Policies Towards Foreign Direct Investment

Brazil was the world’s sixth-largest destination for Foreign Direct Investment (FDI) in 2019, with inflows of $72 billion, according to UNCTAD.  The GoB actively encourages FDI – particularly in the automobile, renewable energy, life sciences, oil and gas, and transportation infrastructure sectors – to introduce greater innovation into Brazil’s economy and to generate economic growth. GoB investment incentives include tax exemptions and low-cost financing with no distinction made between domestic and foreign investors.  Foreign investment is restricted in the health, mass media, telecommunications, aerospace, rural property, maritime, and insurance sectors.

The Brazilian Trade and Investment Promotion Agency (Apex-Brasil) plays a leading role in attracting FDI to Brazil by working to identify business opportunities, promoting strategic events, and lending support to foreign investors willing to allocate resources to Brazil.  Apex-Brasil is not a “one-stop shop” for foreign investors, but the agency can assist in all steps of the investor’s decision-making process, to include identifying and contacting potential industry segments, sector and market analyses, and general guidelines on legal and fiscal issues.  Their services are free of charge.  The website for Apex-Brasil is: http://www.apexbrasil.com.br/en

In 2019, the Ministry of Economy created the Ombudsman’s office to provide foreign investors with a single point of contact for concerns related to FDI.  The plan seeks to eventually streamline foreign investments in Brazil by providing investors, foreign and domestic, with a simpler process for the creation of new businesses and additional investments in current companies.  Currently, the Ombudsman’s office is not operating as a single window for services, but rather as an advisory resource for FDI.

Limits on Foreign Control and Right to Private Ownership and Establishment

A 1995 constitutional amendment (EC 6/1995) eliminated distinctions between foreign and local capital, ending favorable treatment (e.g. tax incentives, preference for winning bids) for companies using only local capital.  However, constitutional law restricts foreign investment in healthcare (Law 8080/1990, altered by 13097/2015), mass media (Law 10610/2002), telecommunications (Law 12485/2011), aerospace (Law 7565/1986 a, Decree 6834/2009, updated by Law 12970/2014, Law 13133/2015, and Law 13319/2016), rural property (Law 5709/1971), maritime (Law 9432/1997, Decree 2256/1997), and insurance (Law 11371/2006).

Screening of FDI

Foreigners investing in Brazil must electronically register their investment with the Central Bank of Brazil (BCB) within 30 days of the inflow of resources to Brazil.  In cases of investments involving royalties and technology transfer, investors must register with Brazil’s patent office, the National Institute of Industrial Property (INPI).  Investors must also have a local representative in Brazil. Portfolio investors must have a Brazilian financial administrator and register with the Brazilian Securities Exchange Commission (CVM).

To enter Brazil’s insurance and reinsurance market, U.S. companies must establish a subsidiary, enter into a joint venture, acquire a local firm, or enter into a partnership with a local company.  The BCB reviews banking license applications on a case-by-case basis. Foreign interests own or control 20 of the top 50 banks in Brazil, but Santander is the only major wholly foreign-owned retail bank.

Since June 2019, foreign investors may own 100 percent of capital in Brazilian airline companies.

While 2015 and 2017 legislative and regulatory changes relaxed some restrictions on insurance and reinsurance, rules on preferential offers to local reinsurers remain unchanged.  Foreign reinsurance firms must have a representation office in Brazil to qualify as an admitted reinsurer.  Insurance and reinsurance companies must maintain an active registration with Brazil’s insurance regulator, the Superintendence of Private Insurance (SUSEP) and maintain a minimum solvency classification issued by a risk classification agency equal to Standard & Poor’s or Fitch ratings of at least BBB-.

Foreign ownership of cable TV companies is allowed, and telecom companies may offer television packages with their service.  Content quotas require every channel to air at least three and a half hours per week of Brazilian programming during primetime.  Additionally, one-third of all channels included in any TV package must be Brazilian.

The National Land Reform and Settlement Institute administers the purchase and lease of Brazilian agricultural land by foreigners.  Under the applicable rules, the area of agricultural land bought or leased by foreigners cannot account for more than 25 percent of the overall land area in a given municipal district.  Additionally, no more than 10 percent of agricultural land in any given municipal district may be owned or leased by foreign nationals from the same country.  The law also states that prior consent is needed for purchase of land in areas considered indispensable to national security and for land along the border.  The rules also make it necessary to obtain congressional approval before large plots of agricultural land can be purchased by foreign nationals, foreign companies, or Brazilian companies with majority foreign shareholding.  In December 2020, the Senate approved a bill (PL 2963/2019; source:  https://www25.senado.leg.br/web/atividade/materias/-/materia/136853) to ease restrictions on foreign land ownership; however, the Chamber of Deputies has yet to consider the bill. Brazil is not yet a signatory to the World Trade Organization (WTO) Agreement on Government Procurement (GPA), but submitted its application for accession in May 2020.  In February 2021, Brazil formalized its initial offer to start negotiations.  The submission establishes a series of thresholds above which foreign sellers will be allowed to bid for procurements.  Such thresholds differ for different procuring entities and types of procurements.  The proposal also includes procurements by some states and municipalities (with restrictions) as well as state-owned enterprises, but it excludes certain sensitive categories, such as financial services, strategic health products, and specific information technologies.  Brazil’s submission still must be negotiated with GPA members.

By statute, a Brazilian state enterprise may subcontract services to a foreign firm only if domestic expertise is unavailable.  Additionally, U.S. and other foreign firms may only bid to provide technical services where there are no qualified Brazilian firms. U.S. companies need to enter into partnerships with local firms or have operations in Brazil in order to be eligible for “margins of preference” offered to domestic firms participating in Brazil’s public sector procurement to help these firms win government tenders.  Nevertheless, foreign companies are often successful in obtaining subcontracting opportunities with large Brazilian firms that win government contracts and, since October 2020, foreign companies are allowed to participate in bids without the need for an in-country corporate presence (although establishing such a presence is mandatory if the bid is successful).  A revised Government Procurement Protocol of the trade bloc Mercosul (Mercosur in Spanish), signed in 2017, would entitle member nations Brazil, Argentina, Paraguay, and Uruguay to non-discriminatory treatment of government-procured goods, services, and public works originating from each other’s suppliers and providers.  However, none of the bloc’s members have yet ratified it, so it has not entered into force.

Other Investment Policy Reviews

The Organization for Economic Co-operation and Development’s (OECD) December 2020 Economic Forecast Summary of Brazil summarized that, despite new COVID-19 infections and fatalities remaining high, the economy started to recover across a wide range of sectors by the end of 2020.  Since the publication, Brazil’s economy is faltering due to the continuing pandemic’s financial impact.  The strong fiscal and monetary policy response managed to prevent a sharper economic contraction, cushioning the impact on household incomes and poverty.  Nonetheless, fiscal vulnerabilities have been exacerbated by these necessary policy responses and public debt has risen.  Failure to continue structural reform progress could hold back investment and future growth.  As of March 2021, forecasts are for economic recovery in 2021 and high unemployment.  The OECD report recommended reallocating some expenditures and raising spending efficiency to improve social protections, and resuming the fiscal adjustments under way before the pandemic.  The report also recommended structural reforms to enhance domestic and external competition and improve the investment climate.

The IMF’s 2020 Country Report No. 20/311 on Brazil highlighted the severe impact of the pandemic in Brazil’s economic recovery but praised the government’s response, which averted a deeper economic downturn, stabilized financial markets, and cushioned income loss for the poorest.  The IMF assessed that the lingering effects of the crisis will restrain consumption while investment will be hampered by idle capacity and high uncertainty.  The IMF projected inflation to stay below target until 2023, given significant slack in the economy, but with the sharp increase in the primary fiscal deficit, gross public debt is expected to rise to 100 percent of GDP and remain high over the medium-term.  The IMF noted that Brazil’s record low interest rate (Selic) helped the government reduce borrowing costs, but the steepening of the local currency yield curve highlighted market concerns over fiscal risks.  The WTO’s 2017 Trade Policy Review of Brazil noted the country’s open stance towards foreign investment, but also pointed to the many sector-specific limitations (see above).  All three reports highlighted the uncertainty regarding reform plans as the most significant political risk to the economy. These reports are located at the following links:

• OECD Report: http://www.oecd.org/economy/brazil-economic-snapshot/
• IMF Report: https://www.imf.org/en/Publications/CR/Issues/2020/12/01/Brazil-2020-Article-IV-Consultation-Press-Release-Staff-Report-and-Statement-by-the-49927
• WTO Report: https://www.wto.org/english/tratop_e/tpr_e/tp458_e.htm

Business Facilitation

A company must register with the National Revenue Service (Receita Federal) to obtain a business license and be placed on the National Registry of Legal Entities (CNPJ).  Brazil’s Export Promotion and Investment Agency (APEX) has a mandate to facilitate foreign investment.  The agency’s services are available to all investors, foreign and domestic.  Foreign companies interested in investing in Brazil have access to many benefits and tax incentives granted by the Brazilian government at the municipal, state, and federal levels.  Most incentives target specific sectors, amounts invested, and job generation.  Brazil’s business registration website can be found at: http://receita.economia.gov.br/orientacao/tributaria/cadastros/cadastro-nacional-de-pessoas-juridicas-cnpj .

Overall, Brazil dropped in the World Bank’s Doing Business Report from 2019 to 2020; however, it improved in the following areas: registering property; starting a business; and resolving insolvency.  According to Doing Business, some Brazilian states (São Paulo and Rio de Janeiro) made starting a business easier by allowing expedited business registration and by decreasing the cost of the digital certificate.  On March 2021, the GoB enacted a Provisional Measure (MP) to simplify the opening of companies, the protection of minority investors, the facilitation of foreign trade in goods and services, and the streamlining of low-risk construction projects.  The Ministry of Economy expects the MP, together with previous actions by the government, to raise Brazil by 18 to 20 positions in the ranking.  Adopted in September 2019, the Economic Freedom Law 13.874 established the Economic Freedom Declaration of Rights and provided for free market guarantees.  The law includes several provisions to simplify regulations and establishes norms for the protection of free enterprise and free exercise of economic activity.

Through the digital transformation initiative in Brazil, foreign companies can open branches via the internet.  Since 2019, it has been easier for foreign businesspeople to request authorization from the Brazilian federal government.  After filling out the registration, creating an account, and sending the necessary documentation, they can make the request on the Brazilian government’s Portal through a legal representative.  The electronic documents will then be analyzed by the DREI (Brazilian National Department of Business Registration and Integration) team.  DREI will inform the applicant of any missing documentation via the portal and e-mail and give a 60-day period to meet the requirements.  The legal representative of the foreign company, or another third party who holds a power of attorney, may request registration through this link: https://acesso.gov.br/acesso/#/primeiro-acesso?clientDetails=eyJjbGllbnRVcmkiOiJodHRwczpcL1wvYWNlc3NvLmdvdi5iciIsImNsaWVudE5hbWUiOiJQb3J0YWwgZ292LmJyIiwiY2xpZW50VmVyaWZpZWRVc2VyIjp0cnVlfQ%3D%3D     

Regulation of foreign companies opening businesses in Brazil is governed by article 1,134 of the Brazilian Civil Code  and article 1 of DREI Normative Instruction 77/2020 .  English language general guidelines to open a foreign company in Brazil are not yet available, but the Portuguese version is available at the following link: https://www.gov.br/economia/pt-br/assuntos/drei/empresas-estrangeiras .

For foreign companies that will be a partner or shareholder of a Brazilian national company, the governing regulation is DREI Normative Instruction 81/2020 DREI Normative Instruction 81/2020.  The contact information of the DREI is drei@economia.gov.br and +55 (61) 2020-2302.

References:

• https://investmentpolicy.unctad.org/country-navigator provides investment measures, laws and treaties enacted by selected countries.
• http://www.doingbusiness.org/data/ provides indicators from economies on the ease of starting a limited liability company.
• GER.co provides links to business registration sites worldwide.

Outward Investment

Brazil does not restrict domestic investors from investing abroad and Apex-Brasil supports Brazilian companies’ efforts to invest abroad under its “internationalization program”: http://www.apexbrasil.com.br/como-a-apex-brasil-pode-ajudar-na-internacionalizacao-de-sua-empresa .  Apex-Brasil frequently highlights the United States as an excellent destination for outbound investment.  Apex-Brasil and SelectUSA (the U.S. Government’s investment promotion office at the U.S. Department of Commerce) signed a memorandum of cooperation to promote bilateral investment in February 2014.

Brazil incentivizes outward investment.  Apex-Brasil organizes several initiatives aimed at promoting Brazilian investments abroad.  The Agency´s efforts comprised trade missions, business round tables, support for the participation of Brazilian companies in major international trade fairs, arranging technical visits of foreign buyers and opinion makers to learn about the Brazilian productive structure, and other select activities designed to strengthen the country’s branding abroad.

The main sectors of Brazilian investments abroad are financial services and assets (totaling 50.5 percent); holdings (11.6 percent); and oil and gas extraction (10.9 percent).  Including all sectors, $416.6 billion was invested abroad in 2019.  The regions with the largest share of Brazilian outward investments are the Caribbean (47 percent) and Europe (37.7 percent), specifically the Netherlands and Luxembourg.

Regulation on investments abroad are contained in BCB Ordinance 3,689/2013  (foreign capital in Brazil and Brazilian capital abroad): https://www.bcb.gov.br/pre/normativos/busca/downloadNormativo.asp?arquivo=/Lists/Normativos/Attachments/48812/Circ_3689_v1_O.pdf

Sale of cross-border mutual funds are only allowed to certain categories of investors, not to the general public.  International financial services companies active in Brazil submitted to Brazilian regulators in late 2020 a proposal to allow opening these mutual funds to the general public, and hope this will be approved in mid 2021.

Brazil does not have a Bilateral Investment Treaty (BIT) with the United States.  In the 1990s, Brazil signed BITs with Belgium, Luxembourg, Chile, Cuba, Denmark, Finland, France, Germany, Italy, the Republic of Korea, the Netherlands, Portugal, Switzerland, the United Kingdom, and Venezuela. However, the Brazilian Congress did not ratify any of these agreements.  In 2002, the Executive branch withdrew the agreements from Congress after determining that treaty provisions on international Investor-State Dispute Settlement (ISDS) were unconstitutional.

In 2015, Brazil developed a state-to-state Cooperation and Facilitation Investment Agreement (CFIA) which, unlike traditional BITs, does not provide for an ISDS mechanism.  CFIAs instead outline progressive steps for the settlement of “issue[s] of interest to an investor”:  1) an ombudsmen and a Joint Committee appointed by the two governments will act as mediators to amicably settle any dispute; 2) if amicable settlement fails, either of the two governments may bring the dispute to the attention of the Joint Committee; 3) if the dispute is not settled within the Joint Committee, the two governments may resort to interstate arbitration mechanisms.  The GOB has signed several CFIAs since 2015 with:  Mozambique (2015), Angola (2015), Mexico (2015), Malawi (2015), Colombia (2015), Peru (2015), Chile (2015), Iran (2016), Azerbaijan (2016), Armenia (2017), Ethiopia (2018), Suriname (2018), Guyana (2018), the United Arab Emirates (2019), Ecuador (2019), and India (2020). The following CFIAs are in force:  Mexico, Angola, Armenia, Azerbaijan, and Peru.  A few CFIAs have received Congressional ratification in Brazil and are pending ratification by the other country:  Mozambique, Malawi, and Colombia (https://concordia.itamaraty.gov.br/ ).  Brazil also negotiated an intra-Mercosul Cooperation and Investment Facilitation Protocol (PCFI) similar to the CFIA in April 2017, which was ratified on December 21, 2018.  (See sections on responsible business conduct and dispute settlement.)

Brazil has a Social Security Agreement with the United States.  The agreement and the administrative arrangement were both signed in Washington on June 30, 2015 and entered into force on October 1, 2018.  Brazil signed a Tax Information Exchange Agreement (TIEA) with the United States in March 2007, which entered into force on May 15, 2013.  In September 2014, Brazil and the United States signed an intergovernmental agreement to improve international tax compliance and to implement the Foreign Account Tax Compliance Act (FATCA).  This agreement went into effect in August 2015.

In October 2020, Brazil signed a Protocol on Trade Rules and Transparency with the United States, which has three annexes aimed at expediting processes involving trade:  I) Customs Administration and Trade Facilitation; II) Good Regulatory Practices; and III) Anti-corruption.  The protocol and annexes provide a foundation for reducing border bureaucracy, improving regulatory processes and stakeholder contribution opportunities, and supporting integrity in public institutions.

Brazil does not have a double taxation treaty with the United States, but Brazil does maintain tax treaties to avoid double taxation with the following 33 countries:  Austria, Argentina, Belgium, Canada, Chile, China, Czech Republic, Denmark, Ecuador, Finland, France, Hungary, India, Israel, Italy, Japan, Luxembourg, Mexico, the Netherlands, Norway, Peru, Philippines, Portugal, Russia, Slovak Republic, South Africa, South Korea, Spain, Sweden, Trinidad & Tobago, Turkey, Ukraine, and Venezuela.  Treaties with Singapore, Switzerland, United Arab Emirates, and Uruguay are pending ratification.

Brazilian industry representatives have for years suggested a bilateral taxation treaty between Brazil and the United States would incentivize U.S. FDI.  A document produced by Brazil’s National Industry Confederation (CNI) and Amcham Brazil is available on this topic in Portuguese:  https://www.portaldaindustria.com.br/publicacoes/2019/10/acordo-para-evitar-dupla-tributacao-entre-o-brasil-e-os-estados-unidos-caminhos-para-uma-possivel-convergencia/

Brazil currently has pending tax reform legislation in Congress which is considered a priority by the government.  The current texts propose simplifying tax collection by unifying various taxes, and would generally maintain the tax burden at its current level which is high relative to other countries in the region.

