Brazil: Investing In Brazil In 1997


Brazil is the only Latin American country that was colonized by the Portuguese. It is also the largest and most populated country in South America. Brazil occupies over half the continent of South America and 40% of Latin America. Brazil has a common border with all South American countries except Ecuador and Chile.

Portugueses is the official language of Brazil, and Roman Catholicism is the major religion. Brazil became independent from Portugal in 1822 and is currently a Federal Republic headed by a president and two chambers of legislature.

The federal capital, for strategic and development reasons, is located in the center of the country and is not close to any active industrial or agricultural area. The main economic activity of the country is concentrated in the South Eastern region of the country, near the cities of Sao Paulo, Rio de Janeiro and Belo Horizonte.

The unit of currency is the "Real" (R$). This currency was introduced on July 1, 1994 through the so-called "Real Plan". Even though the initial rate between the Real and the U.S. dollar was R$1.00 for each US$1.00, being it that such a rate is now R$1,043, the severe inflation rate that prevailed in Brazil's economy for the last decades has been eliminated. Therefore, the new currency has proven to stable, thus economic development has increased as of 1994.

Brazil's population, of approximately 150 million, is multiracial including the initial Portuguese immigrants and their slaves, as well as the later Japanese, Italians, Germans and Swiss which immigrated during the second half of the twentieth century. The labor force in Brazil consists of approximately 64.5 million workers.


The Brazilian economy expanded rapidly during the period from 1968 to 1980. Gross National Product (GNP) increased at an average rate of 7% per annum. In the eighties, GNP showed very unstable figures, ranging from -4.2% to 6.9%. More recently, the Brazilian economy has been growing at an approximate rate of 3.5%.

Even though Brazil has an economic past of uncertainties, today Brazil presents a well balanced economy in terms of virtual self-sufficiency in agriculture and industrial production, diversified markets and inexpensive labor. It should be stressed, however, that such labor costs, are often increased by as much as 80% of total payroll charges.

As a result of the effort to promote exports, the trade surplus in the five years prior to 1988 averaged 11.7 billion dollars per annum; in 1989, it reached 16.8 billion dollars, in 1990, 12.0 billion dollars; in 1991, 11.0 billion dollars; in 1992, 15.6 billion dollars, in 1993, 13.0 billion dollars, and in 1994 10.9 billion dollars. Manufactured goods account for approximately 55% of Brazil's total exports.

The country has increased hydroelectric production and the domestic production of oil to over 60% of the present consumption rate.

The installed capacity of heavy and basic industries (heavy industrial machinery and equipment, shipbuilding, road building equipment, railway equipment, equipment for hidroelectric plants, offshore drilling equipment, steel, cement, aluminum, pulp, paper, etc.) is significant and provides the infrastructure for the manufacturing of capital goods.

Notwithstanding the fact that capital investments have been somewhat reduced in the last few years, due to the general climate of uncertainty caused by increasing inflation as well as other internal political factors, nowadays a new scenario is visible as a result of economic reform and the Industrial Policy.


For the above mentioned reasons, Brazil can currently be considered as a serious candidate for investment purposes. It should be stressed that, since the 1994 calendar year, porfolio investment, as well as capital investment, have increased tremendously. The 1995 and 1996 calendar years proved to be sucessful for Brazil's Stock and Commodities markets. This in itself is a demonstration of Brazil's investment potential in the near future.

Furthermore, the forecast for 1997 is very optimistic, being it that the basic scenario for 1997 does not contain any abrupt changes in the Real Economic Plan. The average GNP forecast*2 for 1997, estimates a growth of approximately 4,0% in 1997 and higher rates for the following years. Inflation is expected to be 10,4% for 1997, as well as the exchange rate will devalue approximately 7,9%, on average.

Huge capital investments are expected in the telecommunications and energy industries. Major automobile manufacturers have announced the creation and development of new industrial plants and factories. Brazil's major steel and mineral government owned company, Companhia Vale do Rio Doce (CVRD), will be privatized in 1997. Additionally, the insurance and financial markets, now more open to foreign investment than in the past, will be receiving foreign financial aid from world leading banks.


Based on Brazilian laws in effect, currently there are basically three options open to foreign investors in Brazil. The choosing between the existing options depends on the investor's profile and on the investment's characteristics (risk, profit margin, cost, etc.).

1) Investors can invest directly in a new local company incorporated in Brazil through a direct equity investment or through the acquisition of shares or quotas of an existing company;

2) Additionally, investors can invest in the various mechanisms of portfolio investments (through an international bank);

3) Finally, investors can make a loan to domestic borrowers (via the signing of the competent loan contract with the local borrower).

It should be stated that the direct participation of foreign investors in a Brazilian company is not usually subject to any restrictions. However, certain limitations are imposed on foreign companies, in areas such as shipping, newspapers and other publication, radio and television, health care, mining activities, banking and alcohol production.

Currently, the Government has a monopoly in certain industries, such as oil, communications and power production. In other areas, protectionist legislation has imposed a market-reserve system limiting the importation of certain items, such as telecommunications and electronic equipment. Nevertheless, as describe above, due to the new industrial policy adopted by the federal government, this scenario is drastically changing, whereas government owned companies are scheduled to be privatized in the near future.

The content of this article is intended to provide a general guide to the subject matter. A specialist's advice should be sought in order to provide professional advice on a case to case basis which will meet specific circumstances.

For more information please contact us.

*1 Information obtained from yearly reports published by leading banks and big-six auditing firms in Brazil.

*2 Information obtained from the Brazilian Association of Commercial and Multiple Banks (ABBC) for which Amaro, Stuber e Advogados Associados is legal counsel.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions