Brazil’s Chamber Lifts Limit of Foreign Capital in Airline Sector

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – The Chamber of Deputies in Brazil approved on Tuesday (June 21st) by 199 votes to 71 a legislative measure that will allow foreign companies to have total capital control of Brazilian airlines. Currently foreign participation in Brazilian airlines is limited to twenty percent, and the original legislative text called for an increase of the limit to 49 percent.

The approval was seen as a victory for the interim government. Planning Minister Dyogo Oliveira, said the measure will benefit the civil aviation sector in Brazil, especially less popular domestic routes.

“It’s an important step because it gives foreign investors the possibility of benefitting from this market, including the least explored, less used routes,” Oliveira told reporters.

The decision by Brazil’s Lower House comes at a time when Brazilian airlines are facing a decrease in demand due to the unattractive foreign exchange rate and the weakened economy.

“It is important for the government to increase foreign capital to one hundred percent; the current economic crisis in the country has required us to do it,” said the Chamber’s majority leader Andre Moura after Tuesday’s vote.

He added, “We are raising foreign capital from 49 percent to one hundred percent not because the government wants to increase, but because of the incompetent economic administration of a misguided and corrupt PT (Workers Party).” The measure will now go to the Senate for a vote.

According to data from ABEAR, Brazilian Airline Association, the demand for Brazilian domestic air travel has registered consecutive monthly negative rates since August of 2015. ABEAR members (Gol, Avianca, Latam, Azul) account for 99 percent of the domestic market.

Analysts forecast that the months of July, August and September will likely register a relief for the sector, with an increase in air travel due to the Rio 2016 Olympic and Paralympic Games. The Brazilian government expects more than one million passengers to pass through the airports of Rio de Janeiro and other cities, hosting competition in the Rio 2016 Games, like the three in São Paulo state (Guarulhos, Congonhas and Viracopos) and airports in Brasilia, Belo Horizonte, Manaus and Salvador.