with domestic law. A 2001 Brazilian Federal Supreme Court ruling established that the 1996 Brazilian Arbitration Act, permitting international arbitration subject to Federal Supreme Court ratification of arbitration decisions, does not violate the Federal Constitution’s provision that “the law shall not exclude any injury or threat to a right from the consideration of the Judicial Power.”

International Arbitration

Brazil has ratified the 1975 Inter-American Convention on International Commercial Arbitration (Panama Convention) and the 1979 Inter-American Convention on Extraterritorial Validity of Foreign Judgments and Arbitration Awards (Montevideo Convention). Law 9307/1996 pertains to advanced legislation on arbitration and anchored in what is most modern about the principles and guarantees of litigants. The GOB developed a new Cooperation and Facilitation Investment Agreement (CFIA) model in 2015 ( internacionais/bilaterais/2015) that does not include investor state dispute settlement mechanisms. (See section 13)

ICSID Convention and New York Convention

Brazil has ratified the 1958 Convention on the Recognition and Enforcement of Foreign Arbitration Awards. Brazil is not a member of the World Bank’s International Center for the Settlement of Investment Disputes (ICSID). Brazil joined the United Nations Commission on International Trade Law (UNCITRAL) most recently in 2010, and its membership will expire at the end of 2016.

Duration of Dispute Resolution – Local Courts

The 2016 World Bank Doing Business report found that on average it takes 11 procedures and 77.75 days to litigate a contract breach at an average cost of 3.85 percent of the economy’s income per capita.

5. Performance Requirements and Investment Incentives


Brazil is not a signatory to the World Trade Organization (WTO) Agreement on Government Procurement (GPA). U.S. companies seeking to participate in Brazil’s public sector procurement need to partner with a local firm or have operations in Brazil. Foreign companies are often successful in obtaining subcontracting opportunities with large Brazilian firms that win government contracts. Under trade bloc Mercosul’s Government Procurement Protocol, member nations Brazil, Argentina, Paraguay and Uruguay are entitled to non-discriminatory treatment of goods, services and public works originating from each other’s’ suppliers and providers. The Protocol has only been ratified by Argentina and so is currently not in force.

Investment Incentives

As part of a December 2014 fiscal tightening package, the GOB announced its intention to scale back the expansionary activities of BNDES. The GOB ended direct Treasury support to the bank, which provided 20 percent of BNDES cash flow in 2014, and raised the official Long Term Interest Rate that serves as the reference rate for subsidized BNDES loans to 7.5 percent from 5.5 % by the end of 2015. The GOB extends tax benefits for investment in less developed parts of the country, including the Northeast and the Amazon regions, with equal application to foreign and domestic investors. These incentives have been successful in attracting major foreign plants to areas like the Manaus Free Trade Zone in Amazonas State, but most foreign investment remains concentrated in the more industrialized southern part of Brazil.

Individual states have sought to attract private investment by offering ad hoc tax benefits and infrastructure support to companies, negotiated on a case by case basis. Competition among states to attract employment generating investment has led some states to challenge such tax benefits as beggar-thy-neighbor fiscal competition.

In January 2015, the GOB eliminated industrial products tax (IPI) exemptions on vehicles, while keeping all other tax incentives provided by the October 2012 Inovar-Auto program. Through Inovar-Auto, auto manufacturers are able to apply for tax credits based on their ability to meet certain criteria, including manufacturing processes performed in Brazil, enhancing fuel efficiency, committing to investing in research and development in Brazil or using Brazilian engineering services, and agreeing to participate in a fuel-efficiency labeling scheme.

In September 2014, the GOB issued Decree 8304 to reinstate the Special Regime for the Reinstatement of Taxes for Exporters, dubbed the Reintegra Program. Under the program, exporters of products covering 8,630 tariff codes receive a subsidy of 3 percent of the value of their exports. To qualify, the imported content of the exported goods cannot exceed 40 percent, except in the case of high-tech goods, such as pharmaceuticals, electronics, and aircraft and parts, which are permitted to have up to 65 percent of inputs imported. In addition, Reintegra exempts exporters from so-called indirect taxes on capital expenditures, including the PIS/Cofins social contribution taxes and the tax on financial transactions (IOF). On February 27, 2015, Decree 8415 revoked Decree 8304 and determined new regulations for the program; however, the 3 percent subsidy on the value of the exports is still in effect.

