Protectionism all over the place: Brazil is closing its doors
In another attempt protecting the labour market, Brazil has raised the minimum capital requirements for granting permanent Director’s Visas in Brazil. In the past it was possible to obtain a permanent visa for intra-company transferees to work as managers, directors, or executives with a minimum investment of US$200.000. From now on, companies have to invest at least R$ 600.000 in order to obtain a visa for its foreign directors who are coming to live in Brazil. Each additional director will require another R$600.000.
On this blog I have already given other examples of protectionism by the Brazilian government. Just a few days ago I wrote an article about the massive tax increase (+30%) on imported cars. Also the wind-energy industry is experiencing the measurements to protect the local (monopolist) steel industry.
Although the increased capital requirements and the additional option to get visa for foreign managers will provide additional revenue for Brazil government and facilitate the creation of jobs in the country, they could add further stress on the already tight labour market particularly for qualified labour and possibly discourage long term productive foreign direct investments in Brazil vis-a-vis other similar foreign direct investment destinations with a more favourable legislation on foreign labour.
Again, this looks like another time the Brazilian government is shooting in its own foot.
So, as the Economist already mentioned in their April 2007 issue:
The Brazilian formula is to crowd out enterprise or drive it underground with excessive spending and taxation, then to harass it further with capricious, nonsensical regulation.