WELCOME TO BRAZIL, a country, that offers unlimited opportunities even today - to those who are familiar with the peculiarities of doing business in and dealing with Brazil.

WHY BRAZIL MAKES SENSE:

1. Great potential profits. Inflation is falling. Economists predict five to seven years of steady GDP growth. Invest now, and your investments are set to appreciate handsomely.

2. A peaceful, welcoming, democratic people, peace-loving and civilized.

3.  Real estate prices have gone up in the last year, it is true, but you can still find the best values in the Americas.

4. The cost of living is almost embarrassingly affordable. Medical care provided by U.S.-trained doctors costs about 80% less than what it costs in the States. You've got access to first-world luxuries and conveniences…at a fraction of what you'd pay for them up north.

Following three centuries under the rule of Portugal, Brazil became an independent nation in 1822. By far the largest and most populous country in South America, Brazil has overcome more than half a century of military intervention in the governance of the country to pursue industrial and agricultural growth and development of the interior. Exploiting vast natural resources and a large labor pool, Brazil is today South America's leading economic power and a regional leader. Highly unequal income distribution remains a pressing problem.

Possessing large and well-developed agricultural, mining, manufacturing, and service sectors, Brazil's economy outweighs that of all other South American countries and is expanding its presence in world markets. The maintenance of large current account deficits via capital account surpluses became problematic as investors became more risk averse to emerging market exposure as a consequence of the Asian financial crisis in 1997 and the Russian bond default in August 1998. After crafting a fiscal adjustment program and pledging progress on structural reform, Brazil received a $41.5 billion IMF-led international support program in November 1998. In January 1999, the Brazilian Central Bank announced that the real would no longer be pegged to the US dollar. This devaluation helped moderate the downturn in economic growth in 1999 that investors had expressed concerns about over the summer of 1998, and the country posted moderate GDP growth. Economic growth slowed considerably in 2001-02 - to less than 2% - because of a slowdown in major markets and the hiking of interest rates by the Central Bank to combat inflationary pressures. New president has given priority to reforming the complex tax code, trimming the overblown civil service pension system, and continuing the fight against inflation.

ACQUISITION OF REAL ESTATE IN BRAZIL

Under Brazilian law, questions relating to property are governed by the law of the place where the property is located. Thus, issues regarding real estate property situated in Brazil are governed primarily by the Brazilian Civil Code ("BCC"). 

Pursuant to the Brazilian Civil Code, assets are divided into two broad categories: movable and immovable. Movable are those assets which can be moved by external forces or by themselves, without causing their own destruction or devaluation. 

Immovable assets are those which are by nature immovable or fixed in the land, and can not be partially or totally removed without causing their own destruction or devaluation. The category of immovable property comprises land together with its surface, and all things attached to or forming part of the land, the air space above the land and the subsoil, except for the mines and products from the subsoil, as well as waterfalls, which constitute, for the purposes of exploitation and usage, separate assets from the land. In this sense, according to the Brazilian Federal Constitution ("Federal Constitution"), the exploitation of mineral resources and hydroelectric power requires federal authorization or license. Some assets, however physically movable, are considered immovable by the law, by reason of the use to which they are put by the owner, i.e., industrial machines and equipments. Likewise, property rights are also treated as immovable property, such as rights in rem over immovable property, government stock incorporating an inalienability clause, and the right of an heir to inherit property. 

Foreigners individuals or foreign-owned companies can acquire real estate property in Brazil in the same conditions applied to national individuals or companies. However, special conditions may apply to foreigners or to foreign-owned companies, referring to the purchase of property located near the coast or frontiers or certain specific areas designated as being of national security. Rural areas can be acquired by foreigners or foreign-owned companies, according to specific law dispositions.

POSSESSION AND OWNERSHIP 

With respect to real estate properties, two broad categories of rights emerge: the right of possession and the right of ownership:

The right of possession is a personal right to exercise certain powers of ownership such as: the right to claim, maintain or recover the possession of property; the right to receive its fruits (including rents and other income from the property), the right to be indemnified for necessary improvements carried out, and the right to retain the object. 
The possession of property is forfeited by abandonment, by transference, by the loss or destruction of the property, by its becoming ineligible for purchase or sale, by a third party taking possession of the property, by the non institution, in due time, by the possessor, of the applicable claim to maintain or reinstate the possession, and by constituto possessorio. 

The right of ownership is the most important of all property rights and is defined by the Brazilian Civil Code as the right of an individual to use, enjoy and dispose of his goods, and to recover them from whoever may have taken possession of them unlawfully. It is an absolute and exclusive right, which may, however, belong to several persons at the same time, in relation to the same property, as in a co-ownership or condominium, which is when each of the co-owners of an asset has all the property rights in relation to an ideal part of such asset.
The right of ownership may be restricted in view of public interest or in respect for the property rights of third parties, as in the following situations:

the expropriation of real estate properties by the government (ownership of private property is transferred to the expropriating authority against payment of an indemnity);

the restrictions relating to the division of urban land as, for example, those restrictions to buildings construction, establishing of industrial plants in critical pollution zones, etc, imposed by the law of the municipality where the property is located;

the restrictions imposed in the interest of national security, such as the restrictions on the sale of private land in the coast or within 150 kilometers of the national frontier; and

the restrictions to the right of the proprietor to freely dispose of his goods, arising from the status of insolvency, bankruptcy or "concordata" of the proprietor, in order to protect the creditor's rights.

