March 2, 2016 / 1:28 AM / 4 years ago

UPDATE 1-Brazil to raise foreign ownership in local airlines -source

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BRASILIA, March 1 (Reuters) - Brazilian President Dilma Rousseff has signed a decree that allows an increase of foreign ownership in local airlines to 49 percent from 20 percent, a government source told Reuters on Tuesday.

The decision could allow foreign groups to bolster investment in Brazilian airlines struggling with a deepening recession and a sharp depreciation of the real currency.

The decree, which is expected to be published in the country’s official gazette on Wednesday, is subject to ratification by Congress.

The decision reflects a major policy shift by Rousseff to open up one of the Western hemisphere’s most-closed economies and bring in badly needed capital to halt a recession that is entering its second year.

In an interview with Reuters on Monday, the interim aviation minister, Guilherme Ramalho, said the government was working on the proposal to increase the ownership stake in two stages.

Ramalho and other government officials favor allowing foreign groups to have controlling stakes in local airlines.

Brazilian airlines such as TAM and Gol Linhas Aéreas Inteligentes SA have cut flights and fired staff to cope with what is expected to be the country’s worst recession in a century.

Brazil’s airline market is dominated by TAM, the Brazilian flag carrier of Santiago, Chile-based Latam Airlines Group SA , Gol, which is part owned by U.S.-based Delta Airlines Inc., Avianca Brasil and Azul Linhas Aéreas Brasileiras SA.

Analysts say removing ownership restrictions will trigger a rally in local airline shares and help Delta increase its stake in Gol.

Rousseff also inked a decree that cuts the income tax on remittances sent abroad to pay for tourism services to 6.8 percent from 25 percent, the official said. (Reporting by Lisandra Paraguassu; Writing by Alonso Soto; Editing by Leslie Adler)

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