In May 2010, the GOB launched a National Broadband Plan, which featured fiscal incentives, private sector participation, and regulatory reform to build out Internet infrastructure under the leadership of state-owned firm Telebras. While the plan provided commercial opportunities for foreign investors, it also sought to boost Brazilian technology by granting domestic IT equipment tax exemptions, favorable BNDES financing, and preference in the procurement process.

Research and Development

Tax credits are available based on a producer's ability to meet certain criteria, including investing in research and development in Brazil.

Performance Requirements

Investors in Brazil must adhere to the country’s regulated prices, which fall into one of two groups: those regulated at the federal level, or by a federal company or agency, and those set by sub-national governments (states or municipalities). Regulated prices managed at the federal level include telephone services, oil products (gasoline and bottled cooking gas), electricity, and healthcare plans. Regulated prices controlled by local governments include water and sewage fees, vehicle registration fees, and most fees for public transportation, such as local bus and rail services. As part of its fiscal adjustment strategy, the GOB sharply increased administered prices in January 2015.

In firms employing three or more persons, Brazilian nationals must constitute at least two-thirds of all employees and receive at least two-thirds of total payroll, according to Brazilian Labor Law Articles 352 to 354. Foreign specialists in fields where Brazilians are unavailable are not counted in calculating the one-third permitted for non-Brazilians.

Decree 7174 from 2010, which regulates the procurement of information technology goods and services, requires federal agencies and parastatal entities to give preferential treatment to domestically produced computer products and goods or services with technology developed in Brazil based on a complicated price/technology matrix.

Data Storage

Brazil’s Marco Civil, an Internet law that determines user rights and company responsibilities, states that data collected or processed in Brazil must respect Brazilian law, even if the data is subsequently stored outside the country. Penalties for non-compliance could include fines of up to 10 percent of gross Brazilian revenues and/or suspension or prohibition of related operations. Under the law, Internet connection and application providers must retain access logs for specified periods or face sanctions. While the Marco Civil does not require data to be stored in Brazil, its provisions – as well provisions of other proposed legislation, including a data privacy bill – should be closely tracked by Internet and other data-related companies investing in Brazil operations.

6. Protection of Property Rights

Real Property

Brazil has a system in place for mortgage registration, but implementation is uneven and there is no standardized contract. Foreign individuals or foreign-owned companies can purchase real property in Brazil. These buyers frequently arrange alternative financing in their own countries, where rates may be more attractive. Law 9514 from 1997 helped spur the mortgage industry by establishing a legal framework for a secondary market in mortgages and streamlining the foreclosure process, but the mortgage market in Brazil is still underdeveloped, and foreigners may have difficulty obtaining mortgage financing. Large U.S. real estate firms, nonetheless, are expanding their portfolios in Brazil.

Intellectual Property Rights

Rights holders in Brazil continue to face intellectual property rights (IPR) challenges. Brazil has remained on the “Watch List” of the U.S. Trade Representative's Special 301 report since 2007. For more information, please see:

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at:

Resources for Rights Holders

Andrew Duff/Shannon Brink
U.S. Embassy Brasilia Economic Officers
+55 61 3312-7000;

Laura Hammel
U.S. Mission Brazil IP Attaché
+55 21 3823-2000

7. Transparency of the Regulatory System

In the 2015 World Bank Doing Business report, Brazil ranked 116th out of 189 countries in terms of overall ease of doing business, a decline of 5 positions compared to the 2014 report. According to the World Bank, it takes approximately 174 days to start a business in Brazil. The GOB is seeking to streamline the process and number of days to open a business to five days through its RedeSimples Program. Similarly, the GOB has reduced red-tape through the implementation of the SIMPLES program, which was designed to simplify the collection of up to eight federal, state, and municipal-level taxes into one single payment.

The 2015 World Bank study noted that the annual administrative burden to a medium-size business of tax payments in Brazil is an average of 2,600 hours versus 176.6 hours in the OECD high-income economies. The total tax rate for a medium-sized business in Brazil is 69.4 percent of profits, compared to 41.2 percent in the OECD high-income economies. Business managers often complain of not understanding tax regulations, despite their investments in large tax and accounting departments.