ACQUISITION AND LOSS OF OWNERSHIP 

GENERAL PROVISIONS 

According to Brazilian law, ownership of real estate property is constituted upon the registration of the public or private instrument through which the sale was accomplished at the appropriate Real Estate Registry of the location where the property is situated. The execution of any instrument involving real estate property that was not registered at the respective Real Estate Registry will only become a binding instrument between the parties involved in the sale agreement and, thus, will not be enforceable against third parties. Real estate property is acquired by the registration of the act which have transferred the property, due to any cause, such as:

by the sale and purchase agreement signed by the parties;

by accession (which is the enlargement of the land caused by the incorporation of parcel of the soil, dislocated by natural forces);

by prescription (which is the acquisition of ownership by the possessor who, although not being the owner, has had the possession of the property during a certain period of time, stipulated by law); and

by inheritance.
Likewise, any act which modifies, extinguishes, transmit or create rights related to immovable properties must be registered with the competent Real Estate Registry, such as:

court orders by which undivided land is divided among different owners;

court orders in the winding-up of an estate of a deceased person or the division of property, awarding immovable property to creditors in payment of the debt of the estate;

public auctions and adjudications; and

orders of separation, divorce and nullity which involves the settlement of property or rights in rem related to immovable properties.
The main grounds for extinguishing real estate ownership are:

expropriation, which is the unilateral act of public law by which individual wnership is transferred to the relevant government authority, upon payment of fair compensation by said authority, due to public interest;

transfer;

waiver (for example, when the heir renounces his rights of inheritance); and

abandonment or destruction of the property.

ACQUISITION OF RURAL PROPERTY BY FOREIGN PERSON OR FOREIGN LEGAL ENTITY 

The acquisition of rural property by foreigners who have permanent residence in Brazil or by foreign companies authorized to operate in Brazil is regulated by Law No. 5.709("Law No. 5.709/72"). This law provides that individual foreigners with residence in Brazil cannot acquire more than an area equivalent to 50 (fifty) units of rural property called "módulos rurais". The area of each "módulo rural" is determined by the law of the unit of the Federation where the land is located, according to the specific economics and environmental characteristics of the region where the property is situated and to the kind of agricultural activity to be developed in such area.  On the other hand, the restrictions to the acquisition of rural properties by Brazilian companies with foreign equity control are now being questioned because of the 1995 amendment to the Federal Constitution which removed the distinction between Brazilian companies and Brazilian companies with foreign equity control. However, the restrictions on foreign individuals and foreign corporate entities authorized to operate in Brazil remain in force. 

So there are not restrictions for small parcels of land.

According to Law No. 5.709/72 foreign companies can only acquire rural property, more than an area equivalent to 50 (fifty) units of rural property called "módulos rurais", if the purpose is the implementation of agricultural, cattle-raising, industrialization or colonization projects, and that such projects must be linked to their respective statutes. Such projects must be approved by either the Brazilian Agriculture Ministry or the Department of Trade and Industry, as the case may be. The President of Brazil may, upon specific decree, authorize the acquisition of rural property beyond the provisions of the current law, in cases where such property is the object of priority projects involving the country's development plans. 

The Law intend to protect small farmers against big foreign Company.

GENERAL REMARKS AND REQUIREMENTS UPON PURCHASE 

The acquisition of a real estate property in Brazil due to inter vivos transactions is generally agreed between the purchaser and the seller by means of a sale agreement. If a property is acquired by a single buyer (not in a condominium situation), than the buyer has absolute title to that area of ground. In case of multiple ownership (as it is the case of condominium), each owner can exercise all the rights of ownership, except those incompatible with the indivisibility of the property (for example, the property can not be sold without the approval of all owners, and the price paid must be divided among them). 

Besides the specific requirements related to transactions involving immovable property, Brazilian law requires, as for any other type of contract, that the parties of a sale and purchase contract be capable to perform such a transaction. They must have full legal age (majority), be mentally healthy, or, if not capable, they must be duly represented to perform such a transaction. 

TAXATION 

INTER-VIVOS TRANSFER TAX - ITBI 

Inter-Vivos Transfer Tax ("ITBI") is a tax assessed by the municipalities which is due when real estate property or rights in rem to any real estate property (except those in guarantee), and also assignment of rights for the acquisition of property is transferred, for any reason whatsoever, and on a remunerated basis. For example, the rate established to the Municipality of São Paulo, according to São Paulo Municipal Law No. 11.154, varies from 2% to 6%, depending on the property's value. 

ITBI is not assessed when the transfer of real estate property or rights to any such property takes place to pay up the capital of a company or when resulting from any merger, consolidation, spin-off or liquidation of the legal entity, except if in any of the above mentioned cases, the acquirer's chief activity is the purchase and sale of such assets and rights, lease or commercial lease of real estate property. 

REAL ESTATE INVESTMENT FUNDS - FINANCIAL INSTRUMENT 

Real Estate Investment Funds were established to provide funds for developing real estate ventures for subsequent sale, letting or leasing. The Brazilian Securities Exchange Commission must authorize, regulate and inspect Real Estate Investment Funds operations and administration. 

Property Investment funds are currently being used for the purposes of raising funds for the construction of several Shopping Centers throughout Brazil. Previously, pension funds were direct investors of real estate projects but currently they are investing indirectly, by purchasing shares of property investment funds. 

Both individuals and corporations resident or domiciled abroad are entitled to acquire such shares, provided that the funds resulting from the investment are duly registered with the Central Bank of Brazil, thereby enabling the return abroad of the respective investment and the gains resulting therefrom. Capital gains resulting from investments on property investment funds are subject to withholding tax (IR) at a rate of up to 20% upon disposal or drawing of Real Estate Investment Funds quotas.