Transparency of the Regulatory System

In the 2020 World Bank Doing Business report, Brazil ranked 124th out of 190 countries in terms of overall ease of doing business in 2019, a decrease of 15 positions compared to the 2019 report.  According to the World Bank, it takes approximately 17 days to start a business in Brazil. Brazil is seeking to streamline the process and decrease the amount to time it takes to open a small or medium enterprise (SME) to five days through its RedeSimples Program.  Similarly, the government has reduced regulatory compliance burdens for SMEs through the continued use of the SIMPLES program, which simplifies the collection of up to eight federal, state, and municipal-level taxes into one single payment.

The 2020 World Bank study noted Brazil’s lowest score was in annual administrative burden for a medium-sized business to comply with Brazilian tax codes at an average of 1,501 hours, a significant improvement from 2019’s 1,958 hour average, but still much higher than the 160.7 hour average of OECD high-income economies.  The total tax rate for a medium-sized business is 65.1 percent of profits, compared to the average of 40.1 percent in OECD high-income economies.  Business managers often complain of not being able to understand complex — and sometimes contradictory — tax regulations, despite having large local tax and accounting departments in their companies.

Tax regulations, while burdensome and numerous, do not generally differentiate between foreign and domestic firms.  However, some investors complain that in certain instances the value-added tax collected by individual states (ICMS) favors locally based companies who export their goods.  Exporters in many states report difficulty receiving their ICMS rebates when their goods are exported.  Taxes on commercial and financial transactions are particularly burdensome, and businesses complain that these taxes hinder the international competitiveness of Brazilian-made products.

Of Brazil’s ten federal regulatory agencies, the most prominent include:

• ANVISA, the Brazilian counterpart to the U.S. Food and Drug Administration, which has regulatory authority over the production and marketing of food, drugs, and medical devices;
• ANATEL, the country’s telecommunications regulatory agency, which handles telecommunications as well as licensing and assigning of radio spectrum bandwidth (the Brazilian FCC counterpart);
• ANP, the National Petroleum Agency, which regulates oil and gas contracts and oversees auctions for oil and natural gas exploration and production;
• ANAC, Brazil’s civil aviation agency;
• IBAMA, Brazil’s environmental licensing and enforcement agency; and
• ANEEL, Brazil’s electricity regulator that regulates Brazil’s power sector and oversees auctions for electricity transmission, generation, and distribution contracts.

In addition to these federal regulatory agencies, Brazil has dozens of state- and municipal-level regulatory agencies.

The United States and Brazil conduct regular discussions on customs and trade facilitation, good regulatory practices, standards and conformity assessment, digital issues, and intellectual property protection.  The 18^th plenary of the Commercial Dialogue took place in May 2020, and regular exchanges at the working level between U.S. Department of Commerce, Brazil’s Ministry of Economy, and other agencies and regulators occur throughout the year.

Regulatory agencies complete Regulatory Impact Analyses (RIAs) on a voluntary basis. The Senate approved a bill on Governance and Accountability (PLS 52/2013 in the Senate, and PL 6621/2016 in the Chamber) into Law 13,848 in June 2019.  Among other provisions, the law makes RIAs mandatory for regulations that affect “the general interest.”

The Chamber of Deputies, Federal Senate, and the Office of the Presidency maintain websites providing public access to both approved and proposed federal legislation.  Brazil is seeking to improve its public comment and stakeholder input process.  In 2004, the GoB opened an online “Transparency Portal” with data on funds transferred to and from federal, state, and city governments, as well as to and from foreign countries. It also includes information on civil servant salaries.

In 2020, the Department of State found that Brazil had met its minimum fiscal transparency requirements in its annual Fiscal Transparency Report.  The International Budget Partnership’s Open Budget Index ranked Brazil slightly ahead of the United States in terms of budget transparency in its most recent (2019) index.  The Brazilian government demonstrates adequate fiscal transparency in managing its federal accounts, although there is room for improvement in terms of completeness of federal budget documentation.  Brazil’s budget documents are publicly available, widely accessible, and sufficiently detailed.  They provide a relatively full picture of the GoB’s planned expenditures and revenue streams.  The information in publicly available budget documents is considered credible and reasonably accurate.

International Regulatory Considerations

Brazil is a member of Mercosul – a South American trade bloc whose full members include Argentina, Paraguay, and Uruguay.  Brazil routinely implements Mercosul common regulations.

Brazil is a member of the WTO and the government regularly notifies draft technical regulations, such as potential agricultural trade barriers, to the WTO Committee on Technical Barriers to Trade (TBT).

Legal System and Judicial Independence

Brazil has a civil legal system with state and federal courts.  Investors can seek to enforce contracts through the court system or via mediation, although both processes can be lengthy.  The Brazilian Superior Court of Justice (STJ) must accept foreign contract enforcement judgments for the judgments to be considered valid in Brazil.  Among other considerations, the foreign judgment must not contradict any prior decisions by a Brazilian court in the same dispute.  The Brazilian Civil Code regulates commercial disputes, although commercial cases involving maritime law follow an older Commercial Code which has been otherwise largely superseded.  Federal judges hear most disputes in which one of the parties is the Brazilian State, and also rule on lawsuits between a foreign state or international organization and a municipality or a person residing in Brazil.

The judicial system is generally independent.  The Supreme Federal Court (STF), charged with constitutional cases, frequently rules on politically sensitive issues.  State court judges and federal level judges below the STF are career officials selected through a meritocratic examination process.  The judicial system is backlogged, however, and disputes or trials of any sort frequently require years to arrive at a final resolution, including all available appeals.  Regulations and enforcement actions can be litigated in the court system, which contains mechanisms for appeal depending upon the level at which the case is filed.  The STF is the ultimate court of appeal on constitutional grounds; the STJ is the ultimate court of appeal for cases not involving constitutional issues.

Laws and Regulations on Foreign Direct Investment

Brazil is in the process of setting up a “one-stop shop” for international investors. According to its website:  “The Direct Investments Ombudsman (DIO) is a ‘single window’ for investors, provided by the Executive Secretariat of CAMEX.  It is responsible for receiving requests and inquiries about investments, to be answered jointly with the public agency responsible for the matter (at the Federal, State and Municipal levels) involved in each case (the Network of Focal Points).  This new structure allows for supporting the investor, by a single governmental body, in charge of responding to demands within a short time.”  Private investors have noted this is better than the prior structure, but does not yet provide all the services of a true “one-stop shop” to facilitate international investment.  The DIO’s website in English is: http://oid.economia.gov.br/en/menus/8

Competition and Antitrust Laws

The Administrative Council for Economic Defense (CADE), which falls under the purview of the Ministry of Justice, is responsible for enforcing competition laws, consumer protection, and carrying out regulatory reviews of proposed mergers and acquisitions.  CADE was reorganized in 2011 through Law 12529, combining the antitrust functions of the Ministry of Justice and the Ministry of Finance.  The law brought Brazil in line with U.S. and European merger review practices and allows CADE to perform pre-merger reviews, in contrast to the prior legal regime that had the government review mergers after the fact.  In October 2012, CADE performed Brazil’s first pre-merger review.

In 2020, CADE conducted 471 total formal investigations, of which 76 related to cases that allegedly challenged the promotion of the free market.  It approved 423 merger and/or acquisition requests and did not reject any requests.

Expropriation and Compensation

Article 5 of the Brazilian Constitution assures property rights of both Brazilians and foreigners that own property in Brazil.  The Constitution does not address nationalization or expropriation.  Decree-Law 3365 allows the government to exercise eminent domain under certain criteria that include, but are not limited to, national security, public transportation, safety, health, and urbanization projects.  In cases of eminent domain, the government compensates owners at fair market value.

There are no signs that the current federal government is contemplating expropriation actions in Brazil against foreign interests.  Brazilian courts have decided some claims regarding state-level land expropriations in U.S. citizens’ favor.  However, as states have filed appeals of these decisions, the compensation process can be lengthy and have uncertain outcomes.

Dispute Settlement

ICSID Convention and New York Convention

In 2002, Brazil ratified the 1958 Convention on the Recognition and Enforcement of Foreign Arbitration Awards.  Brazil is not a member of the World Bank’s International Center for the Settlement of Investment Disputes (ICSID).  Brazil joined the United Nations Commission on International Trade Law (UNCITRAL) in 2010, and its membership will expire in 2022.

Investor-State Dispute Settlement

Article 34 of the 1996 Brazilian Arbitration Act (Law 9307) defines a foreign arbitration judgment as any judgment rendered outside the national territory.  The law established that the Superior Court of Justice (STJ) must ratify foreign arbitration awards.  Law 9307, updated by Law 13129/2015, also stipulates that a foreign arbitration award will be recognized or executed in Brazil in conformity with the international agreements ratified by the country and, in their absence, with domestic law.  A 2001 Brazilian Federal Supreme Court (STF) ruling established that the 1996 Brazilian Arbitration Act, permitting international arbitration subject to STJ Court ratification of arbitration decisions, does not violate the Federal Constitution’s provision that “the law shall not exclude any injury or threat to a right from the consideration of the Judicial Power.”

Contract disputes in Brazil can be lengthy and complex.  Brazil has both a federal and a state court system, and jurisprudence is based on civil code and contract law.  Federal judges hear most disputes in which one of the parties is the State and rule on lawsuits between a foreign State or international organization and a municipality or a person residing in Brazil.  Five regional federal courts hear appeals of federal judges’ decisions.  The 2020 World Bank Doing Business report found that on average it took 801 days to litigate a breach of contract.

International Commercial Arbitration and Foreign Courts

Brazil ratified the 1975 Inter-American Convention on International Commercial Arbitration (Panama Convention) and the 1979 Inter-American Convention on Extraterritorial Validity of Foreign Judgments and Arbitration Awards (Montevideo Convention).  Law 9307/1996 amplifies Brazilian law on arbitration and provides guidance on governing principles and rights of participating parties.  Brazil developed a new Cooperation and Facilitation Investment Agreement (CFIA) model in 2015 (https://concordia.itamaraty.gov.br/ ), but it does not include ISDS mechanisms.  (See sections on bilateral investment agreements and responsible business conduct.)

Bankruptcy Regulations

Brazil’s commercial code governs most aspects of commercial association, while the civil code governs professional services corporations.  In December 2020, Brazil approved a new bankruptcy law (Law 14,112), which largely models UNCITRAL Model Law on International Commercial Arbitration, and addresses criticisms that its previous bankruptcy legislation favored holders of equity over holders of debt.  The new law facilitates judicial and extrajudicial resolution between debtors and creditors, and accelerates reorganization and liquidation processes.  Both debtors and creditors are allowed to provide reorganization plans that would eliminate non-performing activities and sell-off assets, thus avoiding bankruptcy.  The new law also establishes a framework for cross-border insolvencies that recognizes legal proceedings outside of Brazil.  The World Bank’s 2020 Doing Business Report ranks Brazil 77th out of 190 countries for ease of “resolving insolvency.”

Investment Incentives

The GoB extends tax benefits for investments in less developed parts of the country, including the Northeast and the Amazon regions, with equal application to foreign and domestic investors.  These incentives were successful in attracting major foreign plants to areas like the Manaus Free Trade Zone in Amazonas State, but most foreign investment remains concentrated in the more industrialized southeastern states in Brazil.

Individual states seek to attract private investment by offering tax benefits and infrastructure support to companies, negotiated on a case-by-case basis.  Competition among states to attract employment-generating investment leads some states to challenge such tax benefits as beggar-thy-neighbor fiscal competition.

While local private sector banks are beginning to offer longer credit terms, the state-owned Brazilian National Development Bank (BNDES) is the traditional Brazilian source of long-term credit as well as export credits.  BNDES provides foreign- and domestically owned companies operating in Brazil financing for the manufacturing and marketing of capital goods and primary infrastructure projects.  BNDES provides much of its financing at subsidized interest rates. As part of its package of fiscal tightening, in December 2014, the GoB announced its intention to scale back the expansionary activities of BNDES and ended direct Treasury support to the bank.  Law 13483, from September 2017, created a new Long-Term Lending Rate (TLP) for BNDES. On January 1, 2018, BNDES began phasing in the TLP to replace the prior subsidized loan rates.  After a five-year phase in period, the TLP will float with the market and reflect a premium over Brazil’s five-year bond yield (which incorporates inflation).  Although the GoB plans to reduce BNDES’s role further as it continues to promote the development of long-term private capital markets, BNDES continues to play a large role, particularly in concession financing, such as Rio de Janeiro’s water and sanitation privatization projects, in which BNDES can finance up to 65 percent of direct investments.

In December 2018, Brazil approved a new auto sector incentive package – Rota 2030 – providing exemptions from Industrial Product Tax (IPI) for research and development (R&D) spending.  Rota 2030 replaced the Inovar-Auto program which was found to violate WTO rules.  Rota 2030 increases standards for energy efficiency, structural performance, and the availability of assistive technologies; provides exemptions for investments in R&D and manufacturing process automation; incentivizes the use of biofuels; and funds technical training and professional qualification in the mobility and logistics sectors.  To qualify for the tax incentives, businesses must meet conditions including demonstrating profit, minimum investments in R&D, and no outstanding tax liabilities.

Brazil’s Special Regime for the Reinstatement of Taxes for Exporters, or Reintegra Program, provides a tax subsidy of two percent of the value of goods exported.

Brazil provides tax reductions and exemptions on many domestically-produced information and communication technology (ICT) and digital goods that qualify for status under the Basic Production Process (Processo Produtivo Básico, or PPB).  The PPB is product-specific and stipulates which stages of the manufacturing process must be carried out in Brazil in order for an ICT product to be considered produced in Brazil.  Brazil’s Internet for All program, launched in 2018, aims to ensure broadband internet to all municipalities by offering tax incentives to operators in rural municipalities.

Law 12.598/2012 offers tax incentives to firms in the defense sector.  The law’s principal aspects are to:  1) establish special rules for the acquisition, contract, and development of defense products and systems; 2) establish incentives for the development of the strategic defense industry sector by creating the Special Tax Regime for the Defense Industry (RETID); and, 3) provide access to financing programs, projects, and actions related to Strategic Defense Products (PED).

A RETID beneficiary, known as a Strategic Defense Company (EED), is accredited by the Ministry of Defense.  An EED is a legal entity that produces or develops parts, tools, and components to be used in the production or development of defense assets. It can also be a legal entity that provides services used as inputs in the production or development of defense goods.  RETID benefits include sale price credit and tax rate reduction for the manufacturing supply chain, including taxes on imported components.  Additionally, RETID provides exemption from certain federal taxes on the purchase of materials for the manufacture of defense products, strategic defense products (PRODE / PED) and services provided by strategic defense companies (EED).

In April 2020, the Brazilian Defense and Security Industry Association (ABIMDE) requested the Minister of Defense to consider implementing improvements to Law 12.598 by allowing all its members to:  1) have access to special bidding terms (TLE) for defense and security materials; and, 2) automatically utilize their RETID status, rather than being required to individually apply to the Ministry of Defense for certification, as is currently the process.  However, as of April 2021, the law has not been changed.

Foreign Trade Zones/Free Ports/Trade Facilitation

The federal government grants tax benefits to certain free trade zones.  Most of these free trade zones aim to attract investment to the country’s relatively underdeveloped North and Northeast regions.  The most prominent of these is the Manaus Free Trade Zone, in Amazonas State, which has attracted significant foreign investment, including from U.S. companies.  Constitutional amendment 83/2014 extended the status of Manaus Free Trade Zone until the year 2073.

Performance and Data Localization Requirements

Government Procurement Preferences:  The GoB maintains a variety of localization barriers to trade in response to the weak competitiveness of its domestic tech industry.  These include:

1. Tax incentives for locally-sourced information and communication technology (ICT) goods and equipment (Basic Production Process (PPB), Law 8248/91 (amended by Law 13969/2019), and Portaria 87/2013); and
2. Government procurement preferences for local ICT hardware and software (2014 Decrees 8184, 8185, 8186, 8194, and 2013 Decree 7903); and the CERTICS Decree 8186, which aims to certify that software programs are the result of development and technological innovation in Brazil.

At the end of 2019, Brazil adopted a New Informatic Law, which revised the tax and incentives regime for the ICT sector.  The regime is aligned with the requirements of the World Trade Organization (WTO), following complaints from Japan and the European Union that numerous Brazilian tax programs favored domestic products in contravention of WTO rules.

The New Informatic Law provides for tax incentives to manufacturers of ICT goods that invest in research, development, and innovation (RD&I) in Brazil.  In order to receive the incentives, the companies must meet a minimum nationalization requirement for production, but the nationalization content is reduced commensurate with increasing investment in R&D.  At least 60% of the production process is required to take place in Brazil to ensure eligibility.

The Institutional Security Cabinet (GSI) mandated the localization of all government data stored on the cloud during a review of cloud computing services contracted by the Brazilian government in Ordinance No. 9 (previously NC 14), made official in March 2018.  While it does allow the use of cloud computing for non-classified information, it imposes a data localization requirement on all use of cloud computing by the Brazil government.

