The Law 4131/62 defines foreign capital as “any goods, machinery, equipment, cash and financial resources that enter Brazil for the production of goods or services, or for investment in economic activities, provided that in either case they belong to individuals or legal entities resident, domiciled or headquartered abroad”.
The entity in charge of the registering, monitoring and following up on foreign investments is the Brazilian Central Bank, while the Federal Revenue Secretariat is encumbered with the eventual taxation of these foreign investments. Also, foreign investors must translate their foreign currencies into Brazilian currency by entering into a foreign exchange contract with any authorized Brazilian financial institution (cash investments).
Foreign investments in Brazil are usually made through the incorporation of a company, the opening of a branch or subsidiary, or through direct investments on the capital or financial markets, among others. Foreign capital is granted equal treatment to domestic capital and the Law prohibits any discrimination unless expressly prescribed.
Participation of foreign capital in the following activities is prohibited:
• Domestic flight routes.
• Nuclear energy.
• Health services.
• Post office and telegraph services.
• Businesses abutting on international borders.
• Aerospace industry, restricted to the launch and orbital positioning of satellites, vehicles, aircraft and related activities, excluding the manufacture or marketing of these items and their accessories.
Some restrictions apply to foreign investment in the ownership and management of newspapers, magazines and other periodicals, radio and television networks and ownership of countryside real estate properties. There are also limitations on the presence of foreign capital in financial institutions, though these restrictions can be lifted in the national interest.