FDİ in Brazil and the Government Roles

International Political Economy Research Paper Fall Semester, 2009

Department of International RelationFaculty of Business and Economics/Eastern Mediterranean UniversityFamagusta/TRNC 2009

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‘God’ in Global Market Blessed

Foreign Direct Investment in Brazil andthe Government Role

(An Analysis of State’s Regulation)Nofia Fitri

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‘God’ in Global Market Blessed

While he gushes, Lula says, “God is Brazilian”

A uniquely blessed country, as Brazilians regard themselves, with a kind of goodfortune, the country’s most popular president in half a century, Luiz Inácio Lula daSilva believe that Brazil will be one of the six biggest economies in the world within 10years.

(TIME, 22 Sept, 2008)

(The strategic geo-politic of Brazil could be the first blessed of this country within theglobal market, whether the government role could be the second blessed?)

Content

I. IntroductionUnderstanding of Foreign Direct Investment (FDI)

II. Brazil FDI TracksImport Substitution (IS) to Economic TransitionLiberalization of Brazil’s Economic SystemBrazil FDI Reports

III. Brazil State’s regulationBrazil’s Constitution and FDI LawAnti-trust LawTax System

IV. Analysis of Government Intervention and State Regulations

V. Closing

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Tracking Foreign Direct Investment in Brazil and the Government Role(An Analysis of State’s Regulation)

“In the 21st century, Brazil reached the status of 8th largest economy in the world with more than 80% of exports consists of manufactures and semi-manufactures products, became the 2nd biggestindustrial sectors in Americas, succeeded with the Land Reform Program, which provide suitableliving and working conditions for over one million families, an initiative capable of generating twomillion jobs, also the pioneer in the fields of deep water oil research and was the first capitalistcountry to bring together the ten largest car assembly companies inside its national territory. One ofthe key of Brazil transition economic is Brazil has a long tradition as a host country for internationaldirect investment.”

I. Introduction

Foreign Direct Investment (FDI) has become a worldwide phenomenon in the global economic, which FDI

continues to gain in importance as a form of international economic transactions, emerged as an instrument of

international economic integration, and become the major pillar of internationalization for firms. Since the

mid-1980s, most developing countries have become much more open to FDI, with a view to benefiting from

the development contributions which FDI can generate for host countries. Although global FDI flows are still

much lower than trade flows, FDI can be seen as the main channel of international competition. Firms

undertake FDI primarily in order to expand and compete with domestic and other firms on the respective

markets.1

Within the development process, FDI can play a significant role, both for home country, moreover for

host countries. In addition to capital inflows, FDI can be a vehicle for obtaining foreign technology,

knowledge, managerial skills and other important inputs; integrating into international marketing, distribution

and production networks; and improving the international competitiveness of firms and the economic

performance of countries. At the same time, neither inflows of FDI nor the benefits from such inflows are

automatic.2

The benefits of FDI are many, but to attract it has become a problem for many countries. Therefore

many countries have liberalized their FDI policies, and an increasing number of host governments provide

various forms of investment incentives to encourage entry by foreign-owned companies, include fiscal

incentives such as tax holidays and lower taxes for foreign investors, financial incentives such as grants and

preferential loans to transnational corporations (TNCs), and measures such as market preferences,

1Gábor Hunya and Roman Stöllinger, Foreign Direct Investment Flows Between EU and the BRICs, Research Paper, The ViennaInstitute for International Economic Studies, Viewed at: http://publications.wiiw.ac.at/?action=publ&id=details&publ=RR358.

2 UNCTAD Secretariat, “The Development Dimension of FDI: Policies to Enhance the Role of FDI in the National andInternational Context” viewed at: http://www.unctad.org/en/docs/iteiia20034_en.pdf

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infrastructure and sometimes even monopoly rights.3 Thus it is not surprising that the attitudes inward FDI

have also changed. As a consequences of this, many countries reformed their trade policies, made some new

trade legislation, based of the liberalize trade principle. That’s the reason why governments need to consider

what role they want inward FDI to play in their economies' development process, and then design their FDI

policies accordingly.

Government policies are vital for enhancing the developmental impact of FDI. Furthermore, at the same

time as barriers to cross-border exchanges are being reduced, including in the area of investment, international

cooperation has been strengthened through various international agreements to regulate these exchanges.

Countries thus need to ensure that policies undertaken at the national level in pursuit of specific development

objectives are enhanced, and not hindered, by international rule making.4 Thus, the broad policy objectives are

to attract in particular investment that is in line with the identified development objectives; to maximize the

potential benefits of FDI; to minimize negative effects like balance-of-payments problems, crowding out,

transfer pricing, abuse of market power, labor issues and environmental effects.5

As the result of the expert Meeting held in Geneva (UNCTAD, 2002), it was stated that considering

what host country policies could effectively help developing countries and economies in transition to attract

FDI and benefit from it, their noted that a wide range of host country policy measures were implemented, for

example: Create a sound and stable macroeconomic and political environment, including a transparent and

predictable business environment; Develop physical and technical infrastructure, and promote clusters;

Develop human resources; Develop domestic enterprise capabilities (notably small and medium-sized

enterprises); Address environmental and social concerns; Adopt competition laws and reduce restrictive

business practices; Influence the behavior of investors by offering investment incentives and by imposing

performance requirements (often in combination); Create larger markets through regional and bilateral

cooperation; and Protect investment, including intellectual property rights.6

Understanding of Foreign Direct Investment (FDI)

Balance of Payments Manual, has defined FDI refers to investment made to acquire lasting interest in

enterprises operating outside of the economy of the investor. Further, in cases of FDI, the investor's purpose is

3Ibid.4Ibid., p. Vii5José Gilberto Scandiucci Filho, The Brazilian ExperienceWith B lateral Investment Agreement: A Note. Viewed at

http://www.unctad.org/sections/wcmu/docs/c2em21p15_en.pdf6UNCTAD Secretariat, loc.cit., p. 233.

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to gain an effective voice in the management of the enterprise. The foreign entity or group of associated

entities that makes the investment is termed the "direct investor" (Balance of Payments Manual: Fifth Edition

(Washington, D.C., International Monetary Fund, 1993). Another definition explained by Benchmark

definition of the OECD, a direct investment enterprise is an incorporated or unincorporated enterprise in which

a single foreign investor either owns 10 per cent or more of the ordinary shares or voting power of an

enterprise (unless it can be proved that the 10 per cent ownership does not allow the investor an effective voice

in the management) or owns less than 10 per cent of the ordinary shares or voting power of an enterprise, yet

still maintains an effective voice in management. Detailed Benchmark Definitions of Foreign Direct

Investment: Third Edition (Paris, Organisation for Economic Co-operation and Development, 1996).7 The

components of FDI are equity capital, reinvested earnings and intracompany loans.

Characteristics of the Foreign Investment project affecting the outcome of the bargaining process are:

(1) absolute size of fixed investment; (2) ratio of fixed to variable cost; (3) the level of technology complexity

of the foreign investment regime; and (4) the degree of marketing complexity.8 According to Dos Santos (Dos

Santos, 1973: 76), foreign capital is able to prevent the development of a significant capital-goods sector

because of its political control over the dependent countries. Within the dominant power block ‘big monopoly

capital’ has achieved supremacy over the old agrarian and export interest as well as over national competitive

industrial capital by controlling the most dynamic branches of industry, now the key sector of the economy.

