Despite its history of extremely rigid and bureaucratic exchange rules, Brazil will now evolve towards a scenario of free movement of capital and simpler and less bureaucratic operations.
The foreign exchange law approved at the end of 2021 will imply profound changes in the rules of the Brazilian foreign exchange market, greatly facilitating the use of the Brazilian currency in international transactions, as well as by international agents in Brazil.
Based on this new Legal Framework for the Foreign Exchange Market (Law 14,286, of 12/31/2021), the Central Bank of Brazil – BACEN and the National Monetary Council (CMN) are producing, throughout this year 2022, the respective specific regulations and setting deadlines for adapting to the local market.
Such adaptations of Brazil to the international market will bring, from 2023, greater legal certainty, as well as should facilitate the contribution of foreign investments. Consequently, this will imply a reduction in the costs of transactions with foreign currencies and an increase in the convertibility of the Brazilian currency (“Real”).
This new scenario generates a facilitation of exports and imports, as well as an incentive to attract foreign capital, especially in favor of infrastructure projects and public service concessions and exploration of natural resources in general, in addition to investments in the Brazilian financial and capital market.
Among the main developments, the following stand out: the circulation of Brazilian currency (Reais) abroad; the possibility of paying local obligations in foreign currency; to release foreign currency purchase and sale transactions between local individuals; and the expansion of the possibility of opening accounts in foreign currency in the country.
The circulation of Brazilian currency (Reais) abroad must allow local banks and foreign exchange brokers to fulfill payment orders in Reais (BRL) received from abroad or sent abroad, through the use of accounts in Reais (BRL) held in banks, owned by institutions domiciled or headquartered abroad and that are subject to financial regulation and supervision in their country of origin. In addition, it should eliminate the regulatory restriction currently in place in relation to the investment abroad of funds raised in the country.
The payment in foreign currency of obligations enforceable in Brazil must include, for example, leasing agreements entered into between Brazilian residents, if the funds are raised abroad, as well as contracts in general entered into by exporters in which the counterparty is concessionaire, permit holder, authorization holder or lessee in the infrastructure sectors.
Brazilian banks may finance Brazilian exports abroad and, in addition, a Brazilian exporter who receives funds from abroad may lend them to a subsidiary of the company outside the country, as the current restrictions on the use of such funds held in accounts abroad cease to exist. Enabling the Brazilian exporter and its economic group abroad to make flexible use of the resources from export revenues.
The expansion of the possibility of opening accounts in foreign currency in the country will reach new sectors of the economy, since, currently, this is only allowed to agents authorized to operate in foreign exchange, issuers of international credit cards, insurance companies and tourist service providers. With this opening, business models linked to innovations, for example, involving the transfer of Reais (BRL) out of Brazil, will be able to do so without the obligation of the exchange contract to send such resources abroad.
Therefore, this modernization of the Brazilian foreign exchange market is moving towards equating foreign exchange operations with the other operations of the Brazilian financial system as a way of providing the necessary agility in the global value chain, flexibility in debt payments and the reduction of bureaucracy in the registration of foreign investments, facilitating the flow of capital and credit operations.