Investors in certain sectors in Brazil must adhere to the country’s regulated prices, which fall into one of two groups: those regulated at the federal level by a federal company or agency and those set by sub-national governments (states or municipalities).  Regulated prices managed at the federal level include telephone services, certain refined oil and gas products (such as bottled cooking gas), electricity, and healthcare plans.  Regulated prices controlled by sub-national governments include water and sewage fees, and most fees for public transportation, such as local bus and rail services.  For firms employing three or more persons, Brazilian nationals must constitute at least two-thirds of all employees and receive at least two-thirds of total payroll, according to Brazilian Labor Law Articles 352 to 354. This calculation excludes foreign specialists in fields where Brazilians are unavailable.  There is a draft bill in Congress (PL 2456/19) to remove the mandatory requirement for national employment; however, the bill would maintain preferential treatment for companies that continue to employ a majority of Brazilian nationals.

Decree 7174/2010, which regulates the procurement of information technology goods and services, requires federal agencies and parastatal entities to give preferential treatment to domestically produced computer products and goods or services with technology developed in Brazil based on a complicated price/technology matrix.

Brazil’s Marco Civil, an Internet law that determines user rights and company responsibilities, states that data collected or processed in Brazil must respect Brazilian law, even if the data is subsequently stored outside the country.  Penalties for non-compliance could include fines of up to 10 percent of gross Brazilian revenues and/or suspension or prohibition of related operations. Under the law, Internet connection and application providers must retain access logs for specified periods or face sanctions.  Brazil’s Lei Geral de Proteção de Dados Pessoais (LGPD) went into effect in August 2020.  The LGPD governs the processing of the personal data of subjects in Brazil by people or entities, regardless of the type of processing, the country where the data is located, or the headquarters of the entity processing the data.  It also established a National Data Protection Authority (ANPD) to administer the law’s provisions, responsible for oversight and sanctions (which will go into effect August 2021), which can total up to R$50 million (approximately $9 million) per infringement.

Real Property

Brazil has a system in place for mortgage registration, but implementation is uneven and there is no standardized contract.  Foreign individuals or foreign-owned companies can purchase real estate property in Brazil.  Foreign buyers frequently arrange alternative financing in their own countries, where rates may be more attractive.  Law 9514 from 1997 helped spur the mortgage industry by establishing a legal framework for a secondary market in mortgages and streamlining the foreclosure process, but the mortgage market in Brazil is still underdeveloped, and foreigners may have difficulty obtaining mortgage financing.  Large U.S. real estate firms are, nonetheless, expanding their portfolios in Brazil.

Intellectual Property Rights

Intellectual property (IP) rights  holders in Brazil continue to face challenges.  Brazil has remained on the “Watch List” of the U.S. Trade Representative’s (USTR) Special 301 Report since 2007.  For more information, please see:  https://ustr.gov/sites/default/files/files/reports/2021/2021%20Special%20301%20Report%20(final).pdf.Brazil

Brazil has one physical market, located in Sao Paolo,  listed on USTR’s 2020 Review of Notorious Markets for Counterfeiting and Piracy.  The Rua 25 de Marco area  is reportedly a distribution center for counterfeit and pirated goods throughout Sao Paulo.  Enforcement actions in this region continue.  Authorities used these enforcement actions as a basis to take civil measures against some of the stores. For more information, please see: https://ustr.gov/sites/default/files/files/Press/Releases/2020%20Review%20of%20Notorious%20Markets%20for%20Counterfeiting%20and%20Piracy%20(final).pdf.

According to the National Forum Against Piracy, contraband, pirated, counterfeit, and stolen goods cost Brazil approximately $74 billion in 2019.  (http://www.fncp.org.br/forum/release/292 ) (Yearly average currency exchange rate: 1 USD = 3.946 R)

For additional information about treaty obligations and points of contact at local IP offices, please see the World Intellectual Property Organization (WIPO)’s country profiles: http://www.wipo.int/directory/en 

Capital Markets and Portfolio Investment

The Brazil Central Bank (BCB) embarked in October 2016 on a sustained monetary easing cycle, lowering the Special Settlement and Custody System (Selic) baseline reference rate from a high of 14 percent in October 2016 to a record-low 2 percent by the end of 2020.  The downward trend was reversed by an increase to 2.75 percent in March 2021.  As of March 2021, Brazil’s banking sector projects the Selic will reach 5 percent by the end of 2021.  Inflation for 2020 was 4.52 percent, within the target of 4 percent plus/minus 1.5 percent.  The National Monetary Council (CMN) set the BCB’s inflation target at 3.75 percent for 2021, at 3.5 percent for 2022 and at 3.25 percent at 2023.  Because of a heavy public debt burden and other structural factors, most analysts expect the “neutral” policy rate will remain higher than target rates in Brazil’s emerging-market peers (around five percent) over the forecast period.

In 2020, the ratio of public debt to GDP reached 89.3 percent according to BCB, a new record for the country, although below original projections.  Analysts project that the debt/GDP ratio will be at or above92 percent by the end of 2021.

The role of the state in credit markets grew steadily beginning in 2008, with public banks now accounting for over 55 percent of total loans to the private sector (up from 35 percent).  Directed lending (that is, to meet mandated sectoral targets) also rose and accounts for almost half of total lending.  Brazil is paring back public bank lending and trying to expand a market for long-term private capital.

While local private sector banks are beginning to offer longer credit terms, state-owned development bank BNDES is a traditional source of long-term credit in Brazil.  BNDES also offers export financing.  Approvals of new financing by BNDES increased 40 percent in 2020 from 2019, with the infrastructure sector receiving the majority of new capital.

The São Paulo Stock Exchange (BOVESPA) is the sole stock market in Brazil, while trading of public securities takes place at the Rio de Janeiro market.  In 2008, the Brazilian Mercantile & Futures Exchange (BM&F) merged with the BOVESPA to form B3, the fourth largest exchange in the Western Hemisphere, after the NYSE, NASDAQ, and Canadian TSX Group exchanges.  In 2020, there were 407 companies traded on the B3 exchange.  The BOVESPA index increased only 2.92 percent in valuation during 2020, due to the economic impact of the COVID-19 pandemic.  Foreign investors, both institutional and individuals, can directly invest in equities, securities, and derivatives; however, they are limited to trading those investments on established markets.

Wholly owned subsidiaries of multinational accounting firms, including the major U.S. firms, are present in Brazil.  Auditors are personally liable for the accuracy of accounting statements prepared for banks.

Money and Banking System

The Brazilian financial sector is large and sophisticated. Banks lend at market rates that remain relatively high compared to other emerging economies.  Reasons cited by industry observers include high taxation, repayment risk, concern over inconsistent judicial enforcement of contracts, high mandatory reserve requirements, and administrative overhead, as well as persistently high real (net of inflation) interest rates.  According to BCB data collected for final quarter of 2019, the average rate offered by Brazilian banks to non-financial corporations was 13.87 percent.

The banking sector in Brazil is highly concentrated with BCB data indicating that the five largest commercial banks (excluding brokerages) account for approximately 80 percent of the commercial banking sector assets, totaling $1.58 trillion as of the final quarter of 2019.  Three of the five largest banks (by assets) in the country – Banco do Brasil, Caixa Econômica Federal, and BNDES – are partially or completely federally owned.  Large private banking institutions focus their lending on Brazil’s largest firms, while small- and medium-sized banks primarily serve small- and medium-sized companies.  Citibank sold its consumer business to Itaú Bank in 2016, but maintains its commercial banking interests in Brazil.  It is currently the sole U.S. bank operating in the country.  Increasing competitiveness in the financial sector, including in the emerging fintech space, is a vital part of the Brazilian government’s strategy to improve access to and the affordability of financial services in Brazil.

On November 16, 2020, Brazil’s Central Bank implemented a twenty-four hour per day instant payment and money transfer system called PIX.  The PIX system is supposed to deconcentrate the banking sector, increase financial inclusion, stimulate competitiveness, and improve efficiency in the payments market.

In recent years, the BCB has strengthened bank audits, implemented more stringent internal control requirements, and tightened capital adequacy rules to reflect risk more accurately.  It also established loan classification and provisioning requirements. These measures apply to private and publicly owned banks alike.  In December 2020, Moody’s upgraded a collection of 28 Brazilian banks and their affiliates to stable from negative after the agency had lowered the outlook on the Brazilian system in April 2020 due to the economic unrest.  The Brazilian Securities and Exchange Commission (CVM) independently regulates the stock exchanges, brokers, distributors, pension funds, mutual funds, and leasing companies with penalties against insider trading.

Foreigners may find it difficult to open an account with a Brazilian bank.  The individual must present a permanent or temporary resident visa, a national tax identification number (CPF) issued by the Brazilian government, either a valid passport or identity card for foreigners (CIE), proof of domicile, and proof of income.  On average, this process from application to account opening lasts more than three months.

Foreign Exchange and Remittances

Foreign Exchange

Brazil’s foreign exchange market remains small.  The latest Triennial Survey by the Bank for International Settlements, conducted in December 2019, showed that the net daily turnover on Brazil’s market for OTC foreign exchange transactions (spot transactions, outright forwards, foreign-exchange swaps, currency swaps, and currency options) was $18.8 billion, down from $19.7 billion in 2016.  This was equivalent to around 0.22 percent of the global market in 2019 versus 0.3 percent in 2016.

Brazil’s banking system has adequate capitalization and has traditionally been highly profitable, reflecting high interest rate spreads and fees.  Per an October 2020 Central Bank Financial Stability Report, despite the economic difficulties caused by the pandemic, all banks exceeded required solvency ratios, and stress testing demonstrated that the banking system has adequate loss-absorption capacity in all simulated scenarios.  Furthermore, the report noted 99.9 percent of banks already met Basel III requirements and possess a projected Common Equity Tier 1 (CET1) capital ratio above the minimum 7 percent required at the end of 2019.

There are few restrictions on converting or transferring funds associated with a foreign investment in Brazil.  Foreign investors may freely convert Brazilian currency in the unified foreign exchange market where buy-sell rates are determined by market forces.  All foreign exchange transactions, including identifying data, must be reported to the BCB.  Foreign exchange transactions on the current account are fully liberalized.

The BCB must approve all incoming foreign loans.  In most cases, loans are automatically approved unless loan costs are determined to be “incompatible with normal market conditions and practices.”  In such cases, the BCB may request additional information regarding the transaction.  Loans obtained abroad do not require advance approval by the BCB, provided the Brazilian recipient is not a government entity.  Loans to government entities require prior approval from the Brazilian Senate as well as from the Economic Ministry’s Treasury Secretariat and must be registered with the BCB.

Interest and amortization payments specified in a loan contract can be made without additional approval from the BCB.  Early payments can also be made without additional approvals if the contract includes a provision for them.  Otherwise, early payment requires notification to the BCB to ensure accurate records of Brazil’s stock of debt.

Remittance Policies

Brazilian Federal Revenue Service regulates withholding taxes (IRRF) applicable to earnings and capital gains realized by individuals and legal entities resident or domiciled outside Brazil.  Upon registering investments with the BCB, foreign investors are able to remit dividends, capital (including capital gains), and, if applicable, royalties.  Investors must register remittances with the BCB.  Dividends cannot exceed corporate profits.  Investors may carry out remittance transactions at any bank by documenting the source of the transaction (evidence of profit or sale of assets) and showing payment of applicable taxes.

Under Law 13259/2016 passed in March 2016, capital gain remittances are subject to a 15 to 22.5 percent income withholding tax, with the exception of capital gains and interest payments on tax-exempt domestically issued Brazilian bonds.  The capital gains marginal tax rates are: 15 percent up to $874,500 in gains; 17.5 percent for $874,500 to $1,749,000 in gains; 20 percent for $1,749,000 to $5,247,000 in gains; and 22.5 percent for more than $5,247,000 in gains.  (Note:  exchange rate used was 5.717 reais per dollar, based on March 30, 2021 values.)

Repatriation of a foreign investor’s initial investment is also exempt from income tax under Law 4131/1962.  Lease payments are assessed a 15 percent withholding tax.  Remittances related to technology transfers are not subject to the tax on credit, foreign exchange, and insurance, although they are subject to a 15 percent withholding tax and an extra 10 percent Contribution for Intervening in Economic Domain (CIDE) tax.

Sovereign Wealth Funds

Brazil had a sovereign fund from 2008 – 2018, when it was abolished, and the money was used to repay foreign debt.

The GoB maintains ownership interests in a variety of enterprises at both the federal and state levels.  Typically, boards responsible for state-owned enterprise (SOE) corporate governance are comprised of directors elected by the state or federal government with additional directors elected by any non-government shareholders.  Although Brazil participates in many OECD working groups, it does not follow the OECD Guidelines on Corporate Governance of SOEs.  Brazilian SOEs are prominent in the oil and gas, electricity generation and distribution, transportation, and banking sectors.  A number of these firms also see a portion of their shares publicly traded on the Brazilian and other stock exchanges.

Notable examples of majority government-owned and controlled firms include national oil and gas giant Petrobras and power conglomerate Eletrobras.  Both Petrobras and Eletrobras include non-government shareholders, are listed on both the Brazilian and American stock exchanges,  and are subject to the same accounting and audit regulations as all publicly traded Brazilian companies.

Privatization Program

Given limited public investment spending, the GoB has focused on privatizing state–owned energy, airport, road, railway, and port assets through long-term (up to 30 year) infrastructure concession agreements, although the pace of privatization efforts slowed in 2020 due to the COVID-19 pandemic.

In 2019, Petrobras sold its natural gas distribution pipeline network, started the divestment of eight oil refineries, sold its controlling stake in Brazil’s largest retail gas station chain, and is in the process of selling its shares in regional natural gas distributors.  While the pandemic resulted in a slowdown in the refinery divestments, momentum is increasing once again as of early 2021.  Since 2016, foreign companies have been allowed to conduct pre-salt exploration and production activities independently, and no longer must include Petrobras as a minority equity holder in pre-salt oil and gas operations.  Nevertheless, the 2016 law still gives Petrobras right –of first refusal in developing pre-salt offshore fields and obligates operators to share a percentage of production with the Brazilian state.  The GoB supports legislation currently in Congress to further liberalize the development of pre-salt fields by removing Petrobras’ right-of-first refusal as well as production sharing requirements.

In March 2021, Brazil approved legislation to reform Brazil’s natural gas markets, which aims to create competition by unbundling production, transportation, and distribution of natural gas, currently dominated by Petrobras and regional gas monopolies.  Creation of a truly competitive market, however, will still require lengthy state-level regulatory reform to liberalize intrastate gas distribution, in large part under state-owned distribution monopolies.

Eletrobras successfully sold its six principal, highly-indebted power distributors, and the GoB intends to privatize Eletrobras through issuance of new shares that would dilute the government’s majority stake and in early 2021 submitted a legislative proposal to Congress to advance this process.

In March 2021, the GoB included the state-owned postal service Correios in its National Divestment Plan (PND).  As in the case of Eletrobras, privatization will require further Congressional legislation.

In 2016, Brazil created the Investment Partnership Program (PPI) to accelerate the concession of public works projects to private enterprise and the privatization of some state entities.  PPI takes on priority federal concessions in road, rail, ports, airports, municipal water treatment, electricity transmission and distribution, and oil and gas exploration and production.  Since 2016, PPI has auctioned off 200 projects, collecting $35 billion in auction bonuses and securing private investment commitments of $179 billion, including 28 projects, $1.43 billion in auction bonuses, and commitments of $8.14 billion in 2020.  The full list of PPI projects is located at: https://www.ppi.gov.br/schedule-of-projects

While some subsidized financing through BNDES will be available, PPI emphasizes the use of private financing and debentures for projects.  All federal and state-level infrastructure concessions are open to foreign companies with no requirement to work with Brazilian partners.

In 2008, the Ministry of Health initiated the use of Production Development Partnerships (PDPs) to reduce the increasing dependence of Brazil’s healthcare sector on international drug production and to control costs in the public healthcare system, which provides services as an entitlement enumerated in the constitution.  The healthcare sector accounts for 9 percent of GDP, 10 percent of skilled jobs, and more than 25 percent of research and development nationally.  PDP agreements provide a framework for technology transfer and development of local production by leveraging the volume purchasing power of the Ministry of Health. In the current administration, there is increasing interest in PDPs as a cost saving measure.  U.S. companies have both competed for these procurements and at times raised concerns about the potential for PDPs to be used to subvert intellectual property protections under the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

Most state-owned and private sector corporations of any significant size in Brazil pursue corporate social responsibility (CSR) activities.  Brazil’s new CFIAs (see sections on bilateral investment agreements and dispute settlement) contain CSR provisions.  Some corporations use CSR programs to meet local content requirements, particularly in information technology manufacturing.  Many corporations support local education, health, and other programs in the communities where they have a presence.  Brazilian consumers, especially the local residents where a corporation has or is planning a local presence, generally expect CSR activity.  Corporate officials frequently meet with community members prior to building a new facility to review the types of local services the corporation will commit to providing.  Foreign and local enterprises in Brazil often advance United Nations Development Program (UNDP) Sustainable Development Goals (SDG) as part of their CSR activity, and will cite their local contributions to SDGs, such as universal primary education and environmental sustainability.  Brazilian prosecutors and civil society can be very proactive in bringing cases against companies for failure to implement the requirements of the environmental licenses for their investments and operations.  National and international nongovernmental organizations monitor corporate activities for perceived threats to Brazil’s biodiversity and tropical forests and can mount strong campaigns against alleged misdeeds.