FDI based on the National policy framework and International framework; multilateral instruments,

regional instruments, and bilateral treaties including multilateral conventions that deal with issues of

importance to FDI, namely, the settlement of disputes, the recognition and enforcement of foreign arbitral

awards, industrial property rights and investment guarantees. As an emphasis of this research, national

framework for FDI would be explain more deeply. The regulatory framework for FDI in a country or territory

consists of laws, regulations, official policy declarations and guidelines that are relevant to FDI and related

fields. Naturally, the regulatory framework for FDI differs considerably between countries. Some countries

have specific legal frameworks regulating FDI. In the country profiles prepared for this volume, the laws and

regulations have been selected to cover, inter alia:9 Corporate law, including accounting and reporting

7UNCTAD, World Investment Directory: Volume 9 Latin America and the Caribbean 2004 Parts 1 and 2. p. 53. Viewed athttp://www.unctad.org/en/docs/iteiit20044_en.pdf

8Shah M. Tarzi, Third World Governments and Multinational Corporations: Dynamics of Host’s Bargaining Power in David A.Lake, International Political Economy: Perspectives on Global Power and Wealth. (4th Edition). (London: Routledge, 2000), p. 166.

9 UNCTAD, World Investment Directory: Volume 9 Latin America and the Caribbean 2004 Parts 1 and 2. Loc.cit., p. 58

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regulations; Incentives for, and restrictions on, FDI; Mergers and acquisitions; Securities; Taxation (mainly

corporate and individual income tax); Transfer of technology; Industrial/intellectual property; Labour relations

and employment; and Environmental protection.

II. Brazil FDI Tracks

FDI began to gain importance in Brazil in the late 19th century, especially through British investmentsin services directly related to exports activities such as railroad and sea transportation, financialservices and commercialization. Foreign investments in urban infrastructure services (transportation,energy, and so on) gained strength in the first decades of the 20th century, driven by growingurbanization and industrialization. Industry, manufacturing sectors, expanded at the beginning of 21stCentury.

With a long tradition as a host country for international direct investment, Brazil widely known as one

of the most destination. Foreign companies have been in the country for decades and most big multinational

corporations have invested in Brazil. Today, Brazil is the most important source country for Foreign Direct

Investment (FDI)10 in the Latin America. Over the last few decades, FDI have played a very important role in

Brazilian industrialization, attracted by the large domestic power - but also government policies - and directed

preferentially toward capital and technology-intensive industrial sectors. Since the very start, foreign

investments in the country were regulated by a logic of market-seeking, the profitability of the investment

being guaranteed by the protectionist trade policy (Veiga, 2004). The chief purpose of the regulatory

mechanisms set down in Law 4.131 (exchange controls, tax regime, and so forth) was to discourage the

outflow of the foreign capital already invested in the country and stimulate re-investment (Laplane and Sarti,

1999).

Brazil has a dynamic regulation with the long history of regulations amendments. As Vega explained,

before Brazil started to reform Its economic system, the Constitution of 1988 reinforced the restrictions in

effect up to then by introducing in Article 171 the legal distinction between a “Brazilian company of national

capital” and a “Brazilian company of foreign capital”, which created the legal base for discriminating between

the two types of company in terms of regulation and policy. The Constitution also maintained the state

monopolies in the oil and gas sectors, and in telecommunications and postal services, as well as reserving for

“Brazilian companies of national capital” the exploitation of mineral and water resources, coastal navigation,

10 FDI in Brazil is defined as import goods, machinery and equipment into the country without any initial disbursement of foreignexchange, or of financial or monetary resources for use in economic activities. In both cases, the resources should belong to natural orjuridical persons resident, domiciled or headquartered outside of Brazil (Law No² 4.131). Reinvestment is defined as the returns producedby enterprises established in the country, attributable to persons resident or domiciled abroad, which were reutilized in the same enterprisesthat produced them or in another sector of the economy.

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domestic air transportation, and media activities. Restrictions on the activity of foreign companies in sectors

that provide financial and insurance services were likewise maintained. The Constitution did not alter the most

restrictive sectoral regulation to foreign capital in Brazil, namely the Law on Information Technology adopted

in 1984 and which reserved the domestic production of hardware equipment to companies of national capital.11

Afterwards, in a row with the presidents’ era, Brazil did the amendment of this constitution, therefore the

explanation of Brazil FDI tracks and government policy would begin with the ISI regime.

Import Substitution Industrialization (ISI) to Economic Transition

As we agree that Import Substitution (IS) would have prompted widespread and undue government

intervention in resource allocation.12 When Prebisch and Singer worried about the future of developing

countries, they gave an attention that for the periphery area became dependent of their industry is the only

solution to develop the economic growth. Structuralist scholars had brought protectionist as a trade policy for

most of the developing country. Then as we can see, government played an important role within the process.

Brazilian law stated that both domestic and foreign capitals enjoy equal treatment. The 1988 Brazilian

Constitution, which established a series of state monopolies in some sectors of the economy and assured

protection and preferential treatment to domestic capital, has been altered. At present, the legislation that

regulates foreign capital has eliminated many state monopolies and restrictions to the foreign capital and no

longer discourages new foreign investments.

By restricting FDI, the Brazilian government had to encourage private companies to borrow from

overseas sources. Foreign Corporation already in Brazil opted for this venue, for it offered ways to exceed the

12 percent limit imposed on profit remittance. Typically, there was no limit on how replaced FDIs in the

financial transactions between the home office and its subsidiaries in Brazil. This allowed MNCs to expatriate

more than the 12 percent of their profits.13 In this era, Brazil’s strategy was to build a capitalism without risk

and a capitalism with closed markets.

Up until 1990, Brazil was a closed market. The Bank of Brazil’s foreign trade division (CACEX)

maintained a list of tariffs on some 13 500 items, also known as the Annex C. of the list, close to 3000 items

11 Pedro da Motta Veiga, Foreign Direct Investment in Brazil: Regulation,Fflows and Contribution to Development. p.3. Viewedat http://www.iisd.org/pdf/2004/investment_country_report_brazil.pdf.

12 For neo-classical the government intervention under import substitution policy has led to a structure of incentives with a highinter-industry variant.

13 Eul Soo Pang, The International Political Economy of Transformation in Argentina, Brazil, and Chile since 1960. “ (New York:Palgrave Macmillan, 2002). p. 54.

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were forbidden to enter the country. The Brazilian domestic market protection came in several forms; an

outright ban on certain items; high taxes on automobiles, electronic component, manufactured; and heavily

subsidized sector such as agriculture. During those times, World Bank reported that Brazil tariff rate for

industrialized product was three times than Korea.14During his first two years in office, Collor brought down

trade barriers by removing subsidies and liberalizing trade procedures, then he continued with privatization

plan. This privatization strategy was built on the assumption: (1) that the state must reduce its interventionist

role in the market place, (2) that private sectors ownership and management must be more efficient and

productive, an (3) that the federal government must eliminate its deficit.15

The impeachment of the President Collor caused of the corruption case in December 1993 and the

expulsion of a dozen federal deputies in May and June 1994 was the high point of Brazil’s peculiar

democracy. After Collor, Franco with the Real Plan brought this country closed its chapter on the final phase

of the statist economic development model and produced a new volatile mix of economic reform and free-

wheeling political system, as it embraced its third elected civilian presidency in five years since 1985.

