In a bid to attract FDI in the tourism industry, the Brazilian government Friday announced it would exempt projects in the tourism sector from the recently passed three year lock-in clause. The exemption is expected to enhance foreign investment in the Brazilian hospitality sector and spur opportunities and growth. The three year lock-in clause is aimed at governing real estate activities in the countries. Consequently, the government expects that the move will see an increase in the number of hotel rooms, and as well enable domestic realty majors to introduce foreign partners in their projects.

 

Companies such as Unitech and DLF that have major hotel and tourism investment projects in the pipeline are looking to increase liquidity through the use of foreign funds. As it stands, Brazilian foreign direct investment norms restrict foreign investors from shipping profits back to their home countries for a period of three years for investments made in real estate projects, that includes hotels and tourism related ventures.

 

Sources confirmed that, for a company to benefit from the relaxed FDI norms in the hospitality sector, foreign direct investment projects are expected to meet a minimum 50% of built up space for hotel and tourism activities, that must include beach resorts, restaurants and tourist complexes, and an additional minimum of 20% for the development of hotel rooms. Generally though, firms that incorporate hotel projects in their real estate projects also stand to gain from the government’s announcement.

 

The Brazilian tourism ministry approximates that around 1.2 million hotel rooms are currently available in the country but, 2020 requirement projections topped 6.6 million hotel rooms. Consequently, the DIPP said mixed projects are currently needed to promote tourism in Brazil.

 

Regardless, the Brazilian tourism sector hopes to gain considerably from the high profile events scheduled to be held in the country, including the 2014 FIFA World Cup, expected to attract visitors and foreign investors and the 2016 Olympics in Rio de Janeiro. The government plans to invest 1 million reals to improve facilities across the country ahead of the world cup. A major foreign investment in the tourism and hospitality sector was Accor, the French Corporation’s, addition of 5,000 rooms in its hotels in Brazil, at an estimated investment of €200 million. The investment will be possible through the expansion of the corporation’s 20 Formule 1 and Ibis hotels in the country throughout 2010.

 

The tourism industry accounts for 2.6% of the country’s GDP and is the fourth biggest sector in ranking of exports and promotes a vital increase in the coming years, from the planned high profile events.

 

June 20, 2010.