investments should be in the national interest, and it is
welcome to the extent that it represents a long-term
commitment to the economic development. Areas
particularly favored by the local include development of
agriculture, technology, labour-intensive industries, and
manufacture of products that are currently imported and
those that will increase exports. Foreign investors may also
participate in the National Privatization Program by
converting Brazilian foreign debt securities, or by subscribing
to the privatization funds. Although there are no federal tax
incentives to attract foreign capital, many states and local
government offer tax concessions especially in the poorer
Northeast and Amazon regions. Except for the above tax
incentives, all corporations are subject to 26% corporation
income tax. There is a strong control over foreign currency
transaction which is monitored by the National Monetary
Council. All foreign currency loans have to be approved by
the Central Bank. When Brazil is short of foreign exchange,
the Central Bank centralizes all foreign currency repatriation
and remittance requests, and releases foreign currency when
it becomes available. Therefore delays occur, though the
Bank pay interest compensations. Foreign ownership is
restricted in certain industries viewed as strategically
important. These include communications, aviation, defense,
classified government contracts, coastal and freshwater
shipping, financial institutions, and privatized companies.
Other than these, foreign firms are generally allowed to have
100% ownership. Under the Constitution, national capital
companies may also receive temporary market protection or
benefits in activities considered to be important or national
development. There is limitation on rural land but no
restriction on ownership of urban land and buildings.
Security markets are available with the principal stock
exchanges in Sao Paulo and Rio de Janeiro. All public issues
of securities have to be registered with the Securities
Commission(CVM) The process of registration can be very
time-consuming. Banking and financing business are
regulated by the Central Bank. Major banks in the private
sector have been organized into financial conglomerates, and
are able to offer full range of financial services through
subsidiary and associated companies. A point to note is that
Brazil is not an international financial center and offshore
banking, trust, and financial services are not allowed.
Imports have been generally subject to high tariffs but are
starting to fall. The maximum import duty rate would be
reduced to 40% by the end of 1994, and the modal rate was
projected at 20%. Import procedures were also
deregulated. Besides the 26% corporate tax, a 15% tax is
also charged on dividends. Although a corporation can be
wholly foreign-owned, participation of local capital is
favored by authorities. The director of the corporation must
hold a permanent visa and be domiciled in Brazil, though
nationality is not a restriction. The labor force is
approximately 62 million, or 41% of the population. Women
comprise 35% of the total, and this percentage is projected
to increase. All employers, with few exceptions are required
to employ Brazilians in the proportion of at least two-thirds
of their total personnel as regards both number and total
remuneration. There is a minimum wage requirement and
labor unions have become more active especially after the
national two day strike in 1989. Patent and trademark laws
are available on a federal level. Environmental awareness has
increased due to international pressure, especially from the
US. This has restricted the exploitation of the tropical rain
forest. The infrastructure is underdeveloped. There has been
no major modernization or improvement of the
government-controlled railroad system, though there are
plans for some extensions. Hence road transport dominates,
but highways are not well maintained and construction of
new highways has been slow in recent years. The airline
network is well developed and mainly privately owned.
Urban transportation poses significant problems especially in
major cities. The postal system is well developed. The
telecommunication system has made significant progress, but
is now lack of further investment. Telexes and electronic mail
links are widely used by business and industry. Canadian
Firms in Brazil For Canadian businesses, Brazil offers great
opportunities for its vast consumer base, close proximity,
and its similarities in language and culture. With the current
government’s commitment on economic liberalization, the
investment climate is favorable. Interested firms should be
prepared to commit a medium to long term investment
subject to tight exchange control. Government policy may be
unstable. Precautions should be taken when dealing with
local government due to the cumbersome and corrupt
bureaucracy. Connections with the political scene is
advisable. Also, Brazil has much more primitive financial and
industrial base, and a much lower standard of labor
productivity. Employee training would be a substantial part
of investment. Canadian industries can take advantage of the
large labor base for labor intensive manufacturing processes
like textile and electronics. There is also large potential in the
agriculture, fisheries, and energy sectors. The huge
population, combined with those of the MERCOSUL
countries will form a gigantic consumer base for almost any
product. As inflation and foreign debt under control, Brazil
might fulfill the promises it gave in the 1970s as an economic
miracle among developing countries. Bibliography "Another
Devaluation, Few Tremors." Business Week, (1995), 28.
Arraes, Miguel. Brazil: The People and the Power.
Middlesex: Penguin Books Ltd., 1972. Doing Business in
Brazil. 6th ed. USA: Price Waterhouse, 1994. "Happy
Birthday," The Economist, v.336 (1995), 36. Mccluskey,
Ian. "Magic Rio-ism." Time, 146, no. 24 (1995), 16.
________. "Staking Claims." Time, 146, no. 25 (1995), 33.
Roniger, Luis. Hierarchy and Trust in Modern Mexico and
Brazil. New York: Praeger, 1990. "Survey: Brazil," The
Economist, v.335 (1995). "Tax Reform and the Governors,"
The Economist, v.336 (1995), 39-40. Teixeira, A. S. "The
Changing Role of Education in Brazilian Society." In Modern
Brazil, 71-95. John Saunders ed. Florida: University of
Florida Press, 1971. "The Fiscal Black Hole of Sao Paulo,
and others," The Economist, v.338 (1996), 41-42. Trade
Policy Review: Brazil. Geneva: GATT, 1993. "Urban Crime:
from Rio…," The Economist, v.337 (1995), 37. "Watch my
hands," The Economist, v.337 (1995), 33-34.