Fernando Henrique Cardoso, who began to move the country closer to an open market economy, was led in

1995 with the pressured of Congress for held the constitutional reform, including economic regulation. He was

succeeded promote the reform of key sections of the 1988 constitution in order to reduce the role of the state

and overhaul the complicated taxes within the economic system. The Franco-Cardoso transition was the most

tranquil in Brazilian political history.

Thus, in Brazil start from Collor up to Cardoso, the process of liberalization of its economy to include

the external market has favored the economic relationship of the country with the rest of the world by:

removing or reducing tariffs and non tariff barriers on international trade; simplifying the bureaucratic rules

and procedures and eliminating or reducing the tax on capital income. The program known as Plano Real (the

Real Plan) also contributed to the improvement of foreign trade relations by reducing the rate, also in this

transition era Brazil started its privatization.16 Cardoso economic stabilization policy had worked well during

his two terms in office. The limited engagement in neo-liberalism allowed the positive impact of globalization

to seep into the country, with the consolidated of democracy, endorsed, press freedom, and improved on

14 Ibid.15 Ibid., p. 134.16 The Brazilian Privatization Programme (PND) was put in place by Law 8,031/90, revoked by Law No. 9,491 of 9 September

1997. The National Privatization Council (CND), created in 1995, is in charge of implementing the privatization process. Look BrazilianGovernment online information, Viewed at: https://www.planalto.gov.br/ccivil_03/Constituicao/Emendas/Emc/quadro_emc.htm.

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human rights. Brazil regime then holding by Lula da Silva, who leads this country with continuing Brazil

strategy to liberalize its market and integrate Brazil with international economic, and make a fantastic

economic growth.

Liberalization of Brazil’s Economic System

Regional integration, adoption of fairer economic and trade rules, and democratization of decision-making

bodies are essential elements of Brazil's foreign policy.17 UNCTAD (2008) report stated that Brazil's view is

that international trade is fundamental for economic development and that the multilateral trading system

should contribute to fair and equal development, then conclude that Brazil's broad trade policy objective is,

hence, to use trade to foster sustainable economic growth. Brazil believes that bilateral and regional trade

agreements can be a useful complement to the multilateral system, by deepening the integration of markets,

reinforcing the role of trade in economic growth, promoting gains of scale for domestic firms, and providing

an expanded base to face global competition.

Lula steps is not usually as his former, as wee can see, make a drastic act more than the Real Plan, on

22 January 2007, Lula announced an Acceleration Programme for the Country's Growth (known as the PAC)

to raise growth to 5% by 2008. This will see £121 billion of investment from 2007-2010 on infrastructures

including roads, ports, electricity generation, and housing. The PAC also includes: tax incentives for

investment, with £1.5 billion (R$6.6 billion) of tax cuts in 2007 and around £2.8 billion (R$11.5 billion) from

2008 targeted at “construction, infrastructure and small businesses”; simplification of business registration;

streamlined issuing of environment licenses; limits on the growth of public spending through a cap on the

minimum wage to rise with inflation and economic growth, and a cap on government wages to inflation plus

1.5%; and also a forum to look at pension reform.18

17 Folha de São Paulo, An Assessment of Five Years of Brazilian Foreign Policy, by Ambassador Celso Luiz Nunes Amorim,Minister of External Relations, Viewed at:http://www.mre.gov.br/ingles/politica_externa/discursos/discurso_detalhe3.asp?ID_DISCURSO=3231.

18 The Economist, Stirred, but not shaken up - Brazil's economy’, 27 January 2007, see also BBC News Online, ‘Lula pins hopeson economic plan’, 23 January 2007 and Financial Times, ‘Measures launched to boost Brazil's economic growth’, 23 January 2007). TheFinancial Times noted that public investment in the plan was driven by the hope that it would stimulate private sector investment throughtax breaks for construction and water and other infrastructure spending. The Economist called the PAC “overly timid”, arguing that muchof the expenditure announced in the plan had previously been planned, and that it failed to tackle “the cause of low growth: excessivespending and debt, which depress investment by keeping taxes and interest rates high”, and tax and social security complexity.46 TheFinancial Times also noted that the PAC would not address the “bankrupt pensions system and spiraling government spending”. Therewas, however, some support for the PAC as a means to ensure economic stability in Brazil. Quoted from House of Commons Trade andIndustry Committee of United Kingdom, Trade with Brazil and Mercusor: Seventh Report of Session 2006–07 Volume 1. viewed athttp://www.parliament.the-stationeryoffice.com/pa/cm200607/cmselect/cmtrdind/208/208i.pdf

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Thus, the Federal Government has established programmes and mechanisms to facilitate foreign

investment, especially in sectors that are seen as helping to improve Brazil's international competitiveness,

spur long-term growth, and achieve objectives of the Government’s accelerated PAC under the latest

Multiyear Plan. Under the new Multiyear Plan 2008-2011, policy efforts continue to be geared towards

improving the business and regulatory environment for investment.19 The Federal Government's actions are

aimed at fostering investment in infrastructure and technology-intensive sectors. However, no specific

incentives are offered to foreign investors by the Federal Government.

Brazil FDI Reports

Brazil was the main FDI destination in the region in 2007 and is considered to be among the most attractive

destinations by foreign investors because of its large market, natural resources, and sophisticated and

diversified industrial base (World Economic Forum 2009). FDI in Brazil is quite an old story, which it flows

and stocks have significantly increased over the past 15 years, making Brazil the largest host country for

foreign investment in Latin America and second only to China among developing countries. As World

Economic Forum reported, after a decline in the early 2000s, growth in FDI resumed in 2004—incidentally,

with important positive effects on job creation—reflecting both an increase in greenfield projects and a new

wave of mergers and acquisitions (M&As). The strength of this upward trend was reflected in its resilience to

the recent global economic downturn. Indeed, FDI in Brazil reached a historical record of US$45.1 billion in

2008 (an increase of 30 percent over 2007), while total world inflows fell by 21 percent.20

Historically, the bulk of FDI in Brazil was in manufacturing: this sector accounted for more than two-

thirds of FDI stocks in 1995. Conversely, the increasing importance of the primary sector and manufacturing

was largely due to significant FDI flows in oil and mining, chemicals, automotive, metals, and food and

beverages. By country of origin, the major investors in Brazil have historically been US companies.

Nonetheless, their share—though still significant—has declined over time tothe benefit of European investors.

