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On Wednesday (3 April), Minister of Tourism Marcelo Álvaro
Antônio said he was confident that an aviation bill allowing
foreign investors to own up to 100% of Brazilian airlines will soon
be approved by Congress. The bill was passed by the Lower House on
20 March by 329 votes to 44 and is now with the Senate for a final
vote. Until now the maximum shareholding a foreign investor can own
is 20%. Attempts by the former government of Dilma Rousseff in 2016
to increase foreign shareholding to 49% failed.
The approval by the Lower House is significant because it
ratifies an Extraordinary Decree (Medida Provisória: MP) signed by
former president Michel Temer in December 2018, allowing foreigners
to have shareholding control of Brazilian airlines. However, MPs
are only valid for 120 days and expire unless Congress endorses
them.
Significance
The vote in the Lower House indicates that unlike the two
previous governments, this time the bill appears to have sufficient
cross-party support to be approved. The Minister of Tourism said
that it counts on strong support in the Senate, where leading
parties have agreed to give priority to the bill. He also said that
once the law is approved, at least 12 new companies will start
operating in Brazil.
The law would permit foreign investors to buy stakes in existing
companies or, alternatively, set up a new one. According to the
Minister of Tourism, the presence of new players would increase
competition and potentially raise the number of cities and routes
served. Also, Brazilian companies in need of fresh capital would
benefit by being able to set up joint ventures with foreign
partners.
However, approval of the bill could be delayed if relations
between the government and Congress deteriorate. Over the last few
weeks, Brazilian President Jair Bolsonaro and political leaders in
Congress have had differences over the vote of the pension reform
and other austerity measures. In this context, it is likely that
legislators will threaten to delay a final vote on the aviation
bill to secure changes to the pension reform draft.
Posted 09 April 2019 by Carlos Caicedo, Senior Principal Analyst, Latin America Country Risk, IHS Markit
