Navigating ship finance in Brazil

Creation of security over a vessel has always been an important issue for borrowers and lenders in the offshore industry. Instead of the traditional mortgage over a vessel, commonly used in most countries, chattel mortgage has been the preferred choice of security used by many players acting in Brazil.

The recent discovery of significant offshore oil and gas reserves has turned Brazil into one of the world’s hotspots for investing in the offshore industry.
In addition to the obvious commercial opportunities, Brazil also offers various tax incentives, attractive finance and repayment terms, and other benefits targeting those looking to invest in Brazilian shipping companies or build Brazilian flagged vessels.

The Merchant Marine Fund

The Merchant Marine Fund (FMM) plays an important role to incentivise inbound investment. It was created to basically fund the development of the Brazilian shipbuilding industry and is, first and foremost, available to Brazilian shipping companies and Brazilian shipyards to finance of up to 90% of the value of the construction, modernisation or repair of vessels. Although FMM funds are only available to Brazilian shipping companies and Brazilian shipyards, there are no restrictions relating to the involvement of foreign partners or investors working with Brazilian companies. There are, however, certain legal, technical and economic requirements that need to be observed.

Flávia Pires is an associate at Vieira Rezende, an associated law firm of Wikborg Rein, in Rio de Janeiro. She has advised a range of international and domestic offshore service companies in their operations in Brazil