All together, Netherlands, Spain, France, and Germany—in that order; accounted for roughly half of FDI

inflows from 2001 to 2006. Canada, Japan, Belgium, Luxembourg, and Portugal have also been significant

19 The Multiyear Plan 2008-2011 was enacted by the Brazilian Congress through Law No. 11,653 of 7 April 2008.20 Irene Mia, Emilio Lozoya Austin (Ed), The Brazil Competiveness Report 2009, World Economic Forum, viewed at:

http://www.weforum.org/pdf/Global_Competitiveness_Reports/Reports/Brazil/BrazilCompetitivenessReport2009.pdf

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investors in recent years. Some companies from developing Asia (notably China and Korea, Rep.) have also

recently begun to set up activities in the country.21

Table I FDI stocks and inflows by home country of investor in Brazil22

Table 3 FDI stocks andf Inward stocks Inward stocks Inward stocks(percent) 1995 (percent) 2000 (percent) 2000

y home country of investor in BrazilFrance 4.9 6.7 6.2Germany 14.0 5.0 4.4Netherlands 3.7 10.7 18.1Spain 0.6 11.9 6.7North Canada 4.4 2.0 4.2United States 26.0 23.8 19.3Japan 6.4 2.4 3.7Caribbean 6.3 11.2 2.3Developing Asia 12.6 17.0 17.7Cayman Islands 2.1 6.0 8.4Portugal 0.3 4.4 3.5Belgium - Luxembourg 2.3 1.6 3.7

From approximately US$ 1.5 billion annually in the 1980s and early 1990s, FDI inflows increased to an

average level of US$ 24 billion annually between 1995 and 2000. It’s interesting to mention that the inflows

continued to grow through the year 2000, despite the Asian crisis of 1997, the Russian crisis of 1998, and even

the Brazilian crisis of 1999. Starting in 2001, with a world economic slowdown considerably reducing trade

and investment flows, FDI inflows to Brazil declined, reaching a low of US$10.1 billion in 2003. In 2004, the

volume of FDI went up again, dipping slightly again in 2005 (Hiratuka, 2008). After 2005 up to 2009, FDI

starting again to be more stabile, even increased. Brazil reported that:23

Foreign direct investment (FDI) inflows increased strongly over the review period, to US$34.3 billionin 2007 (from US$13.1 billion in 2003). FDI inflows over the period totalled US$112.8 billion. TheNetherlands was Brazil's main single investor, with 21.3% of total FDI, followed by the United States(19.2%), the Cayman Islands, Spain, Germany, France, and Luxembourg. These seven investorsaccounted for some two thirds of all FDI inflows during the period.

21 Ibid., p. 80-8122 Ibid.23Celio Hiratuka. 2008. “Foreign Direct Investment and Transnational Corporations in Brazil: Recent Trends and Impacts on

Economic Development.” Discussion Paper No. 10, April. The Working Group on Development and Environment in the Americas.Available at. http://ase.tufts.edu/gdae/Pubs/rp/DP10HiratukaApr08.pdf.

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Important changes occurred in the sectoral composition of FDI inflows as well. Until 1995, the

manufacturing sector accounted for almost 67% of all FDI stock in Brazil, whereas in the second half of the

decade, the prevalence of the service sector was remarkable, with electricity, gas, water, postal services and

telecommunications, financial services, and wholesale and retail trade attracting significant FDI flows (Vaiga,

2004). A large part of the investment in these sectors was associated with the privatization process. By 2000,

the service sector’s share in the FDI stock had increased to 64% and that of the manufacturing sector had

dropped to 33.7%, though manufacturing industries such as food and beverages, automotive, chemicals,

metallurgy, and telecommunications equipment continued to receive significant volumes of investment.

Another feature of recent FDI inflows to the Brazilian economy has been the importance of mergers and

acquisitions. The large share of FDI attributable to mergers and acquisitions shows that a substantial part of the

investment inflows did not contribute to the development of new productive capacity (Laplane and Sarti,

2002).

Table II – Brazil – Share in world and regional FDI inflows - %

Period 1999-1995 1996-2000 2000-2005

Share in World FDI 0.9 2.9 2.3Share in Developing FDI 2.8 11.9 7.3Share in Latin America, Caribbean 10.7 29.7 23.5

Sources: UNCTAD24

There is an on-going debate on the impact of FDI in Brazil. On onehand, TNCs with their investments

are more productive, are capital- and skills-intensive, and grant higher wages than their domestic counterparts.

Linkages with the local economy have been growing over time in industries such as automotive, including

R&D activities (see Balcet 2007). On the other hand, some authors consider that the predominantly market-

seeking strategies implemented by these firms in Brazil, as well as their high propensity to import (especially

in innovation intensive activities), involve some negative consequences, such as a growing technological

dependence of the country from the rest of the world and crowding-out effects detrimental to domestic firms

(see, for instance, Hiratuka 2008). In addition, some authors point to some negative social and environmental

impact of activities carried out by TNCs in the primary sector (agriculture, biofuels, oil and mining and

forestry; see Past 2008).25

24 Ibid.25 Irene Mia, Emilio Lozoya Austin (Ed), The Brazil Competiveness Report 2009, loc.cit.

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III.Brazil’s State Regulations

“Government intervention (by host or home countries) may be motivated by two primary types ofmarket failures: information or coordination failures in the investment process; and the divergenceof private interests of investors (foreign and/or domestic) from the economic and social interests ofhost economies.”

Brazil’s Constitution and FDI Law

As the Doha Ministerial Declaration, in the context of the relationship between trade and investment, states in

paragraph 22: “Any framework should reflect in a balanced manner the interests of home and host countries,

and take due account of the development policies and objectives of host Governments, as well as their right to

regulate in the public interest”.26

Government policies are vital for enhancing the developmental impact of FDI. Furthermore, at the same

time as barriers to cross-border exchanges are being reduced, including in the area of investment, international

cooperation has been strengthened through various international agreements to regulate these exchanges.

Countries thus need to ensure that policies undertaken at the national level in pursuit of specific development

objectives are enhanced, and not hindered, by international rule making.27 Therefore, Governments need to

consider what role they want inward FDI to play in their economies' development process, and then design their

FDI policies. Thus, the broad policy objectives are to attract in particular investment that is in line with the

identified development objectives; to maximize the potential benefits of FDI; and to minimize negative effects

like balance-of-payments problems, crowding out, transfer pricing, abuse of market power, labor issues and

environmental effects.

Brazilian investment policies are based of the Federal and States Laws. Government has been guarantee

that foreign investors receive in principle the same treatment, but emphasized that specific laws may impose

restrictions on foreign investment; thus, foreign participation is restricted in areas such as rural property,

health, the mass media, as well as maritime and air transport.28 Brazil Government has played an important

role within its effort to attract FDI as been explained above. A wide variety of instruments was mobilized to

26 UNCTAD (2008), p. 1427 UNCTAD, The Development Dimension of FDI: Policies and Rule Making Processes, Proceedings of the Expert Meeting held

in Geneva from 6 to 8 November 2002, p. vii28 Legislation is drafted and issued at the federal, state, and municipal levels by the respective legislative bodies. Under the

Constitution, legislation in a number of areas must be drafted and passed at the federal level; these areas include foreign trade,telecommunications, insurance, maritime and air transport, credit policy, monetary issues, and utilities (Article 22). On the other hand,federal and state laws may be issued concurrently on education, health, and social security (Article 24). In accordance with Article 30 ofthe Constitution, municipalities may only issue legislation on matters of local interest and to supplement federal and state legislation wherepertinent. Each federative body drafts its tax legislation in accordance with its constitutional competence.

