(EU) and the Common Market of the South (MERCOSUR)? - FDCL

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Brazilian Constitution. This would be the case if article 184 of the Constitution 288 was
to be applied, which provides for the expropriation of unused land in the framework
of the agrarian reform with compensation payments in the form of so-called “títulos
da dívida agrária”, i.e., compensation in no freely convertible currency. Unused land,
which e.g. belongs to foreign investors, could thereby not be treated in accordance
with the Constitution and the BIT at the same time: otherwise the national or the
international legislation would have to be broken. 289 If this BIT, e.g., should be ratified
by Brazil, then all other BITs ratified by Brazil would include these same far-reaching
regulations which could be claimed by any investor coming from a country which has
an investment treaty with Brazil: a chain reaction.
But even without the ratification of BITs it is not quite understandable, why foreign
investors and governments demand that Brazil sign an internationally binding
treaty. Brazil already has highly deregulated investment rules for FDI: The law on foreign
investment of 1962 (Lei do Capital Estrangeiro LEI Nº 4.131, DE 3 DE SETEM-
BRO DE 1962) is still in force, which in article 2 states that all foreign capital invested
in Brazil will receive identical treatment before the law as national capital, prohibiting
any discriminatory measure, which is not explicitly mentioned in the law. 290
The changes to this law, which were made in 1964 by means of the “Alteração
à Lei do Capital Estrangeiro LEI Nº 4.390, DE 29 DE AGÔSTO DE 1964”, only affect
the modalities for the registration of foreign capital in Brazil and the modalities of
capital and profit-transfers, but do not affect the essence of the principle of National
Treatment defined in 1962. 291
The establishment of a company in Brazil is linked to a juridical persona: according
to the principle sole proprietor a juridical person is sufficient to establish a
company, which, however, cannot be operative in the services sector. For this, two
288 CAPÍTULO III, DA POLÍTICA AGRÍCOLA E FUNDIÁRIA E DA REFORMA AGRÁRIA, Art. 184. “Compete à União
desapropriar por interesse social, para fins de reforma agrária, o imóvel rural que não esteja cumprindo sua função
social, mediante prévia e justa indenização em títulos da dívida agrária, com cláusula de preservação do valor real,
resgatáveis no prazo de até vinte anos, a partir do segundo ano de sua emissão, e cuja utilização será definida em
lei.” Translation: CHAPTER III; AGRICULTURAL AND LAND POLICY AND AGRARIAN REFORM, Article 184. “It is
within the power of the Union to expropriate on account of social interest, for purposes of agrarian reform, the rural
property which is not performing its social function, against prior and fair compensation in agrarian debt bonds with
a clause providing for maintenance of the real value, redeemable within a period of up to twenty years computed
as from the second year of issue, and the use of which shall be defined in the law.”
289 See: Déborah Bithiah de Azevedo: Os acordos para a promoção e a proteção recíproca de investimentos
assinados pelo Brasil, Consultoria Legislativa, Câmara dos Deputados, May 2001, p. 7.
290 “Ao capital estrangeiro que se investir no País, será dispensado tratamento jurídico idêntico ao concedido ao
capital nacional em igualdade de condições, sendo vedadas quaisquer discriminações não previstas na presente
lei.” Art.2°, LEI Nº 4.131, DE 3 DE SETEMBRO DE 1962. Own translation: “The foreign capital invested in the
country will receive identical juridical treatment as the one granted to national capital under equality of conditions,
and whatsoever discrimination which is not mentioned in this law is prohibited.”
291 Alteração à Lei do Capital Estrangeiro LEI Nº 4.390, DE 29 DE AGÔSTO DE 1964: The there changed articles are:
“artigos 4º, 5º, 7º, 9º, 10, 11, o parágrafo único do artigo 25, artigos 28 e 43.”