Opening the Gates

Brazzil Magazine
Wednesday, 01 May 2002

Many journalists and media executives tend to believe that opening the media to foreign capital is their final hope for survival.

By Paulo Rebêlo

As expected, on April 4th, the Senate’s Constitution and Justice Committee has approved a bill opening up Brazilian media companies to foreign capital. Until now, a 60-year old law banned foreign ownership of the country’s media. The foreign participation cannot exceed 30 percent of the voting stockholders. Officially.

This means that from now on any company in Brazil may be a major shareholder or own a media vehicle, such as radio and TV stations, newspapers, magazines, etc and have access to the stock market. Before the approval of the new law, media companies in Brazil had to be owned (officially) by a Brazilian citizen or someone naturalized Brazilian for at least ten years. That explains why the media in Brazil is commonly called a big family business, in which media companies are passed from father to son for generations.

The new foreign investment law intends to help the organization and, especially, assist in getting fresh loans. The editorial policies from broadcast and newspaper companies should remain as defined in the Brazilian Constitution: exclusive responsibility of native or naturalized Brazilians.

According to São Paulo Senator Romeu Tuma, from the rightwing PFL (Partido da Frente Liberal—Liberal Front Party), the project has already been classified as “urgent” by the Senate. It still has to be approved by the full Senate, but no one is expecting any surprise there. Professionals from the media believe that major companies will start getting foreign investments for floating capital right away.

BANKRUPT MODEL

Qualified professionals being fired, magazines being closed, and lack of high-quality content in newspapers are just some of the plagues affecting the Brazilian media industry these days. There is also the pressure of the so-called risk Brazil, that is, the currency devaluation and the economic retraction together with the decline in consumption, which in plain economese characterizes a full-grown recession.

The risk Brazil has direct influence upon newspapers, magazines and radio and TV stations, all on their knees due to products and services they have imported in the last few years. Those who work in the media are feeling deeply the pain. Those who don’t, may follow what is happening through the news. Companies have accumulated huge debts in U.S. dollar a few years ago, when one dollar bought one “real” (the Brazilian currency). But thanks to the currency devaluation, now one dollar is worth about 2.6 reais—a 260 percent increase.

Many journalists and media executives tend to believe that opening the media to foreign capital is their final hope for survival. Is that so? Foreign companies are not willing to participate in bankrupt businesses neither are they interested in buying stocks from archaic family companies before these companies clean the house themselves.

In South America, Brazil is the leading country, occupying almost 50 percent of the continent’s territory. It has close to 8 million people connected to the Internet, an avid population for goods and services. The foreign capital will indeed arrive, but no one knows at what price. For sure, it won’t come for free, it never does.

It’s not hard to find journalists, sometimes in a bar, saying that Brazil will see a new hiring frenzy when the money arrives. It’s a sweet illusion, made better by a few beers, when basic concepts of economy are usually forgotten.

NO FREE MEAL

It’s well known that there’s nothing in the books that can prevent, in the near future, the insertion of a new paragraph in the law allowing foreign participation to exceed 30 percent. For those who don’t remember or aren’t very familiar with the matter, the original bill didn’t include any restriction against foreigners managing TV stations. The Senate introduced such restrictions only after being challenged by protests.

Few people believe that the Brazilian government has enough resources (and will) to insure that the 30 percent limit of participation in the media companies will be observed. Theory and practice may be worlds apart, and often they are. With or without foreign money there is a deepening crisis in the Brazilian media.

It’s quite hilarious to imagine the presumption of smaller companies thinking that they will be able to get easy loans or to put their little hands on foreign funds, after the project gets definitely approved. Many seem to forget the economic rule of thumb: there’s no free meal.

COUNCIL FOR FRIENDS

Right now, Brazil’s government is putting together the Social Communication Council, with primary goals yet to be defined. It will be comprised by politicians, artists and employers’ representatives, which will represent the Congress in order to deal with media companies and discuss programming on Brazilian TVs. Many believe the Council might lead to a new, legalized, kind of censorship. Others suggest that such an invention won’t solve anything and that the market itself will create its own rules.

Nowadays, about 70 percent of radio stations and 25 percent of TV stations in Brazil are controlled by politicians. These stations are not big companies—don’t have the same credibility as the major outlets—and probably aren’t attractive enough to foreign investors. Which makes even more important a debate about the Council’s role, since there will be politicians in it. Until now, no one knows who will they be. Will they be exempt people? Of course no one is thinking the Council as being an action between friends. Or is it?

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