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attract and as a rule for the FDI: the auto industry as the target of a sectoral regime of investments and foreign

trade based on traditional mechanisms as tariff protection and tax exemption. The Law of Information

Technology was reviewed as to its discriminatory aspects against FDI and tax exemption was granted for the

manufacture of information technology and telecommunications equipment, provided that companies allocated

at least 5% of their revenue to R&D activities. The legislation applied to the Free Zone of Manaus, which

benefits mainly the manufacturers of electronic consumer goods, was updated to also require the 5% minimum

application to R&D activities. In the textile sector, the governmental policy combined defining favorable

conditions of public financing for investments (Veiga, 2004).

Specifically, this research would analysis the state regulation, and I started to separate between

international and national framework of Brazil FDI regulation. As had been mentioned before, the amendment

of Basic Law was one of the important steps of Brazil within the process to liberalize its market. Law no.

4.131/62, as amended by Law no. 4.390/64 Article 55, 56 and 57 of Law no. 4.131/62 about Foreign Direct

Investment and Central Bank Authority. There was also the amendment of The Constitution of 1988, Article 17

about the legal distinction between a “Brazilian company of national capital” and a“Brazilian company of

foreign capital.” Many regulations had been regulated as a Brazil FDI National Framework, for this research,

analysis would be concentrate with the Basic Law and constitution of 1998 where had been in amendment as a

Brazil step to liberalize its market. As addition, need to be explore some regulations for explain the

government’s role, there are the most important part of FDI regulation: Tax System, Anti Trust Law, and

Environmental Policy as this research emphasizing.

As an important thing within Brazil FDI tracks, today, Brazilian law, which had been in liberalized,

states that both domestic and foreign capitals enjoy equal treatment. The 1988 Brazilian Constitution, which

established a series of state monopolies in some sectors of the economy and assured protection and preferential

treatment to domestic capital, has been altered. At present, the legislation that regulates foreign capital has

eliminated many state monopolies and restrictions to the foreign capital and no longer discourages new foreign

investments.

Foreign capital is regulated by Law no. 4.131/62, as amended by Law no. 4.390/64. The amended Law

assured no limit on capital repatriation and remittance of profits and the registration of reinvested dividends as

foreign capital. The Law provides for registration with the Foreign Capital Department of Central Bank for any

foreign capital entering the country. Although not mandatory, the registration is a prerequisite for repatriation

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of capital and transfer of earnings (Pacheco, 1997). Article 55, 56 and 57 of Law no. 4.131/62 authorizes the

Central Bank "to carry out, periodically, a census of the foreign capital invested in the country, to draw up the

plan and forms of the census in order to make possible a complete analysis of the situation, flows and results of

the foreign capital" and "draw up a wide-ranging and detailed report for presentation to the Council of

Ministers and the National Congress on the basis of these censuses."29

As Pacheco explained, the Brazilian Law provided the Central Bank with the legal and administrative

authority to require survey respondents to report information on FDI. Nevertheless, in preparing for the

national survey, the authorities still needed to address the issue of data confidentiality, to set the penalties for

failure in reporting and to determine the report requirements. In this context, Central Bank Vote no. 227/96

established as subject to reporting enterprises included in the following classification:30

(1) Any Brazilian business enterprises in which a nonresident person owned or controlled, directly orindirectly, 10 percent or more of the voting shares or 20 percent or more of the total shares, and;

(2) All Brazilian business enterprises with an external debt equal or superior to R$ 10.000,00 (tenthousand Reais) in December 31, 1995.

Anti-Trust Law

Federal Constitution states that the main objective of the antitrust regulations is to repress the abuse of

economic power aimed at dominating markets, eliminating competition and increasing profits in an arbitrary

manner.31 For almost thirty years, Brazil had an antitrust law that although greatly inspired by the U.S.

regulatory model was in fact inoperative. The mechanisms created to enforce Law no 4.137, of September 10,

1962, were swept in the bureaucratic system of the government. In 1990 and 1991, before the new legislation

established, however, Laws No² 8.002 and 8.158 helped to focus on a new set of issues such as the

establishment of a new economic order, as well as theprotection of free competition and of the consumers’

rights.32

As the effect of the Law No² 8.002 and 8.158, the powers of the formed in 1962, antitrust enforcement

agency CADE (Administrative Council of the Economic Defense) were strengthened. Based of that fact, the

Brazilian Congress is currently discussing a proposed bill to amend the Brazilian Antitrust Law. This bill

29 Thelma Lucia Pacheco, Tracking Foreign Direct Investment, Institute of Brazilian Issued, The George Washington University,viewed at http://www.gwu.edu/~ibi/minerva/Spring1997/Thelma.Lucia.Pacheco.html

30 Ibid.31 Ecio Perin Junior, Abuse of Dominance (AOD) in Brazil. Issues and perspectives, Geneva 07-09 Juli 2009, Viewed at:

http://www.unctad.org/sections/wcmu/docs/ciclp2009_s2_br2_en.pdf32 Foreign Relation Ministry of Brazil, Legal Guide for the Foreign Investor in Brazil, Brasília: Ministério das Relações

Exteriores: São Paulo: CESA - Centro de Estudos das Sociedades de Advogados: Imprensa Oficial do Estado de São Paulo, 2006. pp. 85.Viewed at: http://sistemasweb.desenvolvimento.gov.br/INVESTIMENTO_WEB/renai_en/arquivos/IEDfluxoSITERENAI.pdf

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provides for the restructuring of the antitrust institutional framework through the merger between CADE

which has the authority to rule on antitrust violations and merger33 control cases, and Secretary of Economic

(SDE), which is focused on investigating antitrust infringements and giving opinions on high complexity

merger control cases. Secretary of Economical Follow-up (SEAE) would not form part of this new structure

and would develop a secondary consulting role for antitrust analysis in regulated sectors. The Law deems it a

domestic company any foreign company which has any subsidiary, branch, agency, office, representative or

the like in Brazil. Therefore the foreign company shall be notified of all procedural acts, independently of any

power of attorney or any contractual or statutory provisions, in the person responsible for its branch, agency,

subsidiary or any other establishment in Brazil.

As the result, Brazilian legislation establishes a system of merger control, Law No. 8.884/94, with the

rule of reason as the fundamental principle. In June 1994, the Congress approved the current Brazilian

Antitrust Law, Law no 8.884/94, which is guided by the economic order principles set forth in the Federal

Constitution, of 1988, i.e., free competition, free enterprise, consumer protection, economic development and

social use of private property. Law no 8.884/94 specifically states these authorities’ jurisdiction over any and

all individuals and legal entities, whether public or private, organizations and joint ventures, including those

of a temporary nature, or without legal personality.

The antitrust Law also sets forth the instances where there will be individual liability of the officers,

severally or jointly with the company itself. In addition, Section 18 admits, under limited circumstances, the

theory of disregard of the legal entity (piercing the corporate veil), also provides for the obligation to submit

to CADE’s approval any transactions that may hinder any free competition or result in dominance of a certain

market.34 However, Brazil government stated that Law no 8.884/94 provides for, under certain circumstances,

the possibility of taking over violating companies, by means of a judicial order, and thereafter nominating an

intervenor to manage them.