The U.S. diplomatic mission in Brazil supports U.S. business CSR activities through the +Unidos Group (Mais Unidos), a group of multinational companies established in Brazil, which support public and private CSR alliances in Brazil. Additional information can be found at: www.maisunidos.org

Additional Resources

Department of State

• Country Reports on Human Rights Practices (https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/);
• Trafficking in Persons Report (https://www.state.gov/trafficking-in-persons-report/);
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities (https://www.state.gov/key-topics-bureau-of-democracy-human-rights-and-labor/due-diligence-guidance/) and;
• North Korea Sanctions & Enforcement Actions Advisory (https://home.treasury.gov/system/files/126/dprk_supplychain_advisory_07232018.pdf).

Department of Labor

• Findings on the Worst forms of Child Labor Report (https://www.dol.gov/agencies/ilab/resources/reports/child-labor/findings);
• List of Goods Produced by Child Labor or Forced Labor (https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods);
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World (https://www.dol.gov/general/apps/ilab) and;
• Comply Chain (https://www.dol.gov/ilab/complychain/).

Brazil has laws, regulations, and penalties to combat corruption, but their effectiveness is inconsistent.  Several bills to revise the country’s regulation of the lobbying/government relations industry have been pending before Congress for years.  Bribery is illegal, and a bribe by a Brazilian-based company to a foreign government official can result in criminal penalties for individuals and administrative penalties for companies, including fines and potential disqualification from government contracts.  A company cannot deduct a bribe to a foreign official from its taxes.  While federal government authorities generally investigate allegations of corruption, there are inconsistencies in the level of enforcement among individual states.  Corruption is problematic in business dealings with some authorities, particularly at the municipal level.  U.S. companies operating in Brazil are subject to the U.S. Foreign Corrupt Practices Act (FCPA).

Brazil signed the UN Convention against Corruption in 2003 and ratified it in 2005. Brazil is a signatory to the OECD Anti-Bribery Convention and a participating member of the OECD Working Group on Bribery.  It was one of the founders, along with the United States, of the intergovernmental Open Government Partnership, which seeks to help governments increase transparency.

In 2020, Brazil ranked 94th out of 180 countries in Transparency International’s Corruption Perceptions Index.  The full report can be found at:  https://www.transparency.org/en/cpi/2020/index/nzl

From 2014-2021, the complex federal criminal investigation known as Operação Lava Jato (Operation Carwash) investigated and prosecuted a complex web of public sector corruption, contract fraud, money laundering, and tax evasion stemming from systematic overcharging for government contracts, particularly at parastatal oil company Petrobras.  The investigation led to the arrests and convictions of Petrobras executives, oil industry suppliers, including executives from Brazil’s largest construction companies, money launderers, former politicians, and political party operators.  Appeals of convictions and sentences continue to work their way through the Brazilian court system.  On December 25, 2019, Brazilian President Jair Bolsonaro signed a packet of anti-crime legislation into law, which included several anti-corruption measures.  The new measures include regulation of immunity agreements – information provided by a subject in exchange for reduced sentence – which were widely used during Operation Carwash.  The legislation also strengthens Brazil’s whistle blower mechanisms, permitting anonymous information about crimes against the public administration and related offenses.  Operation Carwash was dissolved in February 2021.  In March 2021, the OECD established a working group to monitor anticorruption efforts in Brazil.

In December 2016, Brazilian construction conglomerate Odebrecht and its chemical manufacturing arm Braskem agreed to pay the largest FCPA penalty in U.S. history and plead guilty to charges filed in the United States, Brazil, and Switzerland that alleged the companies paid hundreds of millions of dollars in bribes to government officials around the world.  The U.S. Department of Justice case stemmed directly from the Lava Jato investigation and focused on violations of the anti-bribery provisions of the FCPA. Details on the case can be found at: https://www.justice.gov/opa/pr/odebrecht-and-braskem-plead-guilty-and-agree-pay-least-35-billion-global-penalties-resolve

In January 2018, Petrobras settled a class-action lawsuit with investors in U.S. federal court for $3 billion, which was one of the largest securities class action settlements in U.S. history.  The investors alleged that Petrobras officials accepted bribes and made decisions that had a negative impact on Petrobras’ share value.  In September 2018, the U.S. Department of Justice announced that Petrobras would pay a fine of $853.2 million to settle charges that former executives and directors violated the FCPA through fraudulent accounting used to conceal bribe payments from investors and regulators.

Resources to Report Corruption

Petalla Brandao Timo Rodrigues
International Relations Chief Advisor
Brazilian Federal Public Ministry
contatolavajato@mpf.mp.br

Setor de Autarquias Sul (SAS), Quadra 01, Bloco A; Brasilia/DF

stpc.dpc@cgu.gov.br

https://www.gov.br/cgu/pt-br/anticorrupcao

Transparencia Brasil
R. Bela Cintra, 409; Sao Paulo, Brasil
+55 (11) 3259-6986
http://www.transparencia.org.br/contato

Strikes and demonstrations occasionally occur in urban areas and may cause temporary disruption to public transportation.  Brazil has over 43,000 murders annually, with low rates of completion in murder investigations and conviction rates.

Non-violent pro- and anti-government demonstrations have occurred periodically in recent years.

Although U.S. citizens usually are not targeted during such events, U.S. citizens traveling or residing in Brazil are advised to take common-sense precautions and avoid any large gatherings or any other event where crowds have congregated to demonstrate or protest. For the latest U.S. State Department guidance on travel in Brazil, please consult www.travel.state.gov.

The Brazilian labor market is composed of approximately 100.1 million workers, including employed (86.2 million) and unemployed (13.9 million).  Among employed workers, 34 million (39.5 percent) work in the informal sector.  Brazil had an unemployment rate of 13.9 percent in the last quarter of 2020, although that rate was more than double (28.9 percent) for workers ages 18-24.  Low-skilled employment dominates Brazil’s labor market.  The nearly 40 million workers in the informal sector do not receive the full benefits formal workers enjoy under Brazil’s labor and social welfare system.  Since 2012, women have on average been unemployed at a higher rate (3.15 percentage points higher) than their male counterparts.  In 2020, the difference reached 4.5 percentage points.  Foreign workers made up less than one percent of the overall labor force, but the arrival of more than 260,000 economic migrants and refugees from Venezuela since 2016 has led to large local concentrations of foreign workers in the border state of Roraima and the city of Manaus.  Since April 2018, the government of Brazil, through Operation Welcome’s voluntary interiorization strategy, has relocated more than 49,000 Venezuelans away from the northern border region to cities with more economic opportunity.  Migrant workers from within Brazil play a significant role in the agricultural sector.

Workers in the formal sector contribute to the Time of Service Guarantee Fund (FGTS) that equates to one month’s salary over the course of a year. If a company terminates an employee, the employee can access the full amount of their FGTS contributions or 20 percent in the event they leave voluntarily.  Brazil’s labor code guarantees formal sector workers 30 days of annual leave and severance pay in the case of dismissal without cause.  Unemployment insurance also exists for laid off workers equal to the country’s minimum salary (or more depending on previous income levels) for six months.  The government does not waive labor laws to attract investment; they apply uniformly cross the country.

In April 2020, Provisional Measure 396/2020 (later ratified as Law 14020/2020) authorized employers to reduce working hours and wages in an effort to preserve employment during the economic crisis caused by the pandemic.  The law will maintain its validity only during the state of calamity caused by the pandemic and the reduction requires the employee’s concurrence.

Collective bargaining is common and there were 11,587 labor unions operating in Brazil in 2018.  Labor unions, especially in sectors such as metalworking and banking, are well organized in advocating for wages and working conditions and account for approximately 19 percent of the official workforce according to the Brazilian Institute of Applied Economic Research (IPEA).  In some sectors, federal regulations mandate collective bargaining negotiations across the entire industry.  A new labor law in November 2017 ended mandatory union contributions, which has reduced union finances by as much as 90 percent according to the Inter-Union Department of Statistics and Socio-economic Studies (DIEESE).  DIEESE reported a significant decline in the number of collective bargaining agreements reached in 2018 (3,269) compared to 2017 (4,378).

Employer federations also play a significant role in both public policy and labor relations.  Each state has its own federations of industry and commerce, which report respectively to the National Confederation of Industry (CNI), headquartered in Brasilia, and the National Confederation of Commerce (CNC), headquartered in Rio de Janeiro.

Brazil has a dedicated system of labor courts that are charged with resolving routine cases involving unfair dismissal, working conditions, salary disputes, and other grievances.  Labor courts have the power to impose an agreement on employers and unions if negotiations break down and either side appeals to the court system.  As a result, labor courts routinely are called upon to determine wages and working conditions in industries across the country.  The labor courts system has millions of pending legal cases on its docket, although the number of new filings has decreased since November 2017 labor law reforms.

Strikes occur periodically, particularly among public sector unions. A strike organized by truckers’ unions protesting increased fuel prices paralyzed the Brazilian economy in May 2018, and led to billions of dollars in losses to the economy.

Brazil has ratified 97 International Labor Organization (ILO) conventions and is party to the UN Convention on the Rights of the Child and major ILO conventions concerning the prohibition of child labor, forced labor, and discrimination.  For the past eight years (2010-2018), the Department of Labor, in its annual publication Findings on the Worst forms of Child Labor, has recognized Brazil for its significant advancement in efforts to eliminate the worst forms of child labor.  On January 1, 2019, newly-elected President Jair Bolsonaro eliminated the Ministry of Labor and divided its responsibilities between the Ministries of Economy, Justice, and Social Development. The GoB, in 2020, inspected 266 properties, resulting in the rescue of 942 victims of forced labor.  Additionally, GoB officials removed 1,040 child workers from situations of child labor compared to 1,409 children in 2018.  Of these, 20 children were rescued from situations of slavery-like conditions, compared to 28 in 2018.

Programs of the U.S. International Development Finance Corporation (DFC) are available, although DFC reports that certain new authorities established by the BUILD Act of 2018, including equity investments, technical assistance, grants, and feasibility studies, may require a new bilateral Investment Incentive Agreement with the Government of Brazil.  DFC stated in 2019 its intent to invest in infrastructure and women entrepreneurship projects as its primary focus in Brazil.  Brazil has been a member of the Multilateral Investment Guarantee Agency (MIGA) since 1992.  In October 2020, DFC announced $ 984 million in investments in Brazil, mostly focused on small and medium enterprises.  In October and November 2020, the DFC held two substantive discussions on the Investment Incentive Agreement (IIA) with over a dozen Brazilian government (GOB) agencies led by the Ministry of External Relations and the Ministry of Economy.

* Source for Host Country Data: https://www.bcb.gov.br and https://www.ipea.gov.br/portal/

Economic Section
U.S. Embassy Brasilia
BrasiliaECON2@State.gov
+55-61-3312-7000

Policies Towards Foreign Direct Investment

Peru seeks to attract investment – both foreign and domestic – in nearly all sectors.. Peru reported $2 billion in Foreign Direct Investment (FDI) in 2020 and seeks increased investment for 2021. It has prioritized $6 billion in public-private partnership projects in transportation infrastructure, electricity, education, broadband expansion, gas distribution, health, and sanitation.

Peru’s Constitution of 1993grants national treatment for foreign investors and permits foreign investment in almost all economic sectors. Under the Peruvian Constitution, foreign investors have the same rights as national investors to benefit from investment incentives, such as tax exemptions. In addition to the Constitution of 1993, Peru has several laws governing FDI including the Foreign Investment Promotion Law (Legislative Decree (DL) 662 of September 1991) and the Framework Law for Private Investment Growth (DL 757 of November 1991). Other important laws include the Private Investment in State-Owned Enterprises Promotion Law (DL 674) and the Private Investment in Public Services Infrastructure Promotion Law (DL 758). Article 6 of Supreme Decree No. 162-92-EF (the implementing regulations of DLs 662 and 757) authorized private investment in all industries except within natural protected areas and weapons manufacturing.

Peru and the United States benefit from the United States-Peru Free Trade Agreement (PTPA), which entered into force on February 1, 2009. The PTPA established a secure, predictable legal framework for U.S. investors in Peru. The PTPA protects all forms of investment. U.S. investors enjoy the right to establish, acquire, and operate investments in Peru on an equal footing with local investors in almost all circumstances. https://ustr.gov/trade-agreements/free-trade-agreements/peru-tpa

The GOP created the investment promotion agency ProInversion in 2002 to manage privatizations and concessions of state-owned enterprises and natural resource-based industries. The agency currently manages private concession processes in the energy, education, transportation, health, sanitation, and telecommunication sectors, and organizes international roadshow events to attract investors. Major recent and upcoming concessions include ports, water treatment plants, power generation facilities, mining projects, electrical transmission lines, oil and gas distribution, and telecommunications. Project opportunities are available on ProInversion’s website: https://www.proyectosapp.pe/default.aspx?ARE=1&PFL=0&sec=30. Companies are required to register all foreign investments with ProInversion.

The National Competitiveness Plan 2019 – 2030 outlines Peru’s economic growth strategy for the next decade and seeks to close the country’s $110 billion infrastructure gap. The plan was supplemented by a National Infrastructure Plan in July 2019, which identified 52 infrastructure projects keyed to critical sectors. Priority projects include two Lima metro lines, an expansion of Jorge Chavez International Airport, and multiple energy projects including electricity transmission lines. Peru reported in February 2021 that the energy projects had advanced significantly while many transport and agricultural projects suffered significant delays. Of note, the Ministry of Transportation prioritized the Fourth Metro Line and Central Highway, each multi-billion dollar projects, which were not included in the National Infrastructure Plan. Peru maintains an investment research portal to promote these infrastructure investment opportunities: https://www.mef.gob.pe/es/aplicativos-invierte-pe?id=5455

Although Peruvian administrations since the 1990s have supported private investments, Peru occasionally passes measures that some observers regard as a contravention of its open, free market orientation. In December 2011, Peru signed into law a 10-year moratorium on the entry of live genetically modified organisms (GMOs) for cultivation. In December 2020, the moratorium was extended an additional 15 years and will now remain enforced until 2035. Peru also implemented two sets of rules for importing pesticides, one for commercial importers, which requires importers to file a full dossier with technical information, and another for end-user farmers, which only requires a written affidavit.

Peru reformed its agricultural labor laws in 2020 impacting labor costs and tax incentives that could adversely affect investors in Peru’s agricultural sector. The U.S. Department of Agriculture estimated U.S. direct investment in the agriculture sector to reach $1.3 billion in 2021.

Limits on Foreign Control and Right to Private Ownership and Establishment

Peru’s Constitution (Article 6 under Supreme Decree No. 162-92-EF) authorizes foreign investors to carry out economic activity provided that investors comply with all constitutional precepts, laws, and treaties. Exceptions exist, including exclusion of foreign investment activities in natural protected reserves and military weapons manufacturing. Peruvian law requires majority Peruvian ownership in media; air, land and maritime transportation infrastructure; and private security surveillance services. Foreign interests cannot “acquire or possess under any title, mines, lands, forests, waters, or fuel or energy sources” within 50 kilometers of Peru’s international borders. However, foreigners can obtain concessions in these areas and in certain cases the GOP may grant a waiver. The GOP does not screen, review, or approve foreign direct investment outside of those sectors that require a governmental waiver.

Other Investment Policy Reviews

The World Trade Organization (WTO) published a Trade Policy Review (HYPERLINK “https://www.wto.org/english/tratop_e/tpr_e/tp493_e.htm” https://www.wto.org/english/tratop_e/tpr_e/tp493_e.htm) on Peru in October 2019. The WTO commented that foreign investors received the same legal treatment as local investors in general, although Peru restricted foreign investment on property at the country’s borders, and in air transport and broadcasting. The report highlighted the government’s ongoing efforts to promote public-private partnerships (PPPs) and strengthen the PPP legal framework with Organization for Economic Cooperation and Development (OECD) principles. The report noted that Peru maintained a regime open to domestic and foreign investment that fostered competition and equal treatment.

Peru aspires to become a member of the OECD and launched an OECD Country Program in 2014, comprising policy reviews and capacity building projects. The OECD published the Initial Assessment of its Multi-Dimensional Review in 2015 (https://www.oecd.org/countries/peru/multi-dimensional-review-of-peru-9789264243279-en.htm), finding that, in spite of economic growth, Peru “still faces structural challenges to escape the middle-income trap and consolidate its emerging middle class.” In every year since this study was published, Peru has enacted and implemented dozens of reforms to modernize its governance practices in line with OECD recommendations. Recent OECD studies on Peru include: Investing in Youth (April 2019), Digital Government (June 2019), Pension Systems (September 2019), Transport Regulation (February 2020), and Tax Transparency (April 2020). Peru has adhered to 45 of OECD’s 248 existing legal instruments, but its accession roadmap remains unclear.

Peru has not had a third-party investment policy review through the OECD or UNCTAD in the past three years.

Business Facilitation

The GOP does not have a regulatory system to facilitate business operations but the Institute for the Protection of Intellectual Property, Consumer Protection, and Competition (INDECOPI) reviews the enactment of new regulations by government entities that can place burdens on business operations. INDECOPI has the authority to block any new business regulation. INDECOPI also has a Commission for Elimination of Bureaucratic Barriers : https://www.indecopi.gob.pe/web/eliminacion-de-barreras-burocraticas/presentacion.

Peru allows foreign business ownership, provided that a company has at least two shareholders and that its legal representative is a Peruvian resident. Businesses must reserve a company name through the national registry, SUNARP, and prepare a deed of incorporation through a Citizen and Business Services Portal (https://www.serviciosalciudadano.gob.pe/). After a deed is signed, businesses must file with a public notary, pay notary fees of up to one percent of a company’s capital, and submit the deed to the Public Registry. The company’s legal representative must obtain a certificate of registration and tax identification number from the national tax authority SUNAT (www.sunat.gob.pe). Finally, the company must obtain a license from the municipality of the jurisdiction in which it is located. Depending on the core business, companies might need to obtain further government approvals such as: sanitary, environmental, or educational authorizations.

