(Article originally published in Portuguese by Portal Exibidor)
By José Maurício Fittipaldi, partner at CQS/FV Law Firm
Attracting foreign investments is one of the top priorities of the Brazilian economic policies, as it has been for years. In globalized capital markets, being able to attract foreign investment is key, especially to countries like Brazil which combines consecutive years of fiscal deficit, high public debt and a low domestic investment rate.
This is the reason why successive administrations in the federal, state and city levels have put great attention to the issue, implementing a wide range of measures to attract foreign investment across different industries and economic sectors. In the industrial sector, Brazilian states have for years competed against each other for such investments by providing fiscal incentives and other concessions to companies interested in investing in their territories.
While the cost-effectiveness of the so-called ‘fiscal war’ between different states and cities has been under greater scrutiny, the attention of Brazilian policy makers has been focused on investments in infrastructure and industrial facilities, largely missing the fact that more and more capital is being allocated to creative industries, in general, and to audiovisual content production in particular. Globally, more than US$ 100 Billion are invested each year on content production alone, of which approximately US$ 25 Billion are invested by streaming services that are the current growth drivers in the media sector. At any rate, these impressive numbers only reflect the fact that the audiovisual industry has become a hotspot for global investments.
Unfortunately, however, Brazil has not yet been able to become a destination to these resources. Although media companies operating in the country are relevant investors in local content production, the fact is that the country is not yet considered an attractive location for international productions. Other countries, such as Colombia, to mention an example in Latin America, have already taken the lead on this matter, offering international production incentives to attract investments and, by doing so, reaping the benefits to their own economies.
Production incentives are easy to be explained: by offering cash rebates or tax credits over the production expenses actually incurred in a certain region/country, following specific guidelines and criteria, local and national governments can draw such investments into their economies by making content production less expensive.
Countries as diverse as the United Kingdom, Colombia, Canada and Dominican Republic have well established production incentives programs that attracts billions of dollars each year into audiovisual production into their territories. Producers (investors) from all over the world carefully chose the most attractive location for their productions, based on criteria that goes from the existence of production infrastructure and qualified workforce to, of course, the attractiveness of the production incentives. The UK offers content producers a cash rebate of up to 25% of the amounts locally invested, while in Colombia it can get up to 40% in case some specific requirements are met – in order to ensure that the investment is made in benefit of the local AV industry or the economy as whole.
In fact, content production investments have a widespread positive effect in the economies where they´re located, boosting value chains not only within the AV sector. The amounts invested in a film production go far beyond cameras and talent, but are also destined to hotels, catering, costumes, and many other activities. It also indirectly benefits the public overall perception of the portrayed regions, a phenomenon often called “geo-marketing” that hugely benefits the tourism industry.
From a strictly financial perspective, international experience clearly demonstrates the advantages of the production incentives scheme. In the UK, according to data provided by Screen Business, there´s a direct and indirect return of 12.5 pounds for each pound granted as incentive. In Australia, according to OlbergSPI data, A$188 Million granted in tax credits generated A$224 Million only in collected taxes, while adding additional A$795 Million to the overall economy. The numbers, here, speak for themselves.
Although production incentives are still unknown by most Brazilian policy decision makers and legislators, some work has been done to have it implemented in some areas in the country. São Paulo City Film Agency SPCINE has, in fact, implemented a production incentive program to attract productions to the city, offering a cash rebate of up to 30%..
It is nothing but surprising, however, that Brazil is yet to boost its attention to these immense opportunities: the existence of stunning and diverse landscapes, production infrastructure and qualified workforce and a big domestic market naturally makes the country a strong contender for content production global investments. Considering its immense potential, it is urgent that other (and larger) incentive programs are implemented, especially in the Federal level, so to turn Brazil into a concrete option to content producers across the world. In a moment of great economic uncertainty following the COVID pandemic, this would certainly contribute for a more vigorous and sustainable economic recovery.
On top of generating revenues, the implementation of production incentives in Brazil would also attract investments to the country´s production and postproduction infrastructure – which in turn would benefit the local industry and make it a stronger competitor in the international market. A true virtuous cycle.