Foreign Companies Can Have Up to 100% Stake in Brazilian Airlines

06/22/2016 - 10h31

Following new legislation passed by Michel Temer's interim government, foreign companies can now own up to 100% of the capital of Brazilian's national airlines.

Up until the beginning of this year, foreign investors could only have a 20% participation in Brazilian companies. In early 2016 the now suspended President, Dilma Rousseff, passed a temporary measure that increased this limit to 49%.

However, this Tuesday (21) a further amendment to the regulation received government backing. The latest measure allows for 100% foreign ownership of Brazilian companies. The amendment still needs to be approved by the Senate and sanctioned by the President.

Experts in the field said that this year will be unlikely to see many foreign investors taking advantage of the new legislation. Many international companies are reluctant to invest in Brazilian ventures, owing to what are considered shaky economic prospects.

However, business experts believe foreign partners may increase their involvement in Brazil's aviation companies. Major Brazilian airline Gol's minority shareholders include Delta and Air France.

The multinational LATAM airlines group holds 100% of preferential shares and 20% of common stock of Brazilian company TAM S/A. Chinese group HNA and US based United Airlines have considerable holdings in Brazil's Azul airlines.

Latam Brasil came out in support of the change in legislation. However, the Airlines' association (Abear) and the aviation companies Azul and Avianca spoke favourably of the previous 49% limit. Gol refused to comment.

Specialist in aviation and professor at the University of Sao Paulo, Jorge Eduardo Leal, told Folha that such a measure should only be approved when it was reciprocated by other countries.

Translated by GILLIAN SOPHIE HARRIS

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