Tax regulations, while burdensome and numerous, do not differentiate between foreign and domestic firms. However, there have been instances of complaints that the value-added tax collected by individual states (ICMS) favors local companies. Although the tax is designed to be refunded when goods are exported abroad, exporters in many states have had difficulty receiving their ICMS rebates. Taxes on commercial and financial transactions are particularly burdensome, and businesses complain that these taxes hinder the international competitiveness of Brazilian-made products. In addition, the U.S. government is evaluating Provisional Measure 668, which increased the PIS/Cofins tax rate on imported goods only and took effect May 1, 2015.

Of Brazil’s 10 federal regulatory agencies, the most prominent include ANVISA (the Brazilian equivalent of the U.S. Food and Drug Administration), which has regulatory authority over the production and marketing of food, drugs and medical devices; ANATEL, the country's telecommunication agency, which handles licensing and assigning of bandwidth; ANP, the National Petroleum Agency, which regulates oil and gas contracts and oversees the bidding process for oil blocks, including for pre-salt oil; ANAC, the agency that oversees the civil aviation industry; and ANEEL, the country’s electric energy agency. In addition to these federal regulatory agencies, Brazil has at least 27 state-level agencies and 17 municipal-level agencies.

The Office of the Presidency’s Program for the Strengthening of Institutional Capacity for Management in Regulation (PRO-REG), created in 2007 by Decree 6062, has introduced a broad program for improving Brazil’s regulatory framework, including via an ongoing Work Plan launched in 2014 with the U.S. White House Office of Information and Regulatory Affairs (OIRA) to exchange best practices in developing high quality regulations that mandate the least burdensome approach to address policy implementation.

The general public has online access to both approved and proposed federal legislation via websites for the Chamber of Deputies, Federal Senate, and the Office of the Presidency. Brazil is seeking to improve its public comment and stakeholder input process. Since 2004, the GOB has instituted a Transparency Portal, a website in which data is available on funds transferred to and from the federal, state and city governments, as well as to and from foreign countries. It also includes information on civil servants’ salaries.

8. Efficient Capital Markets and Portfolio Investment

In an effort to control rising inflation rates, the BCB initiated a cycle of monetary policy tightening in April 2013, and real interest rates increased through 2015. The current BCB benchmark interest rate is 14.25 percent.

While local private sector banks are beginning to offer longer credit terms, BNDES has been the traditional Brazilian source of long-term credit, and also provides export credits. BNDES provides foreign- and domestically-owned companies operating in Brazil financing for the manufacturing and marketing of capital goods. As part of its package of fiscal tightening, in December 2014, the GOB announced its intention to scale back the expansionary activities of BNDES. The GOB ended direct Treasury support to the bank, and it raised the Long Term Interest Rate that serves as the basis for BNDES loans from 5.0 percent to 7.5 percent by the end of 2015.

All stock trading is performed on the Sao Paulo Stock Exchange (BOVESPA), while trading of public securities is conducted on the Rio de Janeiro market. In 2008, the Brazilian Mercantile & Futures Exchange (BM&F) merged with the BOVESPA to form what is now the fourth largest exchange in the Western Hemisphere, after the NYSE, NASDAQ, and Canadian TSX Group exchanges. BOVESPA launched in 2000 a “New Market” in which the listed companies comply with stricter corporate governance requirements. A majority of initial public offerings (IPOs) are listed on the New Market. At year-end 2015, there were 115 companies listed under the “New Market” program. Their market value reached US$ 185 billion in 2015. At year-end, there were 519 companies traded on the BM&F/BOVESPA. Total daily trading average volume rose from R$ 2.4 billion (US $ 1.2 billion) in 2006 to R$ 7.3 billion (US $ 3.1 billion) in 2014, but decreased to R$ 6.8 billion (US $ 2.0 billion) in 2015.

Foreign investors, both institutions and individuals, can directly invest in equities, securities and derivatives. Foreign investors are required to trade derivatives and stocks of publicly held companies on established markets. At year-end 2015, foreign investors accounted for 52.8 percent of the total turnover on the BOVESPA. Domestic institutional investors were the second most active market participants, accounting for 27.2 percent of activity. Individual investors comprised 13.7 percent of activity, followed by financial institutions (5.1 percent), and public and private companies (1.2 percent).

Wholly owned subsidiaries of multinational accounting firms, including the major U.S. firms, are present in Brazil. Auditors are personally liable for the accuracy of accounting statements prepared for banks.

