Published in “Union Internationale Des Avocats”, Newsletter of the Mergers & Acquisitions Commission, Paris, France, Edition number 5, May 1999.
From March to December 1998, 280 mergers and acquisitions took place in Brazil, representing a small increase compared to the 273 transactions in 1997 (up from 222 mergers/acquisitions in 1996). Once again, foreign investors made more investments than Brazilian investors (175 foreign acquisitions as against 105 Brazilian ones). The sectors involved were: foods (26), telecommunications (26), financial institutions (24), chemical and petrochemical (23) and automobile parts (33).
Mergers and acquisitions in Brazil are principally governed by a dual regime : Law 6.404/76 (the Brazilian Corporate Law) and Law 6.385/76 which regulates the Securities Commission (CVM), both recently modified by Law 9.457/97 of May 1997.
The important developments arising in this area have been due to several factors, legal as well as economic. Through Law 4.131/62, modified by Law 4.390/64 and Decree 55.762/65, all of which are concerned with the registration of foreign capital, Brazil has made the entry of foreign capital into its territory easier. The demand for foreign investment has been evidenced during recent privatisations, principally those in the telecommunications sector.
Meanwhile these developments undoubtedly affect free enterprise and competition within the country. Brazil established in 1962, like its western neighbours, a system of control of economic sectors. In fact this law (4.137/62) only began to be applied from the start of the 1980s following the collapse of the military regime and it gained importance throughout the 1990s due to the opening of the frontiers to foreign investments. A new law (8.884/94) was adopted in 1994 establishing a preventive system of control and restriction on acts and agreements which violate free competition (whereas the 1962 Law only established so-called prices control). The Brazilian government agency in charge of this new system of control is the Administrative Council of Economic Defence (CADE). Its operation is not yet as efficient as the FTC or the European Commission, but its objectives seem well-defined to accompany the constant evolution of national economic developments.
It is clear that the Brazilian economic stabilisation programme introduced almost five years ago has directly induced both foreign and national companies to invest in Brazil. The statistics relating to mergers and acquisitions demonstrate convincingly that Brazil is no longer a “country of the future” but is indeed a country of the present