Promoting foreign investment is a goal of many developing nations. Along with the benefits of that investment, however, foreign participation in development creates problems such as balance of payments deficits caused by the repatriation of profits earned by the foreign investor. Brazil's profit remittance law is one effort to reconcile these problems. Byprovidingfor the registration offoreign investment and using a system of reinvestment incentives, the Profit Remittance Law seeks to promote foreign investment while avoiding the loss of capital which results when profits are remitted abroad. The author of this article describes and explains the Profit Remittance Law and considers its impact on foreign investment in Brazil. The author then assesses the effectiveness of the law in achieving its goals of encouraging investment and retaining the byproducts of such investment in Brazil.

Foreign investment can have an enormous impact on the economy of a developing country. A national decision to encourage such investment involves careful consideration of often competing policies and goals. In enacting investment legislation, the government of a developing country must weigh the advantages of foreign investment in encouraging better use of the nation's assets for national development and local accumulation of capital, against the increased burden on the balance of payments due to eventual profit and interest remittances.