Money and Banking System, Hostile Takeovers

The Brazilian financial sector is large and sophisticated. Banks lend at Brazilian market rates, which remain high. Reasons cited by industry observers include high taxation, repayment risk, and concern over inconsistent judicial enforcement of contracts, high mandatory reserve requirements, and administrative overhead.

The financial sector is concentrated, with BCB data indicating that the 10 largest commercial banks (excluding brokerages) account for approximately 89.6 percent of the commercial banking sector. Three of the five largest banks (in assets) in the country – Banco do Brasil, Caixa Economica Federal, and BNDES – are partially or completely federally owned. Lending by the large banking institutions is focused on the largest companies, while small- and medium-sized banks primarily serve small- and medium-sized companies.

The BCB has strengthened bank audits, implemented more stringent internal control requirements, and tightened capital adequacy rules to better reflect risk. It also established loan classification and provisioning requirements. These measures are applied to private and publicly owned banks alike. The Brazilian Securities and Exchange Commission (CVM) independently regulates the stock exchanges, brokers, distributors, pension funds, mutual funds, and leasing companies with penalties against insider trading.

9. Competition from State-Owned Enterprises

In the 1990s and early 2000s, the GOB privatized state-owned enterprises across a broad spectrum of industries, including mining, steel, aeronautics, banking, energy, and electricity generation and distribution. While the GOB has divested itself from many of its state-owned companies, it maintains partial control (at both the federal and state level) of some previously wholly state-owned enterprises.

Notable examples of majority government owned and controlled firms include national energy giant Petrobras and power utility Eletrobras. Both Petrobras and Eletrobras include non-government shareholders, are listed on both the Brazilian and NYSE stock exchanges, and are subject to the same accounting and audit regulations as all publicly traded Brazilian companies. 2010 legislation obligated Petrobras to serve as the sole operator and minimum 30 percent investor in any exploration consortium, to develop all oil discoveries in Brazil’s offshore “pre-salt” fields. Given the 2010 restrictions on foreign operatorship, as well as a desire to increase foreign investment in offshore oil and gas exploration, in February 2016 the Brazilian Senate passed a bill that would give Petrobras right-of-first refusal in developing pre-salt fields and eliminate Petrobras’ obligation to invest in exploration groups, which could open pre-salt fields to foreign operatorship. As of April 2016, the bill remains under consideration with the Lower Chamber of Deputies.

OECD Guidelines on Corporate Governance of SOEs

The GOB maintains ownership interests in a variety of enterprises at both the federal and state levels. Typically, SOE corporate governance is led by a board comprised of directors elected by the state or federal government with additional directors elected by any non-government shareholders. Brazilian SOEs are concentrated in the energy, electricity generation and distribution, transportation, and banking sectors. A number of these firms are also publically traded on the Brazilian and other stock exchanges.

Sovereign Wealth Funds

The Sovereign Fund of Brazil (FSB) was established in 2008 under Law 11887. It is a non-commodity fund with a mandate to support national companies in their export activities and to offset counter-cyclical development, promoting investment in projects of strategic interest to Brazil both domestically and abroad. The GOB also has the authority to use money from this fund to help meet its fiscal targets when annual revenues are lower than expected, and to invest in state-owned companies. The FSB was worth US$ 2.2 billion in 2016. FSB resources are derived from GOB financial revenues.

10. Responsible Business Conduct

Most state-owned and private sector corporations of any significant size in Brazil pursue corporate social responsibility (CSR) activities. Brazil’s new CFIAs (see section 13) contain CFR provisions. Many corporations support local education, health and other programs in the communities where they have a presence. Brazilian consumers, especially the local citizenry where a corporation has or is planning a local presence, expect CSR activity. It is not uncommon for corporate officials to meet with community members prior to building a new plant or factory to review what types of local services the corporation will commit to providing. Foreign and local enterprises in Brazil often advance United Nations Development Program (UNDP) Millennium Development Goals (MDGs) as part of their CSR activity, and will cite their local contributions to MDGs, such as universal primary education and environmental sustainability.

The U.S. diplomatic mission in Brazil supports American business CSR activities through the +Unidos Group (Mais Unidos), a group of more than 100 American companies established in Brazil. Additional information on how the partnership supports public and private alliances in Brazil can be found on its website:

11. Political Violence

Strikes and demonstrations occur occasionally in urban areas and may cause temporary disruption to public transportation. Occasional port strikes also impact commerce.

