After years of heated discussions, Brazil has enacted new legislation authorizing foreign investors to operate in the country's health sector, including by acquiring hospitals, clinics and laboratories. Data gathered by the Brazilian Federation of Supplementary Health (Federação Nacional de Saúde Suplementar – FenaSaúde) – a private association that unites Brazil's private health operators – indicates that the market comprises approximately 71,9 million people, with revenues in the region of USD 49 billion per year (Sept. 2014).

Law N. 13.097 was published on January 20th, 2015, coming into effect on the same date. It modifies the previous law, Law N. 8.080, of September 19th, 1990, which is the law regulating the Brazilian Unified Health System (Sistema Único de Saúde – SUS), the State-controlled public system for free healthcare.

Despite the fact that Brazil's Federal Constitution sets forth that the Government is required to provide quality, universal and free healthcare to the whole population, the precarious conditions of public hospitals, plagued by long lines, a lack of qualified professionals, poor facilities and a general absence of resources, has driven most of the higher income classes to private health care providers.

According to the Constitution, foreign entities and individuals cannot hold investments in health sector enterprises in the country except as otherwise authorized by specific laws and, so far, the only relevant legal authorization to this end was that of Law N. 9.656, dated June 3rd, 1998, which provides for the organization of private health care operators in Brazil. These are entities whose main activity is to provide reimbursement to clients for private health care expenses, or to provide clients with prepaid treatment in hospitals owned by the operator or by other contracted physicians.

Since the law authorizes private health providers to own their own hospitals and other health service establishments, until recently the main alternative for foreign entities to maintain investments in local hospitals was to become a shareholder of one such operator. Alternatively, other foreign groups could opt to execute long term loans to Brazilian hospitals with an option to convert their debt into equity in the future – at the creditor's criteria and provided the law would so authorize.

Now, based on the new law, foreign investors may, directly or indirectly, hold full or partial ownership in general or specialized hospitals, including philanthropic and not-for-profit establishments, as well as general or specialized clinics, policlinics, human genetics labs, entities that produce and supply drugs and other health products, clinical analysis labs, pathologic anatomy labs and diagnostic imaging centers, among others.

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