Brazil’s Temer vetoes proposed foreign control of airlines
July 27, 2016, 5:20 am

Foreign ownership in local Brazilian carriers is still capped at 20% [Xinhua]

The article is part of a law seeking to modify areas of the aviation sector, mainly in order to allow the state-owned airport infrastructure firm, Infraero, to restructure its debts.

While Temer has expressed support to open up the country’s aviation sector to further foreign investment, he does not support their full ownership.

With the veto, the country’s 20 per cent limit on foreign ownership of airlines remained in place.

The note published in Brazil’s official government newspaper on Tuesday also said the government would draft a new law concerning foreign investment in the sector, and send it to Congress.

Suspended President Dilma Rousseff issued a decree in March lifting the limit on foreign ownership of local airlines to 49 per cent from 20 per cent, in an effort to help Brazil’s highly indebted carriers.

But the move only allows for a controlling stake if the country of origin of the foreign investors extends reciprocity to Brazilian investors. Many countries limit foreign ownership in the aviation sector for strategic and security reasons.

On Tuesday, Temer vetoed this specific article, the rest of the law was passed, allowing Infraero to seek urgent debt relief.

Reuters had earlier quoted Temer’s aides as saying that the government still wants to relax foreign ownership limits for Brazilian airlines.

Foreign owners are already active in Brazil’s airlines.

The market is dominated by TAM, the Brazilian carrier that merged with Santiago, Chile-based Latam Airlines Group SA and Brazil’s Gol, which is partly owned by U.S. carrier Delta Airlines Inc.

Two other carriers, Avianca Brasil and Azul Linhas Aéreas Brasileiras SA, also have significant foreign capital.

TBP and Agencies