Tax System

According to the Brazil Federal Constitution, which was promulgated on October 5, 1988, allocates taxing

power between the Union, the States and Municipalities, granting unto each of them the power to levy

33 The merger was another device used to eliminate competition. Mergers may take several forms. One company may purchase thephysical assets or the shares of stock, and a new company may be formed to buy up the assets or shares of two or more older companies(Schnitzer, 1987).

34 Foreign Relation Ministry of Brazil, Legal Guide for the Foreign Investor in Brazil, loc.cit., p. 86.

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tributes, which had been divided into taxes, betterment fees, social contributions, other contributions and

compulsory loans. Each level of government is allotted specific taxes which are listed in the Constitution. The

following taxes may only be levied by the Federal government: Import duties; Export duties; Income and

capital gains tax; Tax on industrialized goods; Tax on credit and exchange transactions, on insurance and on

securities; Tax on rural land and Tax on large fortunes.35 In the other hand, there is also available States and

the Federal District are allocated the following taxes: inheritance and gifts tax (ITD); tax on transactions

related to the circulation of goods, interstate and inter-municipal transportation, and on communication

(ICMS); and tax on the ownership of motor vehicles (IPVA).

Table III Principal Taxes Applicable to Companies36

Tax Statutory tax rate (%) / tax base Comments

Corporate incometax (IRPJ)

Annual profits up to R$48million: 15%; additional profits: 10%and 27.5%, depending on the incomebracket; net profits exceedingR$20,000 per month are subject to anadditional 10% tax. / taxable profits

For corporations, income tax isassessed on profits and capital gainsgenerated by operations in Brazil or abroad.Corporate income is taxed on net profits,minus deductions, at 15%; on a world-widebasis

Payroll tax 20% / gross salaries

Severancecontribution (FGTS)

8% / gross salaries

Withholding tax(IRF)

Overseas remittances aretaxed at: interest, royalties,technology and know-how relatedpayments: 15%; and services' fees:at 25%

Since 1996, dividends are notsubjected to withholding tax. An adjustmentfee of 10% is charged on remittances ofroyalties or compensation deriving fromtechnology transfers, when the IRF is 15%.

Contribution forthe social integrationprogramme (PIS)

0.65%: cumulative regime/turnover

Rates are levied on companies'turnover

The socialcontribution on profits(CSL)

9% / taxable profits

The socialsecurity contribution(COFINS)

3% gross income(cumulative regime)/ turnover

Environmental tax(TCFA)

Rates are variable Applies to entities that may causepollution, defined in Annex VIII of Law No.10,165 of 27 December 2000. Rates arebased on the size of the entity; rural ownerspay reduced rates

Brazil Trade report quoted that The World Bank has classified Brazil 122nd out of 178 countries with

respect to ease of doing business; Brazil ranked particularly low in the area of taxation.37Studies have found

that Brazil's tax system is relatively complex, with a number of federal and state taxes.38The authorities note

35 pp. 80-81.36 Brazil Investment Report, Viewed at: http://www.iisd.org/pdf/2004/investment_country_report_brazil.pdf37 World Bank online information. Viewed at: http://www.doingbusiness.org/economyrankings/.38 Ibid.

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that the Brazilian Government expressed, in writing, to the World Bank that it did not concur with its findings,

since several inconsistencies rendered the conclusions inappropriate and unsustainable. In the context of this

Review, the authorities further note that they do not consider the tax system to be complex, as most taxpayers,

including small and medium-sized companies pay taxes under simplified legislation.

IV.Analysis of Government Intervention and State Regulations

“Government intervention can be a powerful instrument….as long as it is used within the discipline ofan outward-oriented economy, and with selective and clear objectives of remedying specific marketfailures.” (Mauricio M. Moreira, 1995)

Many arguments had been stating that ‘government intervention’ or as a general ‘state power’ would help a

country from the market failure within the free trade, which had been started with the basic concept of neo-

classical economic theory. Use the comparing of these economic theories I conduct this research to give an

alternative answer why government needs to intervene, as the conclusion. Learn from the Brazil experience, in

case that government has a multiple roles, especially with its policies, and implied a new economic strategy.

Know widely, neo-classical trade theory is based upon the assumption that states act to maximize their

aggregate economic utility, recognizes that trade regulation can be used to correct domestic distortion and to

promote infant industries (Krasner, 2000). Samuelson and Nordhaus gave a detail and clearly explanation how

government directs and interacts with the economy. They stated that the major economic function that

government performs in a modern mixed economy, in fact there are: establishing the legal framework for the

market economy; Affecting the allocation of resources to improve economic efficiency; establishing programs

to improve the distribution of income; and Stabilizing the economy through macroeconomic policies. 39

According to the Samuelson, the first function of government would be the center of this research.

Government setting the legal framework establishes the rules of the market. These rules include the definition

of poverty, the laws of contracts and bankruptcy, the mutual obligation of labor and management, and a

multitude of laws and regulations constraining the way different members of the society interact.40 Samuelson

and Nordhaus stated that during the twentieth century the legal system evolved to make business legally

responsible for their actions and products. Thus Samuelson explanations about the government role within the

market economy, emphasized how much important is the government intervention for stabilize the economy;

especially with establish the states regulations.

39 Paul A. Samuelson and William D. Nordhaus, Economic. (Singapore: Mc-Graw Hill Book, 1992) p. 301.40 Ibid.

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But however, government role within the free trade not merely bring a positive tendency for market, As

Moreira quoted from Krueger and Orsmond (1990:8), they argued:41

In the early development literature, it was implicitly assumed that governments would behave asbenevolent social guardians. Experience has shown, however, governments may instead behave eitheras ‘autonomous bureaucratic states’ or as ‘predatory authoritarian states’. In the former, the bureaucracyin effect governs and behaves to maximize its power through increasing public employment and theactivities undertaken by the state in the latter, the dictator, or oligarchic ruling group has sufficientpolitical power to extract resources from the economy either directly (through taxation) or indirectlythrough providing itself services at the expense of the other sectors.

How significance governments intervene to economic also had been explained by Krugman research.

As he stated, the free market can simply just go bad. In Brazil, who decreased regulations, tariff and privatized

industry and subsequently reaped economic growth, than in the model of Laissez-faire environment, a crisis

occurred. As clearly for him, that the free market cannot be left on its own persistently increase wealth and

incomes (Krugman, 1999).42

Thus, government role, in this term government regulations, are vital for enhancing the developmental

impact of FDI. Furthermore, at the same time as barriers to cross-border exchanges are being reduced,

including in the area of investment, international cooperation has been strengthened through various

international agreements to regulate these exchanges. Countries thus need to ensure that policies undertaken at

the national level in pursuit of specific development objectives are enhanced, and not hindered, by

international rule making.43 In this term, Brazil government had been maintaining to stabilize its market by

selected regulations. As we can see, according to explanations above, the amendment of constitution and FDI

law was done by Brazil as Its effort to liberalize Brazil market. New regulations proved that Brazil can raise it

economic growth and keep stable with the increase of FDI flows, as been shows by this abstract:

Displaying an impressive GDP of US$1,314 billion and with a population of 191 million in 2007,1Brazil is the 10th largest economy and 5th most populous country in the world, as well as the largestmarket in Latin America and the Caribbean. This, coupled with rich natural resources and a fairlysophisticated industrial base, provides the country with key competitive advantages in agriculture andlivestock, an important source of export revenues in times of high commodity prices and an importantpotential for further industrial and export diversification in the future. These factors have also madeBrazil the leading foreign direct investment (FDI) recipient in Latin America, with a US$35 billioninflow in 2007, as compared with US$25 and US$16 billion to the second and third top destinations inthe region, Mexico and Chile. Brazil also ranked 5th in the World Investment Prospect Survey in termsof its attractiveness for foreign investors for the period 2008–2010.44

41 Mauricio M. Moreira, Industrialization, Trade, and Market Failures: The Rule of Governments Intervention in Brazil and SouthKorea. (New York: St Martin Press, 1995) p. 6.

