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704_LegalGuideForForeignInvestorsInBrazil

704_LegalGuideForForeignInvestorsInBrazil

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Published by Claudia Ruic

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Published by: Claudia Ruic on Feb 10, 2012
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Law 8.031, of April 12, 1990, later replaced by Law 9.491 of September 9, 1997,
provides for Brazil’s National Privatization Program, subsequently regulated by
Decree 2.594, of May 15, 1998. The Program foresees the transfer to the private
sector of State-owned companies and banks, by means of public tenders, and
authorizes provision of public services, formerly provided by public utility
companies, by private concession holders.

Legal Guide for Foreign Investors in Brazil

108

Legal Guide for Foreign Investors in Brazil

The National Privatization Board (Conselho Nacional de Desestatização – CND),
whose members are Ministers of State, reports directly to the President of the
Republic, is the authority responsible for conducting the privatization process.

The National Economic and Social Development Bank (BNDES) is the manager
of the National Privatization Fund, and provides administrative and operational
support to the CND, through the contracting of consultants and specialists in
support of privatization, and coordinating the distribution of securities through
stock exchanges, etc..

Most of the privatizations carried out to date have been through auctions at
Brazilian stock exchanges. Law 8.666, of June 21, 1993, which brings into effect
Article 37, XXI, of the Federal Constitution establishes rules for public tenders.
Subsequently, this Law was amended by Law 8.883, of June 8, 1994, by Law
9.648, of May 27, 1998, and by Law nº 11.196, of November 21, 2005, which
established requirements for calls for proposals, tender proceedings, forms of
payment, and acceptable guarantee. A Bill which proposes to alter public tender
procedures is currently being examined by Congress.

An important development for the Brazilian Privatization Program was the
General Telecommunication Law (Law 9.472, of July 16, 1997), which regulates
Constitutional Amendment 8, of August 15, 1995, and allows the provision of
telecommunication services by the private sector. Earlier, Congress had approved
Law 9.295/96, which allowed granting of concessions to provide mobile telephony
services to Brazilian private-sector companies (i.e., companies with no less than
51% of voting capital controlled, directly or indirectly, by Brazilian nationals).

Not only has the Privatization Program enabled the transfer of companies
subordinated to the Federal Government, it has also led to the transfer companies
controlled by states and municipalities to private management. However,
privatization of state and municipality companies and the issuing of concessions
at these levels is subject to local rules. The State of São Paulo has carried out one
of the most successful privatization programs in Brazil. Since publication of the
São Paulo State Privatization Law, the State has transferred to the private sectort
companies in the felds of: piped gas distribution services (both in metropolitan
areas (COMGÁS) and in rural areas (Gas Brasiliano and Gas Natural); electric-
power generation (from plants on the Paranapanema and Tietê rivers belonging
to CESP); and distribution of electricity (CPFL and Eletropaulo, two of Brazil’s
largest distribution companies).

Legal Guide for Foreign Investors in Brazil

Legal Guide for Foreign Investors in Brazil

109

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