Brazil plans to propose to Congress in the first half of the year an increase in the foreign ownership of local airlines, in a move to help the struggling sector.The government continues to discuss the percentage increase in foreign ownership, but believes an increase from the current 20 percent limit is key to bolster investment in local airlines, Interim Aviation Minister Guilherme Ramalho said.
“This is a very favourable moment to attract foreign investment… we should not restrict the access of capital of these companies,” said Ramalho. “The government has a joint position on this matter and that is key for its approval.”
The proposal reflects President Dilma Rousseff’s major shift in policy to open up one of the Western Hemisphere’s most-closed economies and bring in capital to halt a recession entering its second year.
Ramalho said it is “very possible” that the government will propose an initial increase in the foreign ownership stake to be followed by another depending on market reaction and foreign interest.
The Finance Ministry is working on a proposal to raise the ownership stake cap to 49 percent from 20 percent with the option of acquiring a controlling stake if approved by local aviation and competition authorities, Reuters reported.
Brazilian airlines such as TAM and Gol have cut flights and reduced staff numbers to cope with what is expected to be the country’s worst recession in a century. The sharp depreciation of the Brazilian real has worsened the crisis in the country’s aviation sector.
Ramalho said the government has not yet decided if it will adopt any of the current bills to remove capital restrictions or make the change via a presidential decree, which will ultimately have to be ratified by Congress.
DOZENS OF PROPOSALS
There are currently around 68 bills in the Lower House of Congress and two at the Senate to lift limits on foreign ownership.
One of them, which is under review by deputy Clarissa Garotinho, calls for the complete removal of restrictions.
“I believe that we need to move ahead with a bolder proposal because increasing the stake to 49 percent will not solve the problems of the aviation sector in Brazil,” Garotinho said.
Once a rising emerging market star with a expanding middle class that triggered a boom in air travel Brazil’s economy is now in tatters. The economy is expected to contract 8 percent between 2015 and 2016, driving down flight demand and threatening the survival of local airlines.
Ramalho also said that plans to open up the capital of Infraero, the state-run company that controls most of Brazil’s airports, would be delayed until 2017 given current negative market conditions.
Leave a Reply