Outward Investment

The GOP promotes outward investment by Peruvian entities through the Ministry of Foreign Trade and Tourism (MINCETUR). Trade Commission Offices of Peru (OCEX), under the supervision of Peru’s export promotion agency (PromPeru), are located in numerous countries, including the United States, and promote the export of Peruvian goods and services and inward foreign investment. The GOP does not restrict domestic investors from investing abroad.

Transparency of the Regulatory System

Laws and regulations most relevant to foreign investors are enacted and implemented at the national level. Most ministries and agencies make draft regulations available for public comment. El Peruano, the state’s official gazette, publishes regulations at the national, regional, and municipal level. Ministries generally maintain current regulations on their websites. Rule-making and regulatory authority also exists through executive agencies specific to different sectors. The Supervisory Agency for Forest Resources and Wildlife (OSINFOR), the Supervisory Agency for Energy and Mining (OSINERGMIN), and the Supervisory Agency for Telecommunications (OSIPTEL), all of which report directly to the President of the Council of Ministers, can enact new regulations that affect investments in the economic sectors they manage. These agencies also have the right to enforce regulations with fines. Regulation is generally reviewed on the basis of scientific and data-driven assessments, but public comments are not always received or made public.

Accounting, legal, and regulatory standards are consistent with international norms. Peru’s Accounting Standards Council endorses the use of IFRS standards by private entities. Public finances and debt obligations, including explicit and contingent liabilities, are transparent and publicly available at the Ministry of Economy and Finance website: https://www.mef.gob.pe/es/estadisticas-sp-18642/deuda-del-sector-publico.

International Regulatory Considerations

Peru is a member of regional economic blocs. Under the Pacific Alliance, Peru looks to harmonize regulations and reduce barriers to trade with other members: Chile, Colombia, and Mexico. Peru is a member of the Andean Community (CAN), which issues supranational regulations – based on consensus of its members – that supersede domestic provisions.

Peru follows international food standard bodies, including: CODEX Alimentarius, World Organization for Animal Health (OIE), and International Plant Protection Convention (IPPC) guidelines for Sanitary and Phytosanitary (SPS) standards. When CODEX does not have limits or standards established for a product, Peru defaults to the U.S. maximum residue level or standard. Peru’s system is more aligned with the U.S. regulatory system and standards than with its other trading partners. Peru notifies all agricultural-related technical regulations to the World Trade Organization (WTO) Technical Barriers to Trade (TBT) committee.

Legal System and Judicial Independence

Peru uses a civil law system. Peru’s civil code includes a contract section and a general corporations law that regulates companies. Peru’s civil court resolves conflicts between companies. Companies can also access conflict resolution services in civil courts for conflicts and litigation for which a legal claim has been filed. Litigation processes in Peruvian courts are slow.

Peru has an independent judiciary. The executive branch does not interfere with the judiciary as a matter of policy. Regulations and enforcement actions are appealable through administrative process and the court system. Peru is in the process of reforming its justice system. The National Justice Board (Junta Nacional de Justicia), which began operating in January 2020, supervises the selection processes, appointments, evaluations, and disciplinary actions for judges.

Laws and Regulations on Foreign Direct Investment

Peru has a stable and attractive legal framework used to promote private investment. The 1993 Peruvian Constitution includes provisions that establish principles to ensure a favorable legal framework for private investment, particularly for foreign investment. A key principle is equal treatment to domestic and foreign investment. Some of the main private investment regulations include:

• Legislative Decree 662 that approves foreign investment legal stability regulations,
• Legislative Decree 757 that approves the private investment growth framework law, and
• Supreme Decree 162-92-EF that approves private investment guarantee mechanism regulations

Peru’s legal system is available to investors. All laws relevant to foreign investment along with pertinent explanations and forms can be found on the ProInversion website: https://www.proinversion.gob.pe/modulos/LAN/landing.aspx?are=1&pfl=1&lan=9&tit=institucional .

Competition and Antitrust Laws

INDECOPI is the GOP agency responsible for reviewing competition-related concerns of a domestic nature. Congress published a mergers and acquisitions (M&A) control law in January 2021. The law requires INDECOPI to review and approve M&As involving companies, including multinationals, that have combined annual sales or gross earnings over $146 million in Peru and if the value of the sales or annual gross earnings in Peru of two or more of the companies involved in the proposed M&A operation exceed $22 million each.

A legislative decree issued in September 2018 (DL 1444) modified the public procurement law to allow government agencies to use government-to-government (G2G) agreements to facilitate procurement processes.  The GOP sees this G2G procurement model as a method for expediting priority infrastructure projects in a manner that is more transparent and less susceptible to corruption. The USG, however, does not have a mechanism to support Peru’s G2G contracts and the U.S. Embassy has raised concerns with the GOP that its use limits U.S. firms’ participation in infrastructure solicitations. Peru expanded the use of G2G agreements in 2020 to include large infrastructure projects including a $1.6 billion general reconstruction initiative (related to damages caused by the El Nino event of 2017) and a $5 billion Lima metro line project.

Expropriation and Compensation

The Peruvian Constitution states that Peru can only expropriate private property based on public interest, such as public works projects or for national security. Article 70 of the Constitution states that the State can only expropriate through a judicial process, prior mandate of the law, and after payment of compensation, which must include compensation for possible damage. Peruvian law bases compensation for expropriation on fair market value. Article 70 also guarantees the inviolability of private property.

Illegal expropriation of foreign investment has been alleged in the extractive industry. A U.S. company alleged indirect expropriation due to changes in regulatory standards. Landowners have also alleged indirect expropriation due to government inaction and corruption in “land-grab” cases that have, at times, been linked to local government endorsed projects.

Dispute Settlement

ICSID Convention and New York Convention, and PTPA

Peru is a party to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) and to the International Center for the Settlement of Investment Disputes (ICSID convention). Disputes between foreign investors and the GOP regarding pre-existing contracts must still enter national courts, unless otherwise permitted, such as through provisions found in the PTPA. In addition, investors who enter into a juridical stability agreement may submit disputes with the government to national or international arbitration if stipulated in the agreement. Several private organizations – including the American Chamber of Commerce, the Lima Chamber of Commerce, and the Catholic University – operate private arbitration centers. The quality of such centers varies and investors should choose arbitration venues carefully.

The PTPA includes a chapter on dispute settlement, which applies to implementation of the Agreement’s core obligations, including labor and environment provisions. Dispute panel procedures set high standards of openness and transparency through the following measures: open public hearings, public release of legal submissions by parties, admission of special labor or environment expertise for disputes in these areas, and opportunities for interested third parties to submit views. The Agreement emphasizes compliance through consultation and trade-enhancing remedies and encourages arbitration and other alternative dispute resolution measures.

Investor-State Dispute Settlement

The PTPA provides investor-state claim mechanisms. It does not require that an investor exhaust local judicial or administrative remedies before a claim is filed. The investor may submit a claim under various arbitral mechanisms, including the Convention on the Settlement of Investment Disputes (ICSID Convention) and ICSID Rules of Procedure, the ICSID Additional Facility Rules, the United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules, or, if the disputants agree, any other arbitration institution or rules. Peru has paid previous arbitral awards; however, a U.S. court found in one case that Peru altered its tax code prior to payment, thus reducing interest payments.

In February 2016, a U.S. investor filed a Notice of Intent to pursue international arbitration against the GOP for violation of the U.S.-Peru Trade Promotion Agreement. The investor, which refiled its claim in August 2016, holds agrarian land reform bonds that it argues the GOP has undervalued.

In September 2019, a U.S. investor filed an arbitration claim against the GOP over alleged interference over environmental permitting and contractual issues for a hydro power project.

In February 2020, a claimant filed an arbitration claim against Peru for violation of the U.S.-Peru Trade Promotion Agreement regarding a tax and royalty dispute between its mining subsidiary and Peru’s tax authority SUNAT.

There is no recent history of extrajudicial action against foreign investors.

International Commercial Arbitration and Foreign Courts

The 1993 Constitution allows disputes among foreign investors and the government or state-controlled enterprises to be submitted to international arbitration.

Bankruptcy Regulations

Peru has a creditor rights hierarchy similar to that established under U.S. bankruptcy law, and monetary judgments are usually made in the currency stipulated in the contract. However, administrative bankruptcy procedures are slow and subject to judicial intervention. Compounding this difficulty are occasional laws passed to protect specific debtors from action by creditors that would force them into bankruptcy or liquidation. In August 2016, the GOP extended the period for bankruptcy from one to two years. Peru does not criminalize bankruptcy. World Bank’s 2020 Doing Business Report ranked Peru 90 of 190 countries for ease of “resolving insolvency.”

Investment Incentives

Peru offers foreign and national investors legal and tax stability agreements to stimulate private investment. These agreements guarantee that the statutes on income taxes, remittances, export promotion regimes (such as drawbacks, or refunds of duties), administrative procedures, and labor hiring regimes in effect at the time of the investment contract will remain unchanged for that investment for 10 years. To qualify, an investment must exceed $10 million in the mining and hydrocarbons sectors or $5 million within two years in other sectors. An agreement to acquire more than 50 percent of a state-owned company’s shares in a privatization process may also qualify an investor for a legal or tax stability agreement, provided that the added investment will expand the installed capacity of the company or enhance its technological development.

Foreign Trade Zones/Free Ports/Trade Facilitation

Peru was accepted as a member of the Association of Free Zones of the Americas (AZFA) as well as the World Free Zone Organization (WFZO) in 2019. Peru has seven Special Economic Zones (SEZ): a Free Zone in Tacna, and Special Development Zones (SDZ) in Ilo, Matarani, Paita, Tumbes, Loreto and Puno (the last three are not in operation). Companies can become SEZ users through public auctions. This condition gives them access to tax benefits and customs advantages promoting entry, permanence, and exit facilitation procedures for goods and tax exemptions in the development of their activities. Benefits include:

Taxes

• Income Tax exemption (rate outside of the SEZ is 29.5 percent)
• General Sales Tax (IGV) exemption (rate outside of the SEZ is 16 percent)
• Municipal Promotion Tax exemption (rate outside of the SEZ is 2 percent)
• Excise Tax (ISC) exemption (rate outside of the SEZ goes from 2 to 30 percent depending on the product)
• Ad Valorem tariff exemption when importing products from overseas (rates outside of the SEZ are 0, 6, and 11 percent); and
• Exemption from all central, regional or municipal government taxes created in the future, except for social security (EsSalud) contributions and fees

Customs

• Entry of machinery, equipment, raw materials and supplies from abroad is eligible to the suspension of import duties and taxes payments
• Indefinite permanence of goods within the SEZ, as long as company maintains user status
• Products manufactured in the SEZ can be exported directly without having to undergo a nationalization customs regime
• Products manufactured in the SEZ can be entered into national territory under international agreements and conventions; and
• Entry of goods into the SEZ is direct and does not require prior storage

MINCETUR Supreme Decree 005-2019 published in August 2019, implemented regulations for the SDZ of Tumbes, Ilo, Matarani and Paita. SDZ businesses can perform activities in seven economic sectors: industrial, logistics, repair/overhaul, telecommunications, information technology, scientific, technological research, and development. SDZs enjoy the same economic benefits as the SEZs. The MINCETUR Foreign Trade Facilitation Office oversees Peru’s free trade zones.

Performance and Data Localization Requirements

Under the PTPA, Peru made concessions beyond its commitments to the World Trade Organization (WTO). Peru does not maintain any measures that are inconsistent with Trade-Related Investment Measure (TRIM) requirements, according to a WTO Committee on Trade-Related Investment Measure notification dated August 19, 2010.

Current law limits foreign employees to 20 percent of the total number of employees in a local company (whether owned by foreign or national interests). However, under the PTPA, Peru does not to apply most of its nationality-based hiring requirements to U.S. professionals and specialty personnel.

A company’s combined salaries of foreign employees are limited to no more than 30 percent of its payroll. However, DL 689 from November 1991 provides a variety of exceptions to these limits. For example, a foreigner is not counted against a company’s total if they hold an immigrant visa, are an investor in the company, or are a national of a country that has a reciprocal labor or dual nationality agreement with Peru. The United States and Peru recognize dual nationality but do not have a formal agreement. The law exempts foreign banks, and international transportation companies from these hiring limits, as well as all firms located in free trade zones. Companies may apply for exemptions from the limitations for managerial or technical personnel.

The process to obtain a Peruvian visa or permit for residency or work can be cumbersome and lengthy.

Data Storage

Peru adopted the Personal Data Protection Law (Law Number 29733) 2011 and went into effect in 2013. A data controller who processes personal data must notify the National Authority for Personal Data Protection (ANPDP for its Spanish acronym), which maintains a public register. Personal data is defined as any information on an individual which identifies or makes him/her identifiable through reasonable means. Personal data includes: biometric data; data on racial and ethnic origin; political, religious, philosophical or moral opinions or convictions; personal habits; union membership; and information related to health or sexual preference. Unless otherwise exempted by statute, data controllers are generally required to obtain the consent of data subjects for the processing of personal data. Consent must be prior, informed, expressed, and unequivocal. A data controller may transfer personal data to places outside of Peru only if the recipients have adequate protection measures.

Data controllers must adopt technical, organizational, and legal measures to guarantee the security of personal data and avoid their alteration, loss, unauthorized processing or access. Peru’s law does not require any notifications to any data subject or any other entity upon a breach. Peru does not mandate special regulations be enacted for the processing of personal data of minors. The ANPDP is responsible for enforcement and can issue administrative sanctions/fines based upon whether the violation is mild, serious or very serious. The law provides a “principle for availability of recourse for the data subject” stating that any data subject must have the administrative and/or jurisdictional channel necessary to claim and enforce his/her rights when they are violated by the processing of his/her personal data. There are no requirements for foreign IT providers to turn over source code and/or provide access to encryption.

In January 2020, Peru established the Digital Trust Framework (Urgency Decree 007-2020) which provides for personal data protection and transparency, consumer protection, and digital security. The law established the National Digital Secretariat under the Prime Minister’s Office as the overall coordinator and digital trust governing body but placed data protection and transparency under the Ministry of Justice and Human Rights MINJUS (The ANPDP falls under MINJUS). The order created a national data center as a digital platform to manage, direct, articulate, and supervise the operation, education, promotion, collaboration and cooperation of data nationwide.

Real Property

World Bank’s 2020 Doing Business Report ranked Peru 55 of 190 for ease of “registering property.” Peru enforces property rights and interests.  Mortgages and liens exist, and the recording system is reliable, performed by SUNARP, the National Superintendency of Public Records. Foreigners and/or non-resident investors cannot own land within 50 km of a border.

Intellectual Property Rights

Peru is listed on the Watch List in the United States Trade Representative’s (USTR’s) 2021 Special 301 Report, and the Polvos Azules market is included on USTR’s the 2020 Notorious Markets List. The primary reasons for Watch List inclusion are the long-standing implementation issues with the intellectual property provisions of the PTPA, particularly with respect to establishing statutory damages for copyright infringement and trademark counterfeiting.

Peru’s legal framework provides for easy registration of trademarks, and inventors have been able to patent their inventions since 1994. Peruvian law does not provide pipeline protection for patents or protection from parallel imports. Peru’s Copyright Law is generally consistent with the World Trade Organization’s (WTO) Agreement on Trade-Related Aspects of Intellectual Property (TRIPS).

Peruvian law provides the same protections for U.S. companies as Peruvian companies in all intellectual property rights (IPR) categories under the PTPA and other international commitments such as the World Intellectual Property Organization (WIPO) and the World Trade Organization Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Peru joined the Global Patent Prosecution Highway Agreement (GPPH) with Japan effective in 2019. Peru is reinforcing its Patent Support System with the adoption of the WIPO Technology and Innovation Support Center (TISC) Program.

INDECOPI is a reliable partner for the U.S. government, the private sector, and civil society, having made good faith efforts to decrease the trademark and patent registration backlog and filing time. Although INDECOPI is the GOP agency charged with promoting and defending intellectual property rights, IPR enforcement also involves other GOP agencies and offices, including: the Public Ministry (Fiscalia), the Peruvian National Police (PNP), the Tax and Customs Authority (SUNAT), the Ministry of Production (PRODUCE), the Judiciary, and the Ministry of Health’s (MINSA’s) Directorate General for Medicines (DIGEMID).

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles: https://www.wipo.int/directory/en/.

Capital Markets and Portfolio Investment

Peru allows foreign portfolio investment and does not place restrictions on international transactions. The private sector has access to a variety of credit instruments. Peruvian mutual funds managed $12.7 billion in December 2020. Private pension funds managed a total of $47.2 billion in December 2020.

The Lima Stock Exchange (BVL) is a member of the Integrated Latin American Market, which includes stock markets from Pacific Alliance countries (Peru, Chile, Colombia, and Mexico). As of July 2018, mutual funds registered in Pacific Alliance countries may trade in the Lima Stock Exchange.

The Securities Market Superintendent (SMV) regulates the securities and commodities markets. SMV’s mandate includes controlling securities market participants, maintaining a transparent and orderly market, setting accounting standards, and publishing financial information about listed companies. SMV requires stock issuers to report events that may affect the stock, the company, or any public offerings. Trading on insider information is a crime, with some reported prosecutions in past years. SMV must vet all firms listed on the Lima Stock Exchange or the Public Registry of Securities. SMV also maintains the Public Registry of Securities and Stock Brokers.

