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Friday, 05 November 2010 21:48

Latin American Advantages

Written by  Monica Caffaratti
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OnLocLatinAmericaMexicoCoahuilaAs the world’s economic climate continues to cool down, Latin America is working hard to heat things up to bring filmmakers to the region. For productions looking for a little fun in the sun, along with some great tax incentives, heading south of the border may be exactly what you need.


OnLocLatinAmericaBraziCorcovadoSugarLoafAndGuanabaraBayRio Film Commission Coordinator Tatiana Leite reports that Brazil currently offers different forms of government support for the Brazilian film industry. “The main forms of financial support are tax incentives; funds, [such as] National Film Industry Funds [FUNCINES] and the Audiovisual Sector Fund; [and] direct support through the funding of ANCINE and the Ministry of Culture,” Leite explains. “To qualify for tax incentives, which are available for projects concerning film development, production and distribution, technical infrastructure and film festivals, Brazilian film producers must apply for qualification –– usually to ANCINE –– on a specific project. If the application is approved, ANCINE will follow up the project and ensure that the money allocated is spent properly.”

According to Leite, the Brazilian government provides through its legislation the most important tax incentive mechanisms for the development of the film industry in Brazil. Under the “Audiovisual Law” of Federal Law 8685 (established in 1993), taxpayers can acquire equity in independent Brazilian films through the stock exchange. Individuals and corporations that make such an investment are entitled to a tax deduction (equivalent to the capital subscribed) of up to 3 percent of their income tax due. And this mechanism offers other advantages for corporations: Firstly, the total amount invested can be deducted from taxable income as a trading expense, and, secondly, having the company logo displayed before each screening of the film helps to promote the corporate image. Projects that can benefit from this mechanism include the production of features, medium-length films and shorts, as well as distribution, exhibition and technical infrastructure projects.

Under Article 1A of the Audiovisual Law, corporations are entitled to deduct up to 4 percent from their income tax –– and individuals, up to 6 percent –– on the condition that the said deduction be invested in the sponsorship of independent Brazilian film productions. However, under this mechanism, corporations are not entitled to any profits of the film. Under Article 3, profits from the exploitation of foreign audiovisual works in Brazil are subject to tax at a rate of 25 percent, but these taxpayers can get a 70-percent tax deduction, provided that these resources are invested in the development of independent Brazilian feature films or in the co-production of independent Brazilian films, TV films or miniseries. This mechanism has generated important partnerships between Brazilian production companies and the world’s leading film distribution companies.

Article 3A benefits television broadcasters, including subscription television programmers, who can get a 70-percent deduction on tax owed on remittances abroad of profits from the broadcasting or narrowcasting of audiovisual works and events in Brazil, provided that they invest an equivalent amount in the development of independent Brazilian feature films and in the co-production of independent Brazilian films and videos, documentaries, TV films and miniseries.

In Article 39 of Provisional Measure 2228-1, established in 2001, international subscription television programmers are exempt from paying the 11-percent CONDECINE (Contribution to the Development of a National Film Industry) tax on remittances abroad of profits stemming from the exploitation of audiovisual works, provided that they invest an amount equivalent to 3 percent of the remittance value in the production of independent Brazilian films and videos of any length and in the co-production of independent Brazilian films, videos, TV films, miniseries and educational and cultural television programs.

Brazil’s National Film Industry Funds are closed funds managed by Brazilian financial institutions. A percentage of the amount invested in the acquisition of quotas of the National Film Industry Funds can be deducted from taxable income up to 6 percent and 3 percent of total tax due for individuals and corporations, respectively.

The Audiovisual Sector Fund was created in 2006 to provide financial assistance to programs and projects related to the Brazilian audiovisual industry. The resources of the Fund consist mainly of the CONDECINE, a tax applied to the broadcasting, production, licensing and distribution of film and video works for commercial purposes. The first call for projects for the Audiovisual Sector Fund in 2008 awarded approximately R$30 million to Brazilian production companies and distributors along four lines of action: feature film production; independent film production for broadcast and pay TV; acquisition of distribution rights for feature films; and marketing and distribution of feature films. The second edition was issued in February 2010 and will distribute a total amount of R$81.5 million to these lines of action.


