Customer Logins

Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.

Customer Logins

Brazilian aviation investment

09 April 2019 Carlos Caicedo

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, Country Risk – Americas, IHS Markit

Explore

Follow Us

Filter Sort