Brazil’s Temer to Veto Unlimited Foreign Capital in Airline Sector

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – The Brazilian Senate approved this week a bill which would allow for 100 percent of foreign capital participation in Brazil’s civil aviation, but only after senators ensured that interim president Michel Temer will veto the controversial clause.

“The government will veto this clause,” Temer’s Chief of Staff Eliseu Padilha told reporters after a meeting with senators. “We need to gain international confidence for investments in Brazil and generate new jobs. We are thinking of several ways to do this, including the possibility of opening (foreign capital) 100 percent in airlines. But I understand and respect the position of the senators, who want to debate regional aviation, which was not clear on that clause,” added Padilha.

According to the original bill, foreign participation in the sector would increase from 20 percent to at the most forty-nine percent, ensuring that Brazilian investors would continue to have control over the airline companies. An amendment approved by representatives at the Chamber of Deputies, however, lifted the limit of foreign participation, allowing for non-Brazilians to own up to 100 percent of the companies.

This displeased several senators who argued that withdrawing the participation limit for foreign investors would hurt the Brazilian domestic aviation sector as a whole. According to them the increase of foreign participation is a complex issue which warrants further debate.

“Foreign capital will want to invest only in large and more profitable routes, leaving aside the regional aviation and smaller towns,” Senator José Pimentel from the Northeastern state of Ceara was quoted as saying by Agencia Senado, the official Senate press corps.

The Brazilian Airline Association (ABEAR) which has among its members the four largest airline companies in Brazil (Gol, Latam, Azul, Avianca) positioned itself against the withdrawal of a limit for foreign participation.