Transcript BRAZILIAN SHIPPING FINANCE - Mission of Rio Grande do Sul in

BRAZILIAN
SHIPPING FINANCE and
FOREIGN INVESTMENTS
-A LEGAL OVERVIEWPaper drafted for the visit of the Governor of the State
of Rio Grande do Sul, Mr. Tarso Genro, to the
Republic of Korea, 2011
Claudio Köhler- Lawyer and Senior Partner
Vinhas e Pessôa Advogados
Rio de Janeiro- Porto Alegre- São Paulo- Recife
www.vpadv.com.br
[email protected]
INTRODUCTION
The Brazilian Financing System for the Shipbuilding Industry, main characteristics:
All major aspects regulated by the Law  transparent and predictable frame;
Online electronic tax collection control of the AFRMM in all major Ports;
Representatives of major Ministries and Private Industry Associations and Institutions
are Voting Members of the most important Institutions of the Financing System
(i.e. CDFMM, FGCN, FMM). Decentralized expert decision making. Refined
follow up and control system;
Very competitive financing conditions in local or foreign currency: fixed rates between 27%; grace period up to 4 years, value correction TJLP or USD/ PTAX, financing
term up to 20 years and amount financed up to 90 % of approved projects
New and effective Guarantee System by the FGCN, for the construction period of Yards
and Vessels  extremely important in view of the large finance requirements of the
sector
AFRMM
public take
semi private
take
FMM
Banco do
Brasil
mainly shipbuilding and repair
EBN
EBN or EstBR
Presentation
Project: Ship or
Shipyard
other
contributions
to the Fund
CDFMM
Agent
BNDES
CEF
FGCN
Project
financially
approved
Prioritized
Project
PERFORMANCE
INSURANCE
EBN
ASSET
Information, follow up
and controls
EstBR
Shipbuilding
project
Shipyard
Building project
also repair/
modernization
also amplification/
modernization
NOMENCLATURE

AFRMM- Brazilian Tax on disembarkation of freights

Banco do Brasil- Financial Agent for the “semi private” AFRMM take

EBN- Brazilian Shipping Company

FMM- Brazilian Merchant Marine Fund

Agent BNDES- Major Financial Agent for lending FMM funds

EstBR- Brazilian Shipyard

CDFMM- Steering Committee of the Brazilian Merchant Marine Fund

CEF- Caixa Econômica Federal. Financial Agent for the FGCN

FGCN- Guarantee Fund of the Brazilian Shipbuilding Industry

Performance Insurance-

ASSET- Vessel or Shipyard after construction
Selected Financing Conditions
Vessel/ Project
supply origin
local content
fixed rates
volume
Cargo Ship
national
≥ 65%
2- 4%
90%
foreign
≥ 65%
3- 6%
90%
national
< 65%
2- 4.5%
90%
foreign
< 65%
3- 7%
70%
national
≥ 60%
2- 4.5%
90%
foreign
≥ 60%
3- 6%
70%
national
< 60 %
2- 4.5%
90%
foreign
< 60%
4- 7%
60%
national
≥ 50%
2- 4.5%
90%
foreign
≥ 50%
3- 6%
70%
national
< 50%
2- 4.5%
90%
foreign
< 50%
4- 7%
60%
Supply Vessel
Port Serv.
Vessel
Selected Financing Conditions
Vessel/ Project
supply origin
local content
fixed rates
volume
Passanger Ship
national
≥ 30%
2.5- 5%
90- 100%
foreign
≥ 30%
2.5- 5%
75%
< 30%
2.5%- 5%
90- 100%
< 30%
4- 6%
60%
national
≥ 60%
2- 4.5%
90%
foreign
≥ 60%
4- 6%
70%
national
< 60%
2- 4.5%
90%
foreign
< 60%
4- 7%
60%
Shipyard
construction/mo
dernization
Entry Market Requirements

No entry market restrictions for foreign capital. Foreign investors may own up to
100% of a EBN- Brazilian Shipping Company or a EstBR- Brazilian Shipyard. At
least two partners are required in order to incorporate (no single partner Corporation
is available in the Brazilian legal system). The most common entities are the
Brazilian Limited Liability Company Sociedade Empresária sob Responsabilidade
Limitada (for smaller businesses, smaller and personal circle of partners) and the
Stock Corporation- Sociedade Anônima (for medium to large size businessesissuance of securities, several categories of stock/ shares, bonds, etc., elaborated
multi level administration/ management structure, rights of minority shareholders,
shareholders agreements, etc.);

There is also no nationality requirement in what regards the Management.
Notwithstanding, persons nominated to participate in the management of a
corporation with head office in Brazil shall be resident and domiciled in Brazil (visa
requirements). An exception is a limited amount of Supervisory Board Members
(Conselho de Administração) of a Brazilian Stock Corporation, which could be
domiciled abroad;
Market Entry Requirements

All entities with a foreign partner must be registered before the Brazilian Central
Bank. No exchange of currency between any nation and Brazil may occur without
it;

Widely protected IP Rights through registration at the INPI. International
Registrations of Patents and Trademarks may be recognized by international treaties
signed by Brazil