Hey Brazil–Take Your Time With Those BITs, I Can Get Them Somewhere Else!
Today we’re launching the first in a series of posts on the BRIC countries in a fast, quick read format. While the late John Hughes would have appreciated the titular tribute to his Breakfast Club classic, the series is meant to stimulate a robust discussion among those interested in the subject.
For the uninitiated, BRIC is an acronym coined by Goldman Sachs to refer to the red-hot economies of Brazil, Russia, India and China. According to the investment group’s projections, the BRIC countries could become among the four most dominant economies by the year 2050. Let’s get things started with Brazil.
Our first topic picks up on an article I wrote Hey Brazil: It’s Time to Ratify Those Bilateral Investment Agreements. The article centered on Brazil’s reluctance to enter into any Bilateral Investment Treaties (BITs). I promised I’d follow-up with a post on how to do business with Brazil and still enjoy the benefits of a BIT.
But Brazil does not have a BIT, you say?
Fortunately, Brazilian investors do not have to wait for changes in government policy to get the benefit of BITs. Investors can seek to structure their Brazilian investments to take advantage of the protection of BITs between other states.
Establish a subsidiary in another Country. In many cases, a Brazilian investor can establish a subsidiary in a country that has a BIT with the host state through which to channel investments. Some BITs require only that the investor be established or incorporated in the home jurisdiction in order to acquire the protection of the BIT.
Here’s an Example:
Nationalization of Bolivian Energy Industry. When Bolivia took steps to nationalize the energy industry, Brazilian gas company Petrobras considered bringing investment claims against Bolivia for treaty violations by invoking the rights of its subsidiaries in Argentina and the Netherlands. Unlike Brazil, both Argentina and the Netherlands have BITs with Bolivia.
Brazil is increasingly emerging as a global leader and expanding its investment abroad. Brazilian Investors should take full advantage of BITs by establishing a subsidiary in another country. Doing so will ensure that their investments are protected.
Trend to Watch: A Surge in Investment Activity in Brazil Will Ultimately Lead to the Adoption of International Investment Agreements