Brazil opens airline sector to foreign capital

For Dilma Rousseff's allies, however, this relaxation of limits on foreign investment threatens national sovereignty

The full Chamber of Deputies of Brazil on Wednesday approved an executive order allowing foreign investors up 100% ownership of Brazilian airlines, compared to the current 20% limit.

The executive order, presented last March by President Dilma Rousseff before she was stripped off her duties, subjected to impeachment and replaced by Vice President Michel Temer, was modified to be more progressive than the initial proposal, EFE news reported.

The then Brazilian President proposed to lift from 20% to 49%, the maximum foreign stake in domestic airlines, but the rapporteur of the initiative raised the cap to 100% and was supported by 199 in favour to 71 opposed.

The approved order stipulates that foreigners can hold up to 100% stake of a Brazilian airline through bilateral reciprocity agreements, meaning that the investor's country of origin also allows Brazilians to acquire 100% ownership.

The decision of the Lower House was celebrated by the interim president's government.

According to Brazil's lower house spokesman Andre Moura, the decision will help the sector to face the current crisis and allow fare reduction.

"For the government, it is important to allow the participation of foreigners in the sector, even because the country's economic crisis forces us to do so," said Moura, for whom the relaxation will boost investment in the sector and allow Brazilian airlines to have more technology, more aircraft and more security.

"Those benefiting are the passengers, who may pay less for the tickets," he said.

For Rousseff's allies, however, this relaxation of limits on foreign investment threatens national sovereignty.

"Foreigners will be able to create monopolies due to competitive capacity. They come to Brazil to gain more profits and not to increase flights and lower fares," said Deputy Ivan Valente of the Socialism and Freedom Party (PSOL).

If the executive order is also approved by the majority of the Senate, Brazil will become, along with countries like Chile and Singapore, one of the few nations that give total freedom to foreigners to control national carrier.