42 Swan Ritenour, Post-Modern Economics: The Return of Depression Economics. The Quarterly Journal of Austrian EconomicsVol.3, No. 1 (Spring 2000).

43 UNCTAD, The Development Dimension of FDI: Policies and Rule Making Processes, Proceedings of the Expert Meeting heldin Geneva from 6 to 8 November 2002, p. vii

44 UNCTAD, The Brazilian Experience, Viewed at: http://www.unctad.org/sections/wcmu/docs/c2em21p15_en.pdf

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Anti Trust Law and Taxation system within the Brazil FDI Law also had been reformed to attract

foreign investors for investment in Brazil. As the emphasized of this research, the government role is needed

to regulate the process within FDI treaty. Government intervention was not for restricted market or to be

dominant, but the quality of the Government is to make sure and as a guarantee that FDI would bring benefit

for state and fairly for the foreign companies. In other hands, very important also, how government program

for attract the FDI, besides good regulation. In Brazil case, tracing back the Brazil FDI tracks, we can see that

each regime of the presidents held his own economic program, which aimed to achieve the fantastic of Brazil

economic growth.

Beside the success of Real Plan In the era of Cardoso, Brazil, nowadays, under the Lula regime also

launched economic program, PAC, as one of government efforts for attracts foreign investor. Within the

process to attract FDI, Lula stated that Brazil should give a guarantee for the foreign investors’ confidence:

To recover the confidence of investors in Brazil’s economy and to once again achieve a cycle ofeconomic development with social justice, there was a major improvement of the profile of public debtin 2003. The consolidation of public debts shows stabilization with a tendency towards decreasing. Theeconomic policy we adopted led to a recovery of foreign confidence. The accommodation of theexchange rates, major drops in nominal and real interest rates, monetary policies have drasticallyreduced inflationary expectations. The vulnerability of our economy to global turbulence hasdiminished. 45

V. Closing

The power of the state steered the growth of Brazil’s economy for decades. As the economy grew, thestate grew. State power led the transition from the agrarian to the industrial phase in Brazil. The powerof the state shortened Brazil’s rise from a backward economy to the world’s eighth largest industrialeconomy within three decades. The state held the absolute financial lever (Eul Soo-Pang, 2002).46

Experts noted that the policy mix had to be adapted to the special circumstances prevailing in different

countries and might have to evolve over time. Factors influencing this mix were level of development, market

size, domestic capabilities and existing levels of FDI. Thus, it was becoming increasingly important for

countries to consider what the best policy approach was for attracting and benefiting from FDI in accordance

with their development objectives. Inflows of FDI could bring important benefits to the recipient economies in

45 Statement of president of Brazil, Luiz Inacio Lula da Silva, the High level Meeting for Foreign Investor, Geneva 29 January2004. viewed st http://www.unctad.org/sections/edm_dir/docs/Lula_statement290104_en.pdfa

46 UNCTAD (2008). Statement by President Luiz Inácio Lula da Silva, at the High Level Panel of the 12th United NationsConference on Trade and Development in Accra, Ghana, 20 April 2008. Viewed at:http://www.mre.gov.br/ingles/politica_externa/discursos/discurso_detalhe3.asp?ID_DISCURSO= 3309.

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the form of capital inflows, technology spillovers, human capital formation, international trade integration,

enhancement of enterprise development and good governance.47

UNCTAD stated that the host country determinants for FDI consist of (a) the general policy framework

for foreign investment, including economic, political and social stability, the legislation affecting foreign

investment and any other policies affecting FDI locational decisions; (b) economic determinants, such as the

market size, cost of resources and other inputs or the availability of natural resources; and (c) business

facilitation, including investment promotion. All three groups of determinants interact, enhancing or

reducing.48 Brazil can be seen, has been doing the strategy to attract Foreign Investor, through the elements

that UNCTAD mentioned, especially with the establishing of good state-regulations. Brazil states’ regulation

showed that the government rule not in the post that government should protect its economy by restricted

regulation, but government should establish a qualified national framework as a rule to thread the process FDI.

Brazil state’ regulation perhaps would be in amendment, again, at the further, considering also there is some

weaknesses within those regulation, like merger rules and in the effort to decrease the taxes.

VI. ReferencesBooks

Bernstein, Henry. Underdevelopment and Development, the Third World Today. (England: Penguin Books,1981).

Chalmers, Douglas. Vilas, Carlos M. etc. The New Politics of Inequality in Latin America: RethinkingParticipation and Representation. (New York: Oxford University Press, 1997).

Evans, Peter. Dependent Development, the Alliance of Multinational, State, and Local Capital in Brazil.(United Kingdom: Princeton University Press, 1979).

Ferras, J. Carlos. Rush, Howard, and Miles, Ian. Development, technology, and Flexibility: Brazil Faces theIndustrial Divide. (London: Routledge, 1992).

Frieden, Jeffry A., Lake, David A. International Political Economy: Perspectives on Global Power andWealth (4th Edition). (London: Routledge, 2000).

Ghosh, B.N. and Guven, Halil M. (Ed). Globalization and the Third World, a Study of NegativeConsequences. (New York: Palgrave Macmillan, 2006).

Ghosh, B.N. Dependency Theory Revisited. (Hampshire: Ashgate Publishing Limited, 2001).

Hofman, Andre A. The Economic Development of Latin America in the Twentieth Century. (Massachusetts:Edward Edgar Publishing, 2000).

47 UNCTAD 2009, http://www.unctad.org/sections/dite_dir/docs/panel2009_Brazil_sp.pdf48 UNCTAD Series on International Investment Policies for Development, The Role of International Investment Agreements in

Attracting Foreign Direct Investment to Developing Countries, UNITED NATIONS, New York and Geneva, 2009, p. 110

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Jameson, P. Kenneth, and Wilber K. Charles. The Political Economy of Development and Underdevelopment(6th Edition). (New York: McGraw-Hill Inc, 1996).

Kay, Cristobal. Latin American Theories of Development and Underdevelopment. (New York: Routledge,1989).

Moreira, M. Mauricio. Industrialization, Trade and Market Failures: The Role of Government Intervention inBrazil and South Korea. (New York: St. Martin’s Press Inc, 1995).

Oatley, Thomas. International Political Economy: Interest and Institutions in the Global Economy. (NewYork: Pearson Longman, 2008).