In 2016, over three million people demonstrated to call for President Dilma Rousseff’s impeachment and protest against corruption, among the largest public protests in Brazil’s history. At the same time, almost one million people demonstrated in support of the Rousseff administration. Non-violent pro- and anti-government demonstrations have occurred regularly over the past few years.

Although U.S. citizens have traditionally not been targeted during such events, U.S. citizens traveling or residing in Brazil are advised to take common-sense precautions and avoid any large gatherings or any other event where crowds have congregated to demonstrate or protest. For the latest U.S. State Department guidance on travel in Brazil, please consult

12. Corruption

In 2015, Brazil ranked 76th out of 167 countries in Transparency International's Corruption Perceptions Index. The full report can be found at:

Since 2014, “Operation Carwash” (Lava Jato) has uncovered a complex web of corruption, money laundering, and tax evasion related to the upstream, midstream, and downstream arms of Petrobras. The ongoing investigation has led to the arrests of Petrobras directors, oil industry suppliers including executives from Brazil’s largest construction companies, and money launderers. Many Brazilian politicians are also under investigation.

In 2015, GOB prosecutors also announced “Operation Zealots” (Operacao Zelotes), in which firms are alleged to have bribed tax officials to reduce their assessments.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Brazil is a signatory to the OECD Anti-Bribery Convention and a participating member of the OECD Working Group on bribery. It was one of the founders, along with the United States, of the intergovernmental Open Government Partnership, which seeks to help governments increase transparency. Brazil has laws, regulations and penalties to combat corruption, but their effectiveness is inconsistent. Bribery is illegal, and a bribe by a local company to a foreign official is a criminal act. A company cannot deduct a bribe to a foreign official from its taxes. While federal government authorities generally investigate allegations of corruption, there are inconsistencies in the level of enforcement among individual states. Corruption has been reported to be problematic in business dealings with some authorities, particularly at the municipal level. U.S. companies operating in Brazil are subject to the U.S. Foreign Corrupt Practices Act.

Resources to Report Corruption

Georgia Diogo
International Affairs Advisor
Brazilian Federal Public Ministry

Transparencia Brasil
R. Bela Cintra, 409; Sao Paulo, Brasil
+55 (11) 3259-6986

13. Bilateral Investment Agreements

Brazil does not have a Bilateral Investment Treaty (BIT) with the United States. In the 1990s Brazil signed BITs with Belgium and Luxembourg, Chile, Cuba, Denmark, Finland, France, Germany, Italy, the Republic of Korea, the Netherlands, Portugal, Switzerland, the United Kingdom and Venezuela. None of these were approved by Brazil’s Congress and in 2002 an inter-ministerial working group withdrew the agreements from Congress.

The GOB signed six new Cooperation and Facilitation Investment Agreements (CFIAs) in 2015 (, which are pending Congressional ratification: Mozambique (April, 2015), Angola (May 2015), Mexico (June 2015) Malawi (October 2015), Colombia (October 2015), and Chile (November 2015).

The signed CFIAs outline progressive steps for the settlement of any “issue of interest of an investor:” 1) an ombudsmen and a Joint Committee appointed by the two governments will act as mediators of sorts to amicably settle any dispute; 2) if amicable settlement fails, any of the two governments may bring the dispute to the attention of the Joint Committee; 3) if the dispute is not settled within the Joint Committee, the two governments may resort to interstate arbitration mechanisms.”

Bilateral Taxation Treaties

Brazil does not have a double taxation treaty with the United States, but it does have such treaties with 36 other countries, including, among others, Japan, France, Italy, the Netherlands, Canada, Spain, Portugal, and Argentina. Brazil signed a Tax Information Exchange Agreement (TIEA) with the United States in March 2007, and that agreement entered into force on May 15, 2013, signed by President Rousseff in Decree 8003/2013. In September 2014, Brazil and the United States signed an intergovernmental agreement (IGA) to improve international tax compliance and to implement the Foreign Account Tax Compliance Act (FATCA). This agreement went in effect in September 2015.

14. OPIC and Other Investment Insurance Programs

Programs of the Overseas Private Investment Corporation (OPIC) are fully available. Brazil has been a member of the Multilateral Investment Guarantee Agency (MIGA) since 1992.