Bordered by the world’s driest desert to the north, Patagonia’s glaciers to the south, the soaring Andes Mountains to the east, and the Pacific Ocean to the west, Chile offers modern and historic vistas along with world-class production equipment, postproduction facilities, diverse talent and skilled English-speaking technicians. The State of Chile provides more than US$10 million yearly in cinema aid –– and, from this, approximately $4 million per year is specifically destined to feature films.

FilmChile, the Chilean Film & Photo Commission launched and based in Santiago, has a nationwide network of 15 regional offices and enables filmmakers to become familiar with every aspect of what Chile has to offer. With modern infrastructure, low-cost labor and a large variety of natural location settings, Chile attracts scenic films, like The Motorcycle Diaries and James Bond action thriller Quantum of Solace, as well as commercials for GE Wind Energy and Bombardier, who designed the 2010 Olympic torch.

“Chile has several advantages, like economic and political stability, security and geographic diversity that are very attractive for filmmaking,” says Viviana Araneda, trade commissioner for ProChile in Los Angeles, Calif. “Nevertheless, we are working towards promoting new laws that will make us more competitive in order to attract more local and overseas investments, rewarding the risk of investing in local filmmaking. We are also working in the participation of Chile in the most prestigious cultural projects in the world, including international film festivals, in order to have a bigger impact on our country’s visibility.” Araneda also mentions that the Secretary of Culture of Chile and a business delegation accompanied the President of Chile on a recent visit to Los Angeles with the goal of building a bridge between Hollywood and Chile: “We hope to take big steps towards making Chile a springboard for the Latin-American film and TV production industry.”

[can’t confirm if this trip was made. The original quote mentions it as an upcoming trip for September 24 but it may have been cancelled after the news of the trapped miners.]

Luxury accommodations, world-class cuisine and a very safe and friendly environment are all getting Chile recognized as a filming location hot spot. “On my trip with P3 Update Owner Jim Thompson, we toured all over the city of Valparaiso, which is unique with its multicolored houses layered down the mountain to the port,” says Janice Arrington from the Orange County Film Commission. “To get up the steep, green hillsides, the residents use funiculars and every resting spot has a stunning view of the seaside and ships in harbor.”

The locations throughout Chile’s southern hemisphere provide filmmakers a crucial scheduling advantage: Any project scheduled to broadcast during the summer in Europe or America that features summer themes can be shot six months earlier in the Chilean summer. “Chile is very film-friendly to productions coming from outside the country,” says Arrington, “but it also has a vibrant film community that is working around the world as well. Chilean filmmakers are shooting their films in many different countries. Within Chile, the ProChile Film Commission is a helpful ‘first’ contact for production companies.”


Colombia’s Film Law creates a transferable tax credit for contributors who donate to or invest in film projects certified as Colombian productions or co-productions. These qualifying productions can claim 41.23 percent.

“The Film Development Fund provides monetary incentives to competition winners and supports film-related processes, [such as the] script, development, production, postproduction and distribution, and provides automatic incentives for festival promotion and participation,” says Lina María Sánchez, locations and information manager for the Colombian Film Commission. “Colombian productions and co-productions are entitled to these non-repayable incentives and grants. The Fund’s resources come from a contribution paid by exhibitors and distributors of foreign films in theaters throughout the country and by Colombian film producers. From 2003 to 2009, an amount of US$22.2 million has been awarded. In 2010, an amount of around US$5 million will be awarded.”

Sanchez estimates that nowadays around 15 films are released in Colombia every year, including national productions and co-productions. “The crew base has become stronger with this experience,” she adds, noting that there can be three medium-sized productions at the same time. “Colombia’s infrastructure is very strong in terms of its ability to provide adequate public service support for foreign film production. Every city has a different permit system, so it is very important that foreign producers contact the Colombian Film Commission to provide the adequate information. We work with the support of the Vice Presidency Office, the Ministry of Culture [and] the Ministry of Commerce, and we manage cooperation agreements with various [major] cities around Colombia in order to have ‘film-friendly’ regions and locations.”