London Stock Exchange Group FTSE Russell downgraded Peru from Secondary Emerging Market to Frontier status in March 2020. In a statement, the BVL stated that the decision is not necessarily replicable among the other index providers adding that Morgan Stanley Capital International, which is considered a main benchmark for emerging markets, is not expected to reconsider the BVL’s status.

Money and Banking System

Peru’s banking sector is highly consolidated. Sixteen commercial banks account for 90 percent of the financial system’s total assets, valued at $164 billion in December of 2020. In 2020, three banks accounted for 72 percent of loans and 70 percent of deposits among commercial banks. Peru has a relatively low level of access to financial services at 50 percent, particularly outside Lima and major urban areas.

The Central Bank of Peru (BCRP) is an independent institution, free to manage monetary policy to maintain financial stability. The BCRP’s primary goal is to maintain price stability via inflation targeting between one to three percent. Year-end inflation reached 1.8 percent in 2020.

The banking system is considered generally sound, thanks to the GOP’s lessons learned during the 1997-1998 Asian financial crisis. Non-performing bank loans accounted for 3.8 percent of gross loans as of December 2020, an increase from the three percent registered in 2019. The rapid implementation of the $39.5 billion BCRP loan guarantee program in response to the COVID-19 pandemic attenuated loan default risk, but banks are still expected to feel an impact on credit operations within sensitive sectors such as tourism, services, and retail.

Under the PTPA, U.S. financial service suppliers have full rights to establish subsidiaries or branches for banks and insurance companies. Peruvian law and regulations do not authorize or encourage private firms to adopt articles of incorporation or association to limit or restrict foreign participation. However, larger private firms often use “cross-shareholding” and “stable shareholder” arrangements to restrict investment by outsiders – not necessarily foreigners – in their firms. As close families or associates often control ownership of Peruvian corporations, hostile takeovers are practically non-existent. In the past few years, several companies from the region, China, North America, and Europe have begun actively buying local companies in power transmission, retail trade, fishmeal production, and other industries. While foreign banks are allowed to freely establish banks in the country, they are subject to the supervision of Peru’s Superintendent of Banks and Securities (SBS).

Foreign Exchange and Remittances

Foreign Exchange

There were no reported difficulties in obtaining foreign exchange. Under Article 64 of the Constitution, the GOP guarantees the freedom to hold and dispose of foreign currency. Exporters and importers are not required to channel foreign exchange transactions through the Central Bank and can conduct transactions freely on the open market. Anyone may open and maintain foreign currency accounts in Peruvian commercial banks. Under the PTPA, portfolio managers in the United States are able to provide portfolio management services to both mutual funds and pension funds in Peru, including funds that manage Peru’s privatized social security accounts.

The Constitution guarantees free convertibility of currency. However, limited capital controls still exist as private pension fund managers (AFPs) are constrained by how much of their portfolio can be invested in foreign securities. The maximum limit is set by law (currently 50 percent since July 2011), but the BCRP sets the operating limit AFPs can invest abroad. Over the years, the BCRP has gradually increased the operating limit. Peru reached the 50 percent limit in September 2018.

The foreign exchange market mostly operates freely. Funds associated with any form of investment can be freely converted into any world currency. To quell “extreme variations” of the exchange rate, the BCRP intervenes through purchases and sales in the open market without imposing controls on exchange rates or transactions. Since 2014,BCRP has pursued de-dollarization to reduce dollar denominated loans in the market and purchased U.S. dollars to mitigate the risk that spillover from expansionary U.S. monetary policy might result in over-valuation of the Peruvian Sol relative to the U.S. dollar. In December 2020, dollar-denominated loans reached 22 percent, and deposits 32 percent.

The U.S. Dollar averaged PEN 3.49 per $1 in 2020.

Remittance Policies

Article 7 of the Legislative Decree 662 issued in 1991 provided that foreign investors may send, in freely convertible currencies, remittances of the entirety of their capital derived from investments, including the sale of shares, stocks or rights, capital reduction or partial or total liquidation of companies, the entirety of their dividends or proven net profit derived from their investments, and any considerations for the use or enjoyment of assets that are physically located in Peru, as registered with the competent national entity, without a prior authorization from any national government department or decentralized public entities, or regional or municipal Governments, after having paid all the applicable taxes.

Sovereign Wealth Funds

Peru’s Ministry of Economy and Finance (MEF) manages the Fiscal Stabilization Fund which serves as a buffer for the GOP’s fiscal accounts in the event of adverse economic conditions. It consists of treasury surplus, concessional fees, and privatization proceeds, and is capped at four percent of GDP. The fund was nearly completely exhausted to finance increased spending in response to the COVID-19 pandemic, dropping from $5.5 billion at the end of 2019 to $1 million at the end of 2020. The Fund is not a party to the IMF International Working Group or a signatory to the Santiago Principles.

Peru wholly owns 35 state-owned enterprises (SOEs), 34 of which are under the parastatal conglomerate FONAFE. The list of SOEs under FONAFE can be found here: https://www.fonafe.gob.pe/empresasdelacorporacion . FONAFE appoints an independent board of directors for each SOE using a transparent selection process. There is no notable third-party analysis on SOEs’ ties to the government. The largest SOE is PetroPeru which refines oil, operates Peru’s main oil pipeline, and maintains a stake in select concessions. SOE ownership practices are generally consistent with OECD guidelines.

Privatization Program

The GOP initiated an extensive privatization program in 1991, in which foreign investors were encouraged to participate. Since 2000, the GOP has promoted multi-year concessions as a means of attracting investment in major projects, including a 30-year concession to a private group (Lima Airport Partners) to operate the Lima airport in 2000 and a 30-year concession to Dubai Ports World to improve and operate a new container terminal in the Port of Callao in 2006.

Peru has legal and regulatory frameworks to support responsible business conduct (RBC) standards. However, Peru does not have a holistic action plan or national standards for RBC, and there are still challenges of enforcement – particularly in remote regions of the country and with respect to informal workers, indigenous people, and other vulnerable groups. Many multinational companies already adhere to high standards for RBC. Several independent NGOs freely monitor and promote RBC. Standards for conduct on environmental, social, and governance issues are implemented through sector-specific regulation. The UN Working Group on Business & Human Rights is pressing Peru to join the Voluntary Principles on Human Rights and Security Initiative as part of its work towards implementing the UN Principles.

Given its importance to the Peruvian economy, the extractives sector has been a GOP priority for promoting RBC. Supreme Decree No. 042-2003-EM promotes social responsibility in the mining sector, encouraging local employment opportunities, support to communities’ projects, development activities, and purchase of local goods and services. The decree requires mining companies to publish an annual report on sustainable development activities. In 2012, Peru was listed as a compliant country under the Extractive Industries Transparency Initiative (EITI), as the GOP and extractive industries openly publish all company payments and government revenues from oil, gas, and mining. The EITI Board found that Peru had made meaningful progress in meeting the EITI Standard in its first Validation in 2017. The EITI Board will review Peru for revalidation on October 1, 2021.

ProInversion serves as the National Point of Contact (NCP) for the OECD Guidelines for Multinational Enterprises (MNE), to which Peru is an adherent. The NCP participates in activities with the NCP OECD Network located in 50 countries and is in permanent coordination with the OECD Responsible Business Conduct working group.

Additional Resources 

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities and;
• North Korea Sanctions & Enforcement Actions Advisory

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor.
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

Generally, corruption in Peru is widespread and systematic, affecting all levels of government and the whole of society, which, until recently, had developed a high tolerance to corruption. Embezzlement, collusion, bribery, extortion or fraud in the justice system, politics and public works, by high level authorities or key public officers is common. In public procurement, weak control and risk management systems, lack of ethical or integrity values among some public officials, lack of transparency and accountability in procurement processes, social tolerance of corruption, and minimal or no enforcement contribute to the problem. This embedded dynamic has eroded trust, credibility and integrity of public entities and engendered mistrust in the private sector.

Between 2019 and 2020, Peru improved three points and climbed 11 positions (to 94 among 189 countries) in Transparency International’s 2020 Corruption Perceptions Index. This progress reflected GOP investigations and reforms over the past two years. The reforms included eliminating parliamentary immunity and creating a new judicial oversight body, but also the prohibition of convicted criminals from running for elected office and campaign finance reform.

It is illegal in Peru for a public official or an employee to accept any type of outside remuneration for the performance of his or her official duties. The law extends to family members of officials and to political parties. In 2019, Peru made the irregular financing of political campaigns a crime, carrying penalties up to eight years jail time. Peru has ratified both the UN Convention against Corruption and the Organization of American States Inter-American Convention against Corruption. Peru has signed the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and has adopted OECD public sector integrity standards through the GOP’s National Integrity and Anticorruption Plan.

The Public Auditor (Contraloria) oversees public administration. In January 2017, the GOP passed legislative decrees extending the scope of civil penalties for domestic acts of bribery, including by NGOs, corporate partners, board members, and parent companies if its subsidiaries acted under authorization.  Penalties include an indefinite exclusion from government contracting and substantially increased fines. The Public Auditor also began auditing reconstruction projects in parallel to the project, rather than after project implementation, in an effort to improve transparency. It is also running parallel audits to the different government actions at all levels (central, regional, and local) to combat the COVID-19 crisis. In one of the largest transnational bribery scandals in Latin America, the Peruvian company admitted in a 2016 settlement with the United States, Brazil, and Switzerland that it had paid $29 million in bribery between 2004 and 2015. High-ranking officials from the last four Peruvian administrations have also been investigated in connection with the scandal, including former presidents. U.S. firms have reported problems resulting from corruption, usually in government procurement processes and in the judicial sector, with defense and police procurement generally considered among the most problematic.

In one of the largest transnational bribery scandals in Latin America, the Peruvian company admitted in a 2016 settlement with the United States, Brazil, and Switzerland that it had paid $29 million in bribery between 2004 and 2015. High-ranking officials from the last four Peruvian administrations have also been investigated in connection with the scandal, including former presidents. U.S. firms have reported problems resulting from corruption, usually in government procurement processes and in the judicial sector, with defense and police procurement generally considered among the most problematic.

Resources to Report Corruption

Secretary of Public Integrity of the Prime Minister Office and General Coordinator
Eloy Munive Pariona
Jr. Carabaya Cdra. 1 S/N – Lima,
(51) (1) 219-7000, ext. 1137
emunive@pcm.gob.pe

General Comptroller’s Office
Jr. Camilo Carrillo 114, Jesus Maria, Lima
(51) (1) 330-3000
contraloria@contraloria.gob.pe

ProEtica, the Peruvian chapter of Transparency International
Samuel Rotta
Executive Director
Calle Manco Capac 816, Miraflores, Lima
(51) (1) 446-8581, 446-8941, 446-8943
srotta@proetica.org.pe 

According to the Ombudsman, there were 145 active social conflicts in Peru as of January 2021. Although political violence against investors is rare, protests are common. In many cases, protestors sought public services not provided by the government. Widespread protests in late 2020 across several agricultural producing regions resulted in the repeal and rewriting of the nation’s major agricultural law. Protests related to extractives activities stopped operations of Peru’s northern oil pipeline for nearly two months in 2018 and effectively closed Peru’s second largest copper mine, Las Bambas for a month in early 2019. In October 2019, protests erupted in the mining province of Arequipa over Peru’s approval of a construction license for a Mexican copper company, which indefinitely halted its $1.4 billion plan for a copper mine project.

Violence remains a concern in coca-growing regions. The Shining Path (Sendero Luminoso, “SL”) narco-terrorist organization continued to conduct a limited number of attacks in its base of operations in the Valley of the Apurimac, Ene, and Mantaro Rivers (VRAEM) emergency zone, which includes parts of Ayacucho, Cusco, Huancavelica, Huanuco, and Junin regions. Estimates vary, but most experts and Peruvian security services assess SL membership numbers between 250 and 300, including 60 to 150 armed fighters. SL collects “revolutionary taxes” from those involved in the drug trade and, for a price, provides security and transportation services for drug trafficking organizations to support its terrorist activities.

At present, there is little government presence in the remote coca-growing zones of the VRAEM. The U.S. Embassy in Lima restricts visits by official personnel to these areas because of the threat of violence by narcotics traffickers and columns of the Shining Path. Information about insecure areas and recommended personal security practices can be found at http://www.osac.gov  or http://travel.state.gov.

Labor is abundant, although several large investment projects in recent years led to localized shortages of highly skilled workers in some fields. According to the National Bureau for Statistics (INEI), 75.3 percent of the labor force is informal. Unemployment was 7.4 percent in 2020. Unemployment is most prevalent among 14-24 year olds (14.7 percent unemployment in 2020). Additionally, 96 percent of unemployed people reside in urban areas.

Workers in Peru are usually paid monthly. Some workers, like formal miners, are relatively highly paid and also (per statute) receive a share of company profits up to a maximum total annual amount of 18 times their base monthly salary. The statutory monthly minimum wage is PEN 930/month ($266 USD). INEI estimated the poverty line to be PEN 344/month ($99) per person, although it varied by region due to different living costs. Many workers in the unregulated informal sector, most of them self-employed, make less than the minimum wage. Peru’s labor law provides for a 48-hour workweek and one day of rest, and requires companies to pay overtime for more than eight hours of work per day and additional compensation for work at night.

Peru does not have a specific unemployment insurance program, however, the “Compensation for Time of Service” (CTS) requirement mandates an employer pay one month’s salary of an employee per year of work into the employee’s CTS Account. When the employee stops working for the employer (willingly or not), she/he can access the CTS Account. In addition, a fired employee receives one month’s salary per year worked, up to a maximum of twelve months.

In 2020, the government announced implementation of a leave without pay policy to address employers’ inability to pay worker salaries due to the COVID-19 pandemic. To support furloughed workers, the government offered a PEN 760 ($217) monthly cash transfer, allowed workers near retirement to access a portion of their accrued national pension accounts, and covered them under EsSalud, the public health insurance system for formal workers.

Peru’s Decree Law 22342 from 1978 and Law 27360 from 2000 relaxed labor laws for the non-traditional exports (NTE) sector, which includes textiles and certain agricultural products. The laws allowed businesses in the NTE and agricultural sectors to employ workers indefinitely on consecutive short-term contracts, in contrast to the five-year limit on consecutive short-term contracts in place for other sectors. In 2016, the U.S. Department of Labor identified serious concerns that provisions may violate the U.S.-Peru Trade Promotion Agreement by infringing on workers’ freedom of association. In December 2020, acting in response to unrelated agricultural worker protests, Congress repealed a 2019 Executive Order (Urgency Decree 043-2019) that had extended the exemptions until 2031.

Labor unions are independent of the government and employers. Approximately six percent of Peru’s private sector labor force was organized in 2017 (latest date available), with unionization highest in electricity, water, construction, and mining (from 39 percent to 22 percent) and generally low in the rest of the economy. The labor procedure law (No.29497) requires the resolution of labor conflicts in less than six months, allows unions or their representatives to appear in court on behalf of workers, requires proceedings to be conducted orally and video-recorded, and relieves the employee from the burden of proving an employer-employee relationship.

Either unions or management can request binding arbitration in contract negotiations. Strikes can be called only after approval by a majority of all workers (union and non-union), voting by secret ballot, and only in defense of labor rights. Unions in essential public services, as determined by the government, must provide a sufficient number of workers during a strike to maintain operations.

While the government has made improvements in recent years, it often does not dedicate sufficient personnel and resources to labor law enforcement. The Ministry of Labor created the National Labor Inspectorate Superintendent (SUNAFIL) in 2014 and oversees regional offices to represent the labor inspectorate nationally. In 2020, SUNAFIL had 800 labor inspectors. SUNAFIL labor inspectors also help identify and investigate cases of forced and child labor. Additional information on forced labor in Peru can be found in the 2019 Trafficking in Persons Report: https://www.state.gov/trafficking-in-persons-report-2019.

* Source for Host Country Data: Peru’s Central Bank of Reserve , ProInversion .

Table 3: Sources and Destination of FDI
Data not available.

Table 4: Sources of Portfolio Investment
Data not available.

Esteban Sandoval
Senior Economic Specialist
U.S. Embassy Peru
+51 1-618-2672
sandovalej@state.gov

Policies Towards Foreign Direct Investment

The Government of Suriname (GOS) officially supports and encourages business development through foreign and local investment. The overall investment climate favors U.S. investors with experience working in developing countries. Investment opportunities exist in mining, agriculture, the oil and gas sector, timber, fishing, financial technology and tourism.

With the exception of petroleum, Suriname has no sector-specific laws or practices that discriminate against foreign investors, including U.S. investors, by prohibiting, limiting or conditioning foreign investment. In the oil sector, the state oil company, Staatsolie, maintains sole ownership of all oil-related activities. Foreign investment is possible through exploration and product sharing contracts (PSCs) with Staatsolie. Five U.S. companies participate in PSCs as operators and/or as contract partners. A full list of PSCs can be found on Staatsolie’s website: https://www.staatsolie.com/en/staatsolie-hydrocarbon-institute/active-production-sharing-contracts/ 

In February 2021, the Government of Suriname announced that it will terminate its two existing investment entities, namely the Institute for Promoting Investments in Suriname (InvestSur) and the Investment and Development Corporation of Suriname (IDCS) in order to establish a new investment company. In March 2021, the National Assembly launched debate on a draft law to establish a State-owned investment company to be named the Suriname Investment Enterprise NV. The government also created an International Business Directorate at the Ministry of Foreign Affairs to act as a first point of entry for foreign investors.

Suriname does not have a formal business roundtable or ombudsman aimed at investment retention or maintaining an ongoing dialogue with investors.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic private entities can establish and own business enterprises and engage in all forms of remunerative activity.