Samuelson Paul A. and Nordhaus, William D., Economic. (Singapore: Mc-Graw Hill Book, 1992)

Schnitzer, Martin C. Contemporary Government and Business Relations (3rd edition). (Boston: HoughtonMifflin Company, 1987).

Soo Pang, Eul. The International Political Economy of Transformation in Argentina, Brazil, and Chile since1960. (New York: Palgrave Macmillan, 2002).

Seligson, Mitchell and Passé-smith John P. Development and Underdevelopment, the Political Economy ofGlobal Inequality. (London: Lynne Rienner Publisher, 1998).

Working Paper

Amorim, Celso Luiz Nunes. São Paulo, Folha de An Assessment of Five Years of Brazilian Foreign Policy,http://www.mre.gov.br/ingles/politica_externa/discursos/discurso_detalhe3.asp?ID_DISCURSO=3231.

Brazil Investment Report, Viewed at: http://www.iisd.org/pdf/2004/investment_country_report_brazil.pdf

Filho, José Gilberto Scandiucci. The Brazilian Experience With B lateral Investment Agreement: A Note.Viewed at http://www.unctad.org/sections/wcmu/docs/c2em21p15_en.pdf

Hiratuka. Celio. 2008. “Foreign Direct Investment and Transnational Corporations in Brazil: Recent Trendsand Impacts on Economic Development.” Discussion Paper No. 10, April. The Working Group onDevelopment and Environment in the Americas. Available at.http://ase.tufts.edu/gdae/Pubs/rp/DP10HiratukaApr08.pdf.

House of Commons Trade and Industry Committee of United Kingdom, Trade with Brazil and Mercusor:Seventh Report of Session 2006–07 Volume 1. viewed at http://www.parliament.the-stationeryoffice.com/pa/cm200607/cmselect/cmtrdind/208/208i.pdf

Hunya, Gábor and Stöllinger, Roman. 2009. Foreign Direct Investment Flows Between EU and the BRICs,Research Paper, The Vienna Institute for International Economic Studies, Viewed at:http://publications.wiiw.ac.at/?action=publ&id=details&publ=RR358.

Junior, Ecio Perin. Abuse of Dominance (AOD) in Brazil. Issues and perspectives, Geneva 07-09 Juli 2009,Viewed at: http://www.unctad.org/sections/wcmu/docs/ciclp2009_s2_br2_en.pdf

Mia, Irene Emilio and Austin, Lozoya (Ed), The Brazil Competiveness Report 2009, World Economic Forum,http://www.weforum.org/pdf/Global_Competitiveness_Reports/Reports/Brazil/BrazilCompetitivenessReport2009.pdf.

Pacheco, Thelma Lucia. Tracking Foreign Direct Investment, Institute of Brazilian Issued, The GeorgeWashington University, viewed athttp://www.gwu.edu/~ibi/minerva/Spring1997/Thelma.Lucia.Pacheco.html

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http://www.iisd.org/pdf/2004/investment_country_report_brazil.pdf

http://ase.tufts.edu/gdae/Pubs/rp/DP10HiratukaApr08.pdf.

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Ritenour, Swan Post-Modern Economics: The Return of Depression Economics. The Quarterly Journal ofAustrian Economics Vol.3, No. 1 (Spring 2000).

UNCTAD (2004) Statement of president of Brazil, Luiz Inacio Lula da Silva, the High level Meeting forForeign Investor, Geneva 29 January 2004. viewed sthttp://www.unctad.org/sections/edm_dir/docs/Lula_statement290104_en.pdf

UNCTAD (2008). Statement by President Luiz Inácio Lula da Silva, at the High Level Panel of the 12thUnited Nations Conference on Trade and Development in Accra, Ghana, 20 April 2008. Viewed at:http://www.mre.gov.br/ingles/politica_externa/discursos/discurso_detalhe3.asp?ID_DISCURSO= 3309.

UNCTAD Secretariat, “The Development Dimension of FDI: Policies to Enhance the Role of FDI in theNational and International Context” UNCTAD Expert Meeting, Geneva 6-8 November 2002.

UNCTAD Secretariat, “The Development Dimension of FDI: Policies to Enhance the Role of FDI in theNational and International Context” viewed at: http://www.unctad.org/en/docs/iteiia20034_en.pdf

UNCTAD Series on International Investment Policies for Development, The Role of International InvestmentAgreements in Attracting Foreign Direct Investment to Developing Countries, UNITED NATIONS,New York and Geneva, 2009.

UNCTAD Series on International Investment Policies for Development, The Role of International InvestmentAgreements in Attracting Foreign Direct Investment to Developing Countries, UNITED NATIONS,New York and Geneva, 2009, http://www.unctad.org/sections/wcmu/docs/ciclp2009_s2_br2_en.pdf

UNCTAD (2002), The Development Dimension of FDI: Policies and Rule Making Processes, Proceedings ofthe Expert Meeting held in Geneva from 6 to 8 November 2002. Viewed at:www.unctad.org/en/docs/iteiia20034_en.pdf

UNCTAD (2004), World Investment Directory: Volume 9 Latin America and the Caribbean 2004 Parts 1 and2. Viewed at http://www.unctad.org/en/docs/iteiit20044_en.pdf

Veiga, Pedro da Motta. Foreign Direct Investment in Brazil: Regulation,Fflows and Contribution toDevelopment. p.3. Viewed at http://www.iisd.org/pdf/2004/investment_country_report_brazil.pdf.

Legal Documents

1. Legal Guide for the Foreign Investor in Brazil, Foreign Relation Ministery, Sao Paulo 2006.http://www.braziltradenet.gov.br/CDINVESTIMENTO/?Idioma=I.

2. Practical Guide in for International Investment in portfolio, BEST (Brazil Excellence in SecurityTransaction): http://www.bestbrazil.org.br/pages/publications/BrazilianCapital/Pratical_Guide.pdf

Webpage:

1. http://www.bcb.gov.br

2. http://www.unctad.org

3. http://www.investebrasil.org

4. http://www.bestbrazil.org.br

5. http://www.interlinkconsultoria.com.br

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http://www.unctad.org/sections/edm_dir/docs/Lula_statement290104_en.pdf

http://www.mre.gov.br/ingles/politica_externa/discursos/discurso_detalhe3.asp?ID_DISCURSO=




http://www.unctad.org/en/docs/iteiit20044_en.pdf

http://www.iisd.org/pdf/2004/investment_country_report_brazil.pdf.

http://www.braziltradenet.gov.br/CDINVESTIMENTO/?Idioma=I.

http://www.bestbrazil.org.br/pages/publications/BrazilianCapital/Pratical_Guide.pdf

http://www.bcb.gov.br/

http://www.unctad.org/

http://www.investebrasil.org/

http://www.bestbrazil.org.br/

http://www.interlinkconsultoria.com.br/





24

DECLARATION

“I declare that this essay/report was fully prepared by myself, and that I have cited andreferenced all quotations and paraphrases from the writings of other authors. I acknowledgethat my paper and course grade will be reduced according to the Plagiarism Policy of theDepartment of International Relations if cases of plagiarism are detected, and thatdisciplinary consequences may follow”.

Famagusta, 16 January 2009

Signed

______NOFIA FITRI_______(095139)

Graduate Student of International Relation

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