OnLocLatinAmericaMexicoCampecheRecently, Mexico has been focused on bringing in high-budget productions to boost its economy. Mexican Film Commission Coordinator Carla Raygoza reports that an Incentives Program for the “High-Impact” Film and Audiovisual Industry was launched in March 2010. “The program is a compliment to existing policies aimed at boosting and strengthening the film and audiovisual industry in Mexico,” says Raygoza. “It is a comprehensive, three-pronged support mechanism.”

The first part of the program is a specialized Service Platform that includes all of the federal-level government agencies involved with the film and audiovisual industry at one point or another. This will make the process of obtaining the corresponding permits more efficient, and productions will have the advantage of having a go-to official in each agency. This service will be available for all types of productions, regardless of budget and nationality. The second part states that non-Mexican productions are entitled to apply for a value-added tax (VAT) return at the end of their shoot. Paid VAT in Mexico is of 11 percent in the border region and of 16 percent in the rest of the country. This fiscal incentive is available for all types of productions regardless of budget. The third part offers direct financial reimbursements of up to 7.5 percent of the Mexican spend. This is available for film and audiovisual projects with a minimum spend in Mexico of 70 million pesos ($5.5 million) in production costs or 20 million pesos ($1.5 million) in postproduction. A combination of production and postproduction costs may be applicable, in which case the minimum will be of 70 million pesos.

“In order to calculate the financial incentive, the VAT will come into play,” explains Raygoza. “Not all Mexican expenses are subject to VAT or VAT only. Usually, the VAT return will represent approximately 10 to 12 percent of the total qualifying expenses. The sum of both the fiscal and financial incentives will be capped at 17.5 percent of the Mexican spend. Therefore, the difference between the VAT return and the 17.5-percent cap will come in the form of a cash rebate from an independent fund managed by ProMéxico, the federal government institution in charge of attracting foreign investment to our country.”

According to Raygoza, the Fund ProAudiovisual (the official name of the program for the financial reimbursement for high-impact projects) started with $10 million that’s set to increase gradually, depending on demand, to up to $40 million per year. “So far, there are four film productions looking to qualify,” she says. “If and when approved, they would take collectively close to $4 million, leaving still $6 million for the rest of the year and the first quarter of 2011.”

It appears that Mexico’s efforts are paying off, and, according to Raygoza, 2010 has already surpassed expectations. “In 2009 we had no foreign feature films, whereas 2010 will end with at least four, each spending over $10 million in Mexico,” she notes. “We have enough experienced and talented crew to support three major Hollywood films at the same time, plus all 70 Mexican productions happening in Mexico annually. Most of the crew has trained in U.S. studio movies, so the work ethics and discipline are similar, and the quality of the work Mexicans do in films is hailed by the industry as one of the best.”


OnLocLatinAmericaPananaPanama_streetPanama has also been working hard to improve its production incentive law. “The Panama Film Commission has been working since late May of 2010 on redrafting the current Film Law Number 36 of 2007 along with film and audiovisual industry representatives from both the government and private sector,” says Laura Emerick, relations manager for the Panama Film Commission. “We are working to include better incentives and benefits for both filmmakers and companies interested in donating and sponsoring the film and audiovisual industry; establish less bureaucracy for the entire filmmaking process; as well as restructure the current industry so that there is a fully integrated, one-stop shop for the film and audiovisual industry by centralizing all of the head film and audiovisual offices. Other aspects discussed include the possible formation of a Cinematheque that would rescue, archive and exhibit local film and audiovisual projects, created with the aim of collaborating with organizations such as UNESCO and the International Federation of Film Archives [FIAF].”

According to Emerick, this redrafted film law is now being examined by the Ministry of Commerce and Industry’s legal team, which will work with the Ministry of Economy and Finance to evaluate the viability of the new fiscal incentives. “It will shortly be introduced for debate to the National Assembly by the Minister of Commerce and Industry Roberto Henriquez, and will hopefully be enacted by next year 2011,” reports Emerick. “Panama is a U.S. dollar-based economy and the film industry alone generated approximately $11 million in revenue in 2009. It is projected to exceed this figure in 2010 at an estimated value of $16 million USD.”

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