There are no general limits on foreign ownership or control – statutory, de facto, or otherwise. No law requires that domestic nationals own a minimum percentage of domestic companies or that foreign nationals hold seats on the board. No law caps or reduces the percentage of foreign ownership of any private business enterprise.

Except for petroleum, there are no sector-specific restrictions applied to foreign ownership and control. Within the petroleum sector, the law limits ownership to Staatsolie, the state-owned oil company, which maintains sole ownership of all petroleum-related activities. Caribbean Single Market and Economy (CSME) countries do enjoy favored status over other sources of foreign investment, but in practice international firms from beyond the CSME are not denied investment opportunities. An Economic Partnership Agreement (EPA) with the European Union aims to provide European companies better access to Suriname. Suriname has not yet ratified the EPA.

Government ministries screen inbound foreign investments intended for the sector of the economy that they oversee. Special commissions screen all necessary legal and financial documents. Screening criteria vary, but are intended to determine a proposed investment’s compliance with local law. The screening process is neither public nor transparent, and therefore could be considered a barrier to investment. The Department of International Business at the Ministry of Foreign Affairs requests that prospective investors fill out an intake form. The intake form will enable its appraisal committee to conduct a quick scan and conclude whether the FDI in question fits the development goals of the government.

Other Investment Policy Reviews

The World Trade Organization (WTO) conducted an investment policy review of Suriname in 2019: https://www.wto.org/english/tratop_e/tpr_e/tp491_e.htm 

The Inter-American Development Bank published a report called Framework for Private Development in Suriname in 2013.The World Bank Group published Suriname Sector Competitiveness Analysis, focusing on the agribusiness and extractive sectors in 2017.

Business Facilitation

The Santokhi administration has emphasized its desire to diversify Suriname’s economy and deepen business ties with the United States, Europe, and others. In 2020, Suriname’s new government began publishing public tenders on the website of the Ministry of Public Works. The government created a Presidential Commission on the Surinamese Diaspora in an effort to explore possibilities for raising capital and increasing business ties with the Surinamese community in the Netherlands. In March 2021, the National Assembly launched debate on a draft law to establish a State-owned investment company to be named the Suriname Investment Enterprise NV. The government also created an International Business Directorate at the Ministry of Foreign Affairs to act as a first point of entry for foreign investors.

There is no online registration system. Companies must register with the local Chamber of Commerce and Industry, which provides guidance on registration procedures. At the time of registration, the company needs a local notary’s assent to ratify the company bylaws. For non-residents, the notary also sends a request to the Foreign Exchange Commission for approval. Applicants must obtain a tax number at the registration office of the tax department. Applications then go to the Ministry of Justice and Police and finally to the President for approval. The Ministry of Trade, Industry and Tourism launched the Suriname Electronic Single Window (SESW) in September 2019. Online submission and processing of documents required for import, transit of goods, and export is now possible. The World Bank’s Doing Business report indicates starting a business requires 66 days. The local Chamber of Commerce and Industry states it can take as little as 30 days.

Outward Investment

The Government does not promote or incentivize outward investment. Suriname’s outward investment is minimal.

The Government does not restrict domestic investors from investing abroad, but there are no specific mechanisms in place to promote the practice. Due to the small size of the local market, some domestic companies have expanded to CARICOM member states, such as Guyana and Trinidad & Tobago.

Transparency of the Regulatory System

Suriname does not use transparent policies and effective laws to foster competition. The previous National Assembly (2015-2020) indicated that it would vote on a draft competition law, but did not do so. The Competitiveness Unit of Suriname coordinates and monitors national competitiveness and is working towards establishing policies and suggesting legislation to foster competition. Current legislation on topics such as taxes, the environment, health, safety, and other matters are not purposely used to impede investment, but may still form obstacles. Employment protection legislation is among the most stringent in the world. Labor laws, for instance, prohibit employers from firing an employee without the permission of the Ministry of Labor once the employee has fulfilled his or her probationary period, which by law is limited to two months. Tax laws are criticized for overburdening the formal business sector, while a large informal sector goes untaxed. Public sector contracts and concessions are not always awarded in a clear and transparent manner. The current administration has announced its commitment to greater transparency in the public tendering process, and the Ministry of Public Works is publishing procurement notices on its website on a regular basis.

There are no informal regulatory processes managed by non-governmental organizations or private sector associations.

Rule-making and regulatory authority exist within relevant ministries at the national level. It is this level of regulation that is most relevant for foreign businesses. The government may consult with relevant stakeholders on regulations, but there is no required public process. The government presents draft laws and regulations to the Council of Minsters for discussion and approval. Once approved, the President’s advisory body, the State Council, considers the draft. If approved, the government presents a draft to the National Assembly for discussion, amendment, and approval, and then to the President for signature. Legislation only goes into effect with the signature of the President and after publication in the National Gazette.

Legal, regulatory, and accounting systems are often outdated and therefore not transparent nor consistent with international norms. The National Assembly passed the Act on Annual Accounts in 2017 to create more fiscal transparency by requiring all companies, including state owned enterprises, to publish annual accounts based on the International Financial Reporting Standards (IFRS). The law went into effect in 2020 for large companies, while it went into effect for small and medium sized companies (SMEs) in 2021. Small companies can use the IFRS for SMEs.

Suriname passed new legislation in October 2018 to professionalize and institute better standards in the accountancy profession. The legislation created the Suriname Chartered Accountants Institute (SCAI) and makes membership mandatory for accountants in Suriname. The board of the SCAI has the responsibility to monitor the quality of the profession and apply disciplinary measures.

Draft bills or regulations are discussed in view of the public, and relevant stakeholders may be consulted. The National Assembly has established the email address feedbackwetgeving@dna.sr  as a place where individuals can give their opinion on draft legislation.

There is no centralized online location similar to the Federal Register in the United States where key regulatory actions are published. However, the National Assembly publishes the actual text of adopted laws on its website.

It is unclear what the regulatory enforcement mechanisms that ensure the government follows administrative processes might be, as the processes have not been made accountable to the public. There is no public administration law. The Auditor General’s office is an independent body in charge of supervising the financial management of government funds. The Supreme Audit Institution reports to the National Assembly. The Central Accountant Service exercises control on administrative processes at the ministries and reports to the Ministry of Finance. There is no centralized online location where key regulatory actions or their summaries are published, similar to the Federal Register in the United States.

The minimum wage law was revised by State Decree on July 18, 2019. The government will determine the minimum wage biennially. Regulatory reform efforts announced in prior years have largely not been fully implemented. In January 2021, the government announced its intent to implement a value-added tax (VAT) by January 1, 2022.

Reforms such as the revised minimum wages had at most a modest impact due to inflation.

It is unclear what the regulatory enforcement mechanisms are, as the process has not been made public. Regulations are developed by ministries that have jurisdiction over the relevant area, in consultation with involved stakeholders.

The government’s executive budget proposal and enacted budget are easily accessible to the public. The previous government, led by President Desire Delano Bouterse, submitted an executive budget proposal for 2020, but the budget was not passed. The current administration, led by President Chandrikapersad Santokhi, submitted a draft amended budget for 2020, which the National Assembly passed in November 2020. Actual revenues and expenditures regularly deviate from the enacted budget, and the origin and level of accuracy of some information in the budget were not reliable. A full end-of-year report is not publicly available. The Supreme Audit Institution publishes a limited audit based on self-reporting by the ministries. The State Debt Management Office (SDMO) is responsible for the operational management of the public debt of the government. Data regarding public debt is published every three months in the Government Gazette of Suriname and on the SDMO website.

International Regulatory Considerations

As a member of CARICOM, Suriname has committed to regionally-coordinated regulatory systems.

Suriname uses national and international standards. Standards developed by other (international/regional) standardization bodies that Suriname utilizes include: ISO, Codex Alimentarius, International Electro Technical Commission, CROSQ, ASTM International, COPANT, SMIIC (Standards and Metrology Institute for Islamic Countries), NEN (Nederland Normalisatie Instituut), ETSI, GLOBAL GAP, etc..

Suriname is a member of the World Trade Organization (WTO). The WTO Committee on Technical Barriers to Trade (TBT) lists only one notification from Suriname in 2015.

Legal System and Judicial Independence

Suriname’s legal system is based on the Dutch civil system. Judges uphold the sanctity of contracts and enforce them in accordance with their terms. When an individual or company disputes a signed contract, they have the right to take the case to court. The judiciary consistently upholds local law, applies it, and enforces it for local and international businesses.

Laws are defined in criminal, civil, and commercial codes and verdicts are based on the judge’s interpretation of those codes. There is no specialized commercial court. The commercial codes contain commercial legislation.

Historically, the judicial system has been considered to be independent of the executive branch. Most observers consider the judicial system to be procedurally competent, fair, reliable, and free of overt government interference. Due to a shortage of judges and administrative staff, processing of civil cases can be delayed. Last year, the Court of Justice appointed seven new judges to ease the delay in court cases. The number of judges is now 30.

Draft regulations may be reviewed by involved stakeholders and they may be given the opportunity to comment. Since October 2019, individuals have also had the option to comment on draft legislation via email at feedbackwetgeving@dna.sr. There is no formal, required public consultation process. Suriname has no general administrative law, so there are no special administrative tribunals. Judges of the regular courts also hear cases of administrative law.

Laws and Regulations on Foreign Direct Investment

The overall regime, and more particularly the approval of foreign direct investment (FDI), may be discretionary rather than rules-based, leading to heightened unpredictability and uncertainty, and associated risks of favoritism and corruption.

In March 2020, the previous National Assembly passed the Foreign Exchange Act, which placed constraints on the use of foreign currency in cash transactions and established a strict exchange rate for the Surinamese dollar. It also granted the government broad authorities to enforce the law, as well as the power to halt the import of “non-essential” goods. In May 2020, a judge suspended the law over questions concerning its constitutionality. In March 2021, the Santokhi govenrment revoked the law and submitted an amended version to the National Assembly for debate.

In April 2020, the previous National Assembly passed the COVID-19 State of Emergency Law, which granted the government broad powers to enforce COVID-19-related precautionary measures. It also created a $53 million fund to assist struggling businesses, and it allowed the government to take loans and advances from local institutions and consolidate them into a single mega-loan. The new National Assembly extended the law in August 2020 and extended it once again in February 2021.

In September 2020, the new National Assembly amended the State Debt Act and the COVID-19 State of Emergency Law. The changes in these laws allow the government to take out local and international loans in order to respond to the global pandemic. In November 2019, the previous National Assembly amended the State Debt Act in order to raise the government’s debt ceiling from 60% of GDP to 95% of GDP.

In February 2021, the Foreign Exchange Commission announced three new measures regarding exchange rate policy. First, exporters will be required to repatriate all their earned export revenues to Suriname, which also means that the buyer abroad will have to pay for the purchased goods through a Surinamese commercial bank. Second, exporters and foreign exchange offices will be required to exchange 30% of their income in foreign currency to the local currency, the Surinamese Dollar (SRD). Third, importers are required to pay for their imports via Surinamese commercial banks. The stated intention of this measure is to foreclose the possibility that exporters act as illegal “cambios” to finance imports and thus make illegal profits. It is also designed to combat trade-based money laundering.

Several criminal investigations of former government officials began in 2020. In February 2020, former Central Bank Governor Robert van Trikt was arrested on fraud charges. In August 2020, the new National Assembly officially indicted ex-Minister of Finance Gillmore Hoefdraad, which allowed the Attorney General to launch an investigation into alleged financial mismanagement conducted by Hoefdraad in collaboration with the ex-Governor of the Central Bank of Suriname, Robert van Trikt. In December 2020, the new National Assembly voted to indict former Vice President (and current National Assembly member) Ashwin Adhin, which allowed the Attorney General to pursue a criminal investigation for embezzlement, fraud, and destruction of government property. The cases remain ongoing.

There is no primary one-stop-shop website for investments that provide relevant laws, rules, procedures, and reporting requirements for investors.

Competition and Antitrust Laws

There are no domestic agencies currently reviewing transactions for competition-related concerns. The previous National Assembly (2015-2020) considered draft laws on competition and consumer protection, but did not ultimately vote on them. According to the authorities, no date for enactment is foreseen. Both draft laws also cover state-owned enterprises. The CARICOM Competition Commission is based in Suriname, and it monitors potential anti-competitive practices for enterprises operating within the CARICOM Single Market and Economy.

Expropriation and Compensation

According to Article 34 of Suriname’s constitution, expropriation will take place “only for reasons of public utility” and with prior compensation. In practice, the government has no history of expropriations. However, Article 42 of Suriname’s constitution specifically refers to all natural resources as property of the nation, and states that the nation has inalienable rights to take possession of all natural resources to utilize them for the economic, social, and cultural development of Suriname.

There is no history of expropriation.

Dispute Settlement

ICSID Convention and New York Convention

Suriname is not a party to the Convention on the Settlement of Investment Disputes between States and Nationals of other States (ICSID). Suriname has been a member of the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards since 1964, when the country was still a colony of the Netherlands. Upon becoming independent in 1975, Suriname automatically continued its membership in international conventions and treaties.

There is no specific domestic legislation providing enforcement of awards under the 1958 New York Convention or under the ICSID convention.

Investor-State Dispute Settlement

The government is a member state of the Multilateral Investment Guarantee Agency (MIGA).

Suriname has no BIT or FTA with an investment chapter with the United States.

There have been no publicly known investment disputes in the past 10 years involving a U.S person or other foreign investor. Every effort is made to settle investment disputes outside the court system or via arbitration.

Judgments of foreign arbitral awards are enforced by the local courts only if Suriname has a legal treaty of jurisprudence with the foreign country involved. If not, the foreign judgment can be brought before the Surinamese court for consideration as long as the court determines it has jurisdiction and doing so does not otherwise violate any Surinamese laws. With Suriname’s participation and membership in the Caribbean Court of Justice, judgments from this court are also binding for local courts. Cases have been successfully filed against Suriname before the Inter-American Court of Justice and the Organization of American States. Judgments from these courts have been upheld by the Surinamese legal system.

There is no known history of extrajudicial action against foreign investors.

International Commercial Arbitration and Foreign Courts

Suriname’s civil law includes options for arbitration. The government reactivated the Suriname Arbitration Institute (SAI) in August 2014 to offer arbitration and mediation services. The SAI collaborates with the Dutch Arbitration Institute.

The Mediation Council, pursuant to the Labor Mediation Act of 1946, promotes the peaceful settlement of disputes concerning labor issues and the prevention of such disputes in Suriname.

Local courts only recognize and enforce foreign arbitral awards if doing so is stipulated in the contract or agreement and it does not contradict local law. Foreign arbitration is an accepted means of settling disputes between private parties, but only if local alternatives are exhausted.

There have been no publicly known investment disputes in which state-owned enterprises are involved. Court processes are, in general, considered transparent and non-discriminatory.

Bankruptcy Regulations

Suriname has bankruptcy legislation. Creditors, equity shareholders, and holders of other financial contracts, including foreign contract holders, have the right to file for liquidation of debts due to insolvency. In a case where there is a loan from a commercial bank, repayment of the bank loan takes precedence. Bankruptcy, in principle, is not criminalized. However, in cases where a board of directors encouraged a company to pursue bankruptcy to avoid creditors, courts have viewed this behavior as a criminal offense. In the World Bank’s Doing Business Report, Suriname stands at 139 in the ranking of 190 economies on the ease of resolving insolvency.

Investment Incentives

Under current regulations, foreign investors can benefit from both tax and non-tax based incentives. Tax-based incentives include a nine-year tax holiday that can be extended by one year if the investment is at least $13 million; accelerated depreciation of assets; and tax consolidation. Under the Raw Minerals Act, the government grants an exemption of duties for the import of raw materials from CARICOM member countries. Exemptions are also granted in the food industry, the soft drink industry, and the fruit juice industry. In 2011, the government eliminated import duties on computers and related items. The law accords special consideration on investments exceeding $50 million and investments in the exploration and exploitation of bauxite, hydrocarbons, gold, and radioactive minerals. Large investments in the mining sector are subject to extensive negotiations between the government and investors. The government maintains the ability to grant incentives that depart from the provisions in the 2001 Investment Law, for example, incentives related to the provisions of infrastructure. The government does not have a practice of issuing guarantees or jointly financing foreign direct investment projects.

Foreign Trade Zones/Free Ports/Trade Facilitation

Suriname does not have a free trade zone ore duty free zone.

Performance and Data Localization Requirements

There are no policies that mandate hiring local employment; however, the Work Permits Act prohibits employers from employing foreigners without a work permit granted by the Ministry of Labor. Some large multinationals have specific agreements with the government mandating the hiring of local employees.

There are no policies requiring that senior management and board of directors should be Surinamese nationals.

There are no excessively onerous visa, residence, or work permit requirements inhibiting foreign investors’ mobility. Foreigners with short-term business in Suriname can apply online for an e-visa at: https://suriname.vfsevisa.com/ . Business visas require a letter of introduction from the business the applicant will be working with in Suriname. Foreigners who want to work in Suriname first need to apply for a residency permit at the Ministry of Justice and Police, after which they can apply for a work permit at the Ministry of Labor. The free movement of artists, university graduates, media workers, musicians, and athletes of CARICOM origin is arranged through CSME regulations. CSME regulations also provide for the free movement for those seeking to establish or conduct business within the community.

There are no government/authority-imposed conditions on permission to invest. In practice, large foreign investments, especially in the extractives sector, require approval from the relevant Ministry.

The government does not impose forced localization policies on foreign investors.

