Based on a private report of a meeting of the members of Vivacqua Advogados Law Firm with a group of representatives of a Foreign Investment Fund, we summarize below some conclusions about the main risks of investing in Latin America in 2019:
Argentina:
- Unclear position of government on tax reform in an incoming election year;
- Tax policy related to high inflation rates;
- Foreign exchange effects.
Brazil:
- President elected Jair Bolsonaro’s proposal to Impose a 20% tax on dividends (currently zero);
- Brazilian authorities plan to undertake a prolonged fiscal consolidation, which includes an ambitious reform of social security;
- Tax reform proposal to substitute IPI, PIS,COFINS, ICMS, ISS by one federal “VAT” tax.
Chile:
- Tax reform is expected to be introduced in 2019. Major changes on this reform are:
- Creation of integrated corporate tax system in which double taxation of business profits (shareholders & entities) would be eliminated;
- Reduced income tax rate (from 28% to 25%);
- Implement a withholding tax of 10% applicable to digital services.
Mexico:
- Newly-minted United States-Mexico-Canada Agreement (USMCA) is replacing NAFTA. This new document includes strong and effective protection of intellectual property rights;
- New government administration is expected to implement solid tax collection procedures (increase on the government tax audits);
- Mexico (OECD and G20 member) has implemented BEPS framework into its local laws and it is expected to continue to enforce BEPS action plan.
Peru and Ecuador:
- Consistent changes in tax policy.
Venezuela:
- Tax policy related to high inflation rates;
- Foreign exchange effects.