Rio de Janeiro — Brazilian distribs are benefiting from the country’s overall theatrical market growth, but are facing a number of setbacks tied to regulation and access to product and theaters.

Last year, Brazil’s total B.O. rose 22%. The growth continued this year, with first quarter results increasing 23% over the same period in 2003.

2003 STATS
Top film: “Bruce Almighty” (BVI; $11.5 million)
Top indie: “The Regulars” (Lumiere; $6.8 million)
Total B.O.: $223.3 million
Indie B.O.: $28 million (estimate)
Total releases: 225
Indie releases: 143
“Agata and the Storm” (Mais)
“Brown Bunny” (Estacao)
“Kill Bill Vol. 2” (Lumiere)
“Laws of Attraction” (Imagem)
“Prime” (Europa)

“The theatrical market growth is positive for everybody, including independent distributors,” says Marcio Fraccaroli, partner at Imagem Filmes.

But with Brazil one of the most underscreened countries in the world, the exhibition sector is lagging well behind the pace of admissions. The nation has about 1,800 screens for a population of more than 170 million.

“It’s incredibly difficult to distribute our films,” says Adhemar Oliveira, a partner of indie Mais Filmes. Still “Lisbela and the Prisoner,” along with “Carandiru,” boosted box office.

Bruno Wainer, a partner in Lumiere, the country’s leading indie distrib, adds that it’s also increasingly tough for indies to buy quality pics abroad, as they face competition from Hollywood studios. “We had to adopt guerrilla war tactics to fight the majors,” he says.

He criticizes local regulations that allow U.S. studios to invest in local productions to qualify for tax breaks. As a result of this rule, U.S. studios are able to ink distribution deals early on top Brazilian pics.

The country’s video/DVD market is growing, but a recent tax reform has hurt local distribs, which now have to pay state tax, instead of municipal tax. Imagem’s Fraccaroli says the change is responsible for a tax rate increase from 5% to 18% on his company’s revenues — and that’s in addition to several other taxes.

The TV market, meanwhile, remains virtually closed to indies, as nets prefer to buy big film packages from U.S. studios, and pay TV continues in crisis.