Investment in the Brazilian Mining Sector

Occasionally, I will share here some of the emails I often receive from the blog readers.  This week, I received an interesting message regarding mining investments in Brazil.

31/July/2011

Dear Professor Adler Martins

I like your blog very much, for I love International Law, negotiation and the art of drafting contracts.

I would like  you to help me with a doubt.

May a foreign investor acquire a concession for mining exploration (gold) in Brazil?

Is it necessary that Brazilian individuals also have equity in the company?

What are the legal procedures and ways to accomplish that?

Thanks in advance

Abraço (the Portuguese equivalent for warm regards)

MY ANSWER

Dear Reader,

Thank you for following the blog. It good to know that I'm making a difference.

Regarding your question: The Brazilian Constitution, in its Article 175, says that the exploration and exploitation of mining deposits can only be pursued by a Brazilian individual or by a Company established in Brazil.

Thus, if a foreigner wishes to acquire any kind of mineral rights in Brazil, it shall first set up a company in Brazil. This company may either have 100% foreign capital or be a joint venture with Brazilian companies or individuals.  There are no restrictions on this regard.

To set up a company in Brazil, one must register the Articles of Association before the Commercial Registry and register the capital before the Brazilian Central Bank.

I must say that this kind of operation, i.e., opening a company in Brazil in order to acquire mining rights, happens quite often. I have made them myself. To check out more details please consult my Guide on Investing in Brazil.

Restrictions exist, however. The three main ones are:

1. Brazilian companies with more than 49% of foreign capital cannot exploit mining deposits locates within the legal border area, understood as anywhere 150km (about 81 miles) far from the borders;
2. Foreign companies are not allowed to explore uranium and most of other radioactive materials, and
3. Oil is still a Federal monopoly.

Please feel free to contact me.