There are no enforcement procedures for performance requirements on investors.

The 2001 Investment Law authorizes the Minister of Finance to grant both tax and non-tax incentives for new investments and for the expansion of existing investments. Incentives for new investments are on a case-by-case basis at the discretion of the Ministry of Finance. Incentives are available for both domestic and foreign investors, but investors must apply for these incentives before the initial investment is made.

Foreign IT providers are not required to turn over source code and/or provide access to encryption.

There are no measures that prevent or unduly impede companies from freely transmitting customer or other business-related data outside the country’s territory.

There are no mechanisms used to enforce any rules on local data storage within the country.

Real Property

Interest in property is enforced. Mortgages and liens are common. Mortgages are registered with the Mortgage Office. However, no effective registration system exists for other types of liens.

Non-residents can request to lease land from the government if they have established a company under Surinamese law. However, the process from application to approval is lengthy.

The percentage of land in Suriname that lacks a clear land title remains unknown. There is no sustained effort by the government to identify property owners and register land titles. Article 1-1 of the L-1 decree, Principles of Land Policy, states that “all land, to which others have not proven their right to ownership, is domain of the State.” Furthermore, Article 41 of the Surinamese constitution states that wealth and resources are property of the nation and shall be used to promote economic, social, and cultural development. There is no effective demarcation of substantial land claims by indigenous people in the interior.

Unoccupied, legally-purchased property cannot be reverted to other owners, such as squatters.

Intellectual Property Rights

Suriname is a member of the World Trade Organization and the World Intellectual Property Organization; however, it has not ratified the Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement. Even though Suriname is party to multiple agreements, intellectual property rights (IPR) enforcement is weak. The current legal framework mentions protection of copyright, trademarks, and patents; however, that legislation dates back to 1912 (amended in 2001). Although the National Assembly passed amendments to the Music Copyright Law of 1913 in March 2015, there is no enforcement. Infringement on rights and theft are not uncommon due to the absence of enforcement capacity. There is also no protection provided for industrial designs, utility models, geographical indications, layout designs of integrated circuits or undisclosed information.

No IPR-related laws or regulations have been enacted in the past year. A draft IPR bill had been pending under the previous National Assembly (2015-2020), but it did not receive a vote. Currently, patents and copyrights must be registered abroad due to a lack of local legislation.

In 2012, the Suriname Port Unit was established to improve port security and prevent the illegal use of sea containers in drug trafficking and transnational organized criminal activities, such as trafficking in chemicals used in the manufacture of drugs (precursors), smuggling of goods (including counterfeit goods), tax evasion, and possible terrorist acts.

Suriname is not mentioned in the United States Trade Representative’s 2021 Special 301 Report , nor is it named in its 2020 Review of Notorious Markets for Counterfeiting and Piracy.

Capital Markets and Portfolio Investment

The government does not promote portfolio investment.

There is a small self-regulating stock market with eleven companies registered. It meets twice a month but does not have an electronic exchange. There is no effective regulatory system to encourage and facilitate portfolio investment. At present, Suriname is facing liquidity shortfalls. Sufficient policies do exist to facilitate the free flow of financial resources.

As an IMF Article VIII member, Suriname has agreed to refrain from restrictions on payments and transfers for current international transactions.

Credit is allocated on market terms and at market rates. Foreign investors that establish businesses in Suriname are able to get credit on the local market, usually with a payment guarantee from the parent company. The private sector has access to a variety of credit instruments. Larger companies can obtain customized credit products. There is, however, a Central Bank regulation that limits a commercial bank’s credit exposure to a single client.

Money and Banking System

The private sector has access to a variety of credit instruments. Larger companies can obtain customized credit products

According to the IMF Article IV Consultation in 2019, the banking system faces pressing vulnerabilities.

Based on the latest (July 2019) data, the capital adequacy ratio for the banking system stood at 10.5 percent (above the 10 percent minimum requirement), but non-performing loans in the banking system remained high (12.5 percent of gross loans), and profitability was low (0.7 percent return on assets). Deposit and loan dollarization remain high.

Total estimated assets of Suriname’s largest banks:

DSB Bank (annual report, 2018): $1,007 million. DSB annual report 2019 is delayed due to COVID-19 and time needed to implement IFRS.

Hakrin Bank (annual report 28, 2019): $671.2 million

Republic Bank Limited (2020 annual report, Suriname-based assets): $396.5 million. (The Republic Bank Limited of Trinidad and Tobago acquired Royal Bank of Canada’s Suriname holdings in 2015.)

Finabank (annual report, 2019): $322.8 million

Suriname has a central bank system.

Foreign banks or branches are allowed to establish operations in Suriname. They are subject to the same measures and regulations as local banks. According to an IMF assessment in 2016, banks in Suriname are among those in the region that have lost their correspondent relationships. The IMF notes that though the loss of correspondent banking relationships has not reached systemic proportions, a critical risk still exists. According to the IMF’s Article IV Consultation report in 2019, there is a possibility of losing corresponding banking relationships given recent overseas investigations of potential money laundering via Suriname’s financial sector. The reputational risk to both local and foreign banks acting as their correspondents is substantial. In March 2021, Suriname announced that it had completed a National Risk Assessment to identify and assess its vulnerability to money laundering and the financing of terrorism.

There are no restrictions for foreigners to open a bank account. Banks require U.S. citizens to provide the information necessary to comply with the Foreign Accounts Tax Compliance Act (FATCA).

Foreign Exchange and Remittances

Foreign Exchange

There are no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with an investment, such as remittances of investment capital, earnings, loan or lease payments, or royalties. There can be shortages in the availability of U.S. cash dollars at local banks, which can affect businesses.

Funds associated with any form of investment can be freely converted into a usable currency at legal market clearing rates with the permission of the Foreign Exchange Commission. However, the criteria for obtaining permissions are opaque.

In September 2020, the Central Bank of Suriname (CBvS) announced the depreciation of the Surinamese Dollar (SRD). The previous official exchange rate was SRD7.52 to $1 dollar. The new sale rate was adjusted to SRD14.29 to $1 dollar. In March 2021, the CBvS announced that it had come to an agreement with the government to establish a minimum and maximum exchange rate for the U.S. dollar, namely that the rate must stay between SRD14.29 and SRD16.30 to $1. In addition to the official exchange rate, different rates are available unofficially in parallel exchange markets. Media reports indicate that exchange rate policy is a key component of Suriname’s negotiations with the International Monetary Fund – negotiations which began in 2020.

Remittance Policies

There are no recent changes or plans to change investment remittance policies.

The waiting period on remittances can be relatively short for dividends; return on investments, interest, and principal on private foreign debt; lease payments; royalties; and management fees. The time needed to process the requests depends on the sector and the amount transferred. Transfers through the banking system can range from same day to one week waiting times, contingent upon approval by the Foreign Exchange Commission.

Sovereign Wealth Funds

On May 4, 2017, the National Assembly passed legislation establishing a Sovereign Wealth Fund (SWF). In August 2020, President Santokhi announced that the government would operationalize Suriname’s SWF, as the previous government had not instituted the necessary state decrees to do so. In December 2020, the government held talks with experts from Norway to learn more from the Norwegian Sovereign Wealth Fund.

Suriname does not participate in the International Forum of Sovereign Wealth Funds.

State owned enterprises (SOEs) operate in the oil, agribusiness, mining, communications, travel, energy, and financial sectors. SOEs provide little information regarding their operations. Only a few produce annual reports accessible to the public. Staatsolie, Suriname’s state-owned oil company, has publicly available audited accounts. As of 2020, all state-owned enterprises will be required to publish annual accounts. Several have been accused of fraud or corrupt practices. In August 2020, President Santokhi installed a Presidential Committee on the Improper Use of Public Goods. The task of the committee is to conduct an inventory of goods purchased on behalf of the government, as well as semi-governmental entities and SOEs.

There is no public list of SOEs.

SOEs receive advantages when competing in the domestic market. These include access to government guarantees and government loans otherwise unavailable to private enterprises. Additionally, SOEs have access to land and raw materials inaccessible to private entities.

The government does not yet adhere to the OECD Guidelines on Corporate Governance for SOEs.

Privatization Program

The GoS did announce a privatization program largely in the agricultural sector, but the only privatization was the state-owned banana company in 2014. The official governing accord of the ruling coalition states that privatization of SOEs will be considered where appropriate, while President Santokhi has indicated that some SOEs will need to be privatized. However, no such privatizations have taken place under the new government.

Foreign investors can participate in privatization programs. In 2014, the Belgium multinational, UNIVEG, acquired a 90 percent stake in the state-owned banana company through a public, international bidding process. The European Commission assisted with the bidding process. UNIVEG later pulled out of Suriname. The Government took over the remaining 90 percent shares and $15 million debt of UNIVEG and is now the only share holder. As this is the only example of privatization within Suriname, no standard privatization or public bidding processes have been established by the government.

There is a growing awareness of expectations of standards for responsible business conduct (RBC) among consumers and producers. Historically, Alcoa’s subsidiary, Suralco, took the lead on RBC in Suriname, and large multinationals such as Newmont continue to be the largest proponents of RBC. Some larger, state-owned and local companies also model RBC, including Staatsolie, Surinam Airways, Telesur, and the Fernandes Group of Companies, which holds the distribution rights for Coca-Cola, and the McDonalds franchise rights. In March 2020, a number of prominent local companies and business leaders established the SU4SU COVID-19 support fund, which has raised money and donated medical equipment and PPE to local health authorities to assist their efforts in combatting the COVID-19 pandemic.

The government has not taken systematic measures to encourage or promote RBC. Companies are allowed to develop their own policies and standards. The government does incorporate RBC in some of its partnerships and agreements with multinational firms. For example, recent agreements between Staatsolie and foreign companies for offshore drilling include stipulations regarding RBC. The government has no national point of contact or ombudsman for stakeholders to acquire information or raise concerns about RBC. The GOS has not conducted a National Action Plan on RBC and/or Business and Human Rights. It is not known if RBC policies are part of the government’s procurement decisions.

There are no alleged/reported human or labor rights concern related to RBC.

There have been no recent high profile controversial instances of private sector impact on human rights, though indigenous land rights in the interior is an ongoing issue.

The Labor Inspection Department from the Ministry of Labor supervises and enforces the observance of legal regulations regarding the conditions of employment and the protection of employees performing duties. Laws were enforced only in the formal sectors. Labor inspectors did not make regular occupational safety and health inspections. The government is drafting consumer and environmental protection laws. In March 2020, the National Assembly passed an Environment Framework Law.

Currently there is no legislation for corporate governance and executive compensation standards to protect shareholders. The Act on Annual Accounts will require companies to publish annual accounts based on the International Financial Reporting Standards (IFRS) starting in 2020.

The Suriname Trade and Business Association has taken the lead in promoting RBC. The Suriname Conservation Foundation initiated a Green Partnership Program in 2020 signed by 14 enterprises, 13 of which are local, to stimulate awareness about a green economy and nature preservation. So far, no incidents have been reported indicating that those monitoring and or advocating around RBC cannot work freely.

The host government has not encouraged adherence to the OECD Due Diligence Guidance for Responsible Supply Chain of Minerals from Conflict-Afflicted and High-Risk Areas. In March 2019, the government adopted legislation to join the Kimberley Process Certification Scheme in order to become a member of the World Diamond Council Association.

The host government has not encouraged adherence to the OECD Due Diligence Guidance for Responsible Supply Chain of Minerals from Conflict-Afflicted and High-Risk Areas. Suriname became a member of the Extractive Industry Transparency Initiative in 2017. There are no domestic transparency measures requiring the disclosure of payments made to governments and/or other RBC/BHR policies or practices.

Suriname is not a signatory of The Montreux Document on Private Military and Security companies, nor a supporter of the International Code of Conduct or Private Security Providers nor a participant in the International Code of Conduct for Private Security Service Providers Association (ICoCA).

Additional Resources 

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities and;
• North Korea Sanctions & Enforcement Actions Advisory

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor.
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

Suriname’s legal code penalizes corruption, but there is virtually no enforcement. Government officials are occasionally removed from assignments, but convictions are rare. On September 1, 2017, parliament passed anti-corruption legislation nearly 15 years after the initial draft bill was introduced to the National Assembly. An anti-corruption commission, which is mandated by the legislation, has not yet been installed. In August 2020, President Santokhi installed a Presidential committee to conduct an inventory of executive orders and determine what mechanisms need to be put in place to install an anti-corruption commission. Suriname ranks on 94 out of 180 countries on the Corruption Index of Transparency International.

Existing laws that deal with corruption do not extend to family members of officials, or to political parties.

There are currently no laws or regulations to counter conflicts of interest in awarding contracts or government procurement. The Ministry of Public Works announced that it will soon adopt stricter, but also flexible measures for transparency in tenders. Legal requirements for tenders will be examined. Non-legal requirements will be adjusted and introduced shortly. Civil servants and politicians will be prohibited from taking part in tenders.

The government does not encourage or require private companies to establish internal codes of conduct prohibiting bribery of public officials.

Local private companies do not use internal control, ethics, and compliance programs to detect and prevent bribery of government officials.

Suriname has signed and ratified the Inter-American Convention against Corruption. Suriname has not yet signed and ratified the UN Convention against Corruption. Suriname is not a party to the OECD Convention on Combatting Bribery.

There are no NGOs that focus exclusively on investigating corruption.

U.S. firms have identified corruption as an obstacle to FDI. Corruption is believed to be most pervasive in government procurement, the awarding of licenses and concessions, customs, and taxation.

Resources to Report Corruption

Fraud Department
Suriname Police Force( Korps Politie Suriname)
Havenlaan, Paramaribo, Suriname
(597) 404-943

Since the conclusion of the interior war in 1992, Suriname has not seen politically motivated violence or civil disturbance.

In July 2019, illegal goldminers damaged property at the Rosebel goldmine after the company’s security personnel fatally shot an illegal goldminer. The mine was subsequently closed for one month, and then reopened.

Although there is political polarization in Suriname, past elections were considered to be free and fair by international observers, including national elections on May 25, 2020, which brought then-opposition parties into power.

In general, both skilled and unskilled labor is available in the local market. Foreign workers are mainly active in the extractive industries and agricultural sector. Not only Haitians, but also an influx of Cubans have entered the workforce and are active in several sectors for lower wages. Documented foreign workers are protected by labor laws. According to the Statistical Bureau, the unemployment rate in 2019 was 11 percent. An estimated 15 percent of the working-age population worked in the informal economy.

Heavy equipment operators, welders, and other skilled workers in the extractive industries are in high demand. In recent years, Suriname recruited physicians and ER nurses from the Philippines to work in hospital emergency rooms. Because of the economic downturn in 2015-2016, the majority of these workers have left the country, resulting in a shortage of nurses and medical staff. Since 2005, Suriname has welcomed Cuban medical professionals on a rolling basis. In March 2020, Cuba sent 20 doctors and 30 nurses to Suriname to assist with the government’s COVID-19 response. In January 2021, the Minister of Public Health announced that approximately 40 of the almost 100 Cuban medical workers in Suriname had voluntarily agreed to return to Cuba.

There are no policies that require the hiring of nationals; however, the Work Permits Act prohibits employers from employing foreigners without a work permit granted by the Ministry of Labor.

Legislation makes it difficult for employers to respond to fluctuating market conditions. The Dismissal Permits Act prohibits employers from dismissing employees without permission from the Ministry of Labor. Collective redundancy for organizational or economic reasons is permitted in cases such as the closure or decline of a business. Generally, when an employee is laid off, unions negotiate with the employer regarding a package and duration of social benefits. Labor organizations sometimes object to work based on contracts as opposed to full time, ongoing employment.

Labor laws are not waived to attract or retain investment. As Suriname has no special economic zones, foreign trade zones, or free ports with alternative labor policies, all entities are subject to existing legislation.

Collective bargaining agreements are widespread in both the private and public sector. Data regarding the percentage of the economy covered by collective bargaining agreements is unavailable. Employees of most large multi-national firms are unionized.

Labor dispute mechanisms are in place and freely used for mediation and arbitration.

Strikes that pose an investment risk are rare.

Suriname is a member of the International Labor Organization and recognizes international labor law in its domestic legislation. In 2018, Suriname made a moderate advancement in efforts to eliminate the worst forms of child labor. The government ratified International Labor Organization Convention 138 concerning the minimum age for admission to employment, acceded to the Protocol to the Forced Labor Convention, and amended the Law on Labor for Children and Young People, raising the minimum age of work to 16 years.

In June 2019, the National Assembly adopted the family protection law regarding maternity and paternity leave. In July 2019, the National Assembly approved an update of the Minimum Wage Act which set the minimum wage at SRD 8.40 per hour, effective July 10. Every two years, starting 2020, a National Wage Board will advise on a new minimum wage to the Minister of Labor. Pending draft bills in 2020 under the previous National Assembly (2015-2020) included the Draft Working Conditions Act of 2019, the Draft Equal Treatment Act, a draft law on violence and sexual harassment, and a draft law on working hours regulation.

* Source for Host Country Data: Central Bank of Suriname

Table 3: Sources and Destination of FDI

Data not available.

Note: Suriname does not release foreign direct investment data publicly. The IMF’s Coordinated Direct Investment Survey (CDIS) has no information on Suriname. There are no tax haven sources of inward FDI.

Table 4: Sources of Portfolio Investment

Data not available.

Note: Portfolio investment data are not available in Suriname on the IMF’s Coordinated Portfolio Investment Survey. The host government does not publish portfolio investment data.

Economic Officer
U.S. Embassy Paramaribo
(597) 556-700