Brazil is one of the most under-screened territories in the world, but exhibitors there are building up their chains, stimulated by growing theatrical box office.

The country’s total number of screens has risen steadily from 1,620 at the end of 2001 to 2,465 by July 2012.

Driving this expansion is the strong film market. Brazil’s total B.O. soared from 412.5 million reals ($206 million) in 2001 to $709 million in 2011. Grosses for the first six months of the year were up 14.1% on 2011.

Mexican giant Cinepolis, the world’s fourth largest exhib, is making an especially large investment in Brazil.

The company, which opened its first plex in Brazil in June 2010, now has 20 plexes with 159 screens. It is already the country’s third largest exhib, behind Cinemark and UCI, which entered the market in the 1990s.

“A few years ago Cinepolis started its internationalization process. Brazil was absolutely under-screened and we identified an opportunity here,” Cinepolis Brasil general director Eduardo Acuna told Variety, adding the company plans to open 11 plexes in Brazil by the end of 2014.

Pedro Butcher, an analyst and editor of film web portal Filme B, estimates the total number of screens in the country will expand at an annual rate of 10% over the next five years.

But exhibs face some obstacles. “For a number of reasons, such as safety and the lack of real estate, virtually all new multiplexes in Brazil are in shopping centers,” explains Fabio Lima, general manager of film digital aggregator and advertising company Mobz. “In many countries, exhibitors build themselves a standalone multiplex, for instance, in supermarket parking lots. But here they are held back by the pace of shopping center construction.”

The real estate boom in Brazil, high import taxes and labor rights have made high costs another roadblock. Acuna said it is 80% more expensive to build a plex in Brazil than in Mexico.

The good news for exhibs is that the Brazilian Congress recently passed regulations that exempt them for five years from federal taxes, including import taxes on digital projectors and taxes on investments in the construction and renovation of theaters.

This tax break creates the conditions for the launch of the federally-funded Cinema Near You program, aimed at expanding the number of cinemas in small towns and in blue-collar neighborhoods of cities.

The five-year suspension of import taxes on digital projectors also clears the way for the digital conversion of Brazilian-owned screens. Just 593 of Brazil’s 2,465 screens were digital as of July. The big international exhibs, such as Cinemark and Cinepolis, will have separate Virtual Print Fee deals with the majors. The top 17 local exhibs, including the Ribeiro Group, the country’s No. 4 exhib, set up an informal consortium and are negotiating a common Virtual Print Fee deal. The federal government will finance the digitalization of 750 screens of these local companies.

World Report: Brazil 2012
World rushes soccer stories | Exhibs roll out screens | Brazilian pics bubbling under