Why investing in Brazilian Healthcare Sector?

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WHY INVESTING IN BRAZILIAN HEALTH SECTOR?

OVERVIEW

The Brazilian health care sector is characterized by as the same time expensive, extremely lacking of efficient and complex procedures. Having almost 205 millions of people, Brazilian healthcare majority demands has been nourished by a public service entitle SUS, (a public-private partnership whose main characteristic is being carried out by private initiate, despite of being reimbursed by government), whereas private sector - through private health plans - owns almost 25% of its inhabitants.

Of more than 6.300 hospitals in Brazil, almost 70% of them are private, whereas 30% is run under SUS. The SUS is considered as one of the hugest public healthcare system in the world, providing multiple assistance to most of the Brazilian citizens and foreign who lives in countries borders.

Despite having one of the hugest public healthcare systems in the world, Brazil government are not able to afford assistance due to all its citizens. The attempt an extensive healthcare assistance means public spending what implies imperiously increasing in tax burden and in public finance disarray. This context represents the urgent need of national and international private initiatives.

The healthcare industry moves around 10% of Brazil’s GDP, accounting for BRL 396 billion. Approximately 54% of these amounts are investments made by the private sector, that is to say, most of the healthcare infrastructure in Brazil is held by private companies in a widely-range of Brazilian healthcare sectors.

In order to face this precarious situation, current changes in Brazilian legislation regarding foreign investments beckons for a new horizon of opportunities and profits. These changes points to a favorable scenario for different types of foreign capital inflow: by investing in funds, total or partial hospitals acquisitions and mergers, transfers of know-how technology, and others joint action mechanisms.

HEALTHCARE SEGMENTS

Among the healthcare segments where foreign investments are allowed, hospitals (with an average number 200 beds in Brazil), and healthcare support activities: clinics, laboratories, producers and distributers of drugs, pathology, imaging diagnostics and health insurance plan sectors.

Health insurance plan sectors are companies whose main activity is the management of plans, receipt and reimburse of beneficiaries’ customers, as well as ensure them professional due assistance.

Private pharmaceutical companies also have an important role in the Brazilian economy, with the largest profit margins and the segment of healthcare industry where mergers and acquisitions are the most common. Non-profit health care services carried out by foreign companies for treating employees and their dependents are also allowed.

LEGAL

The public sector recognizes the need for more facilities to foreign investments for many reasons. Reducing the government spending and furthering access to new technology from the private sector, among others, has provided a turning point concerning the foreign investments in healthcare sector prohibition.

Since the Brazilian Constitution promulgation, Healthcare sector, among others as education and national security, has been considered a national strategic sector by which foreign investments were restricted. In this sense, foreign investments in hospitals and clinics have been forbidden for a long time until a current legal amendment. Due to a 2015 law n º. 13.097, whose terms emended a general healthcare Brazilian law nº 8.080/90, foreign investments have been allowed to hospital and others segments.

The amendment enables the participation of foreign capital, either directly or indirectly, in Brazilian companies that operate hospitals, clinics, along with healthcare support activities, such as laboratories, producers and distributers of drugs and imaging diagnostics. Meanwhile, foreign companies have already been investing in the private health insurance sector since 1999, due to an equal amendment provided by law nº 9.656/98.

MARKET TREND

Many factors act in fostering healthcare foreign investments. Regarding macroeconomic domain, the current rate of exchange represents an exciting profitable moment for foreign investments, which provides increasing purchasing power under Brazil healthcare depreciated actives. Furthermore, legal and governments facilities through tax relief and reduction are also available. In this sense, it might be said that is an unlosable moment for acquisition of healthcare Brazilian segments.

Regarding the internal scenario, the increase in purchasing power due to new Brazilian middle class allowed the raise in the healthcare spending, as well theirs willing in demand better services. It’s also worth to note the growing elderly population what demands new areas of investments. For instance, in 2013 the number of health plan beneficiaries grew by 4,6%, more than the growth registered in the last three years.

Brazil is characterized by human and regional diversity. Each region demands different types of healthcare services. From preventive medicine to cosmetic medicine, Brazil populations lack many types of health care services that could be provided by foreign investors.

Taking into account the above information, we strengthen our willingness in expand our network services and partners in order to further and offer Brazil Healthcare investments possibilities widely profitable for both parties.

Lucas Valente

FOREIGN INVESTORS' LAWYER

ENG I FR I POR I ESP

valente@reisholanda.com.br

Skype: valente. Reisholanda

+ 55 (71) 98195-3487

+55 (71) 3018-7002 / 3018-7003

Av. Tancredo Neves | nº. 1283 | Ed. Ômega Empresarial

6º andar, C. Das Árvores, CEP: 41820-021 – Salvador – BA – Brazil

www.reisholanda.com.br