15. Labor

Brazil has ratified a number of International Labor Organization (ILO) conventions. Brazil is party to the UN Convention on the Rights of the Child and major ILO conventions concerning the prohibition of child labor, forced labor, and discrimination.

In Brazil’s labor code, formal sector workers are guaranteed 30 days of annual leave and severance pay in the case of dismissal without cause. Brazilian employers are required to pay a “thirteenth month” salary to employees at the end of the year. Brazil also has a system of labor courts that are charged with resolving routine cases involving unfair dismissal, working conditions, salary disputes, and other grievances. Labor courts have the power to impose an agreement on employers and unions if negotiations break down and either side appeals to the court system. As a result, labor courts are routinely called upon to determine wages and working conditions in industries across the country. The system is tantamount to compulsory arbitration and does not encourage collective bargaining. In recent years, however, both labor and management have become more flexible, and collective bargaining has assumed greater relevance.

The Ministry of Labor estimates there are nearly 11,000 labor unions in Brazil, but officials note these figures are inexact. Labor unions, especially in sectors such as metalworking and banking, tend to be well-organized and aggressive in advocating for wages and working conditions and account for approximately 19 percent of the official workforce according to a recent Brazilian Institute of Applied Economic Research (IBGE) release. Strikes occur periodically, particularly among public sector unions. Unions in various sectors engage in industry-wide collective bargaining negotiations mandated by federal regulation. While some labor organizations and their leadership operate independently of the government and of political parties, others are considered to be closely associated with political parties.

Employer federations, supported by mandatory fees based on payroll, play a significant role in both public policy and labor relations. Each state has its own federation, which reports to the National Confederation of Industry (CNI), headquartered in Brasilia.

16. Foreign Trade Zones/Free Ports/Trade Facilitation

The federal government grants tax benefits for certain free trade zones. Most of these free trade zones aim to attract investment to the country’s relatively underdeveloped North and Northeast regions. The most prominent of these is the Manaus Free Trade Zone, in Amazonas State, which has attracted significant foreign investment, including from U.S. companies. In October 2011, President Rousseff signed a constitutional amendment that extends Manaus’s status as an industrial zone for another 50 years. Constitutional amendment 83/2014 came into force in August 2014 and extended the status of Manaus Free Trade Zone until the year 2073.

17. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy


Host Country Statistical source*

USG or international statistical source

USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other

Economic Data






Host Country Gross Domestic Product (GDP) ($M USD)


$ 2,345,379



Foreign Direct Investment

Host Country Statistical source*

USG or international statistical source

USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other

U.S. FDI in partner country ($M USD, stock positions)





Host country’s FDI in the United States ($M USD, stock positions)





Total inbound stock of FDI as % host GDP





** In this year’s report, we are using BCB “stock – distribution by ultimate investment country” statistics for this chart.

Table 3: Sources and Destination of FDI

Direct Investment from/in Counterpart Economy Data (IMF, 2014)

From Top Five Sources/To Top Five Destinations (US Dollars, Millions)

Inward Direct Investment

Outward Direct Investment

Total Inward



Total Outward






Cayman Islands



United States*









British Virgin Islands






The Bahamas









"0" reflects amounts rounded to +/- USD 500,000.

* There is a discrepancy between BCB and IMF calculations for U.S. FDI distribution in Brazil, as well as Brazilian FDI distribution in the United States. According to the BCB, the United States had the highest stock of FDI in Brazil as of 2013. The BCB calculates FDI distribution by ultimate investing country (for which the United States ranks number one), whereas the IMF calculates FDI distribution by immediate investing country (for which the Netherlands ranks number one). The ultimate investor occupies the top of the control chain and does not necessarily coincide with the immediate investor.

Table 4: Sources of Portfolio Investment

Portfolio Investment Assets (IMF, June 2015)

Top Five Partners (Millions, US Dollars)


Equity Securities

Total Debt Securities

All Countries



All Countries



All Countries



United States



United States



United States






Cayman Islands






Cayman Islands















Republic of Korea












18. Contact for More Information

Economic Section
U.S. Embassy Brasilia

Note: Average annual R$/US$ exchange rates were used for this report: 2014 = R$ 2.36; 2015 = R$ 3.34.