Brazil’s Central Bank Proposes Bill to Modernize Foreign Exchange Market

RIO DE JANEIRO, BRAZIL – According to the Central Bank, the bill “aims to establish a new, more modern, concise and legally secure regulatory framework for the foreign exchange and capital markets in Brazil and for Brazilians abroad”.

The PL was sent yesterday to the Chamber of Deputies by means of the President of the Republic, Jair Bolsonaro’s Message No. 483.

“If approved by the National Congress, the bill will allow for the improvement of the business environment in the country, providing simplification and agility for all those who work with international operations.”

“The bill will also enable the introduction of new business models with legal certainty, increasing competition and providing more efficient services for the foreign exchange market and for transactions related to foreign capital,” says the Central Bank, in a statement.

Among the changes is the option of having deposit accounts in Brazilian reais and in foreign currency, and custody accounts held by international organizations, as well as deposit and custody accounts held by foreign central banks and by institutions with domicile or headquarters abroad that provide clearing, settlement and custody services in the international market.

“Such provisions contribute to the Brazilian real to effectively incorporate the assets of these institutions, expanding the use of domestic currency in negotiations abroad, in addition to simplifying the participation of international investors in government bonds denominated in reais directly abroad,” states the rationale for the bill.

“The preliminary draft also favors the use of the Brazilian real in international business by allowing the remittance abroad of third party payment orders from accounts in Brazilian reais held in Brazil and held by foreign banks,” adds the Central Bank.

The PL is structured in 3 pillars: consolidation, modernization, and simplification.

Consolidation

According to the Central Bank, the bill consolidates into a single law more than 40 legal provisions, issued since 1920, “which present dispersed and eventually obsolete ordinances, which increase the legal insecurity of the public and do not take into account the technological changes in progress and the current needs of the Brazilian economy”.

Modernization

The PL reconciles the legal requirements with the demands of an economy integrated into the global production chains, thus easing the development of foreign trade and the flow of resources and investments.

In addition, it allows the introduction of new business models to increase efficiency and promote competition, transparency and financial inclusion, thereby bringing benefits to citizens and companies.

The PL also allows to eliminate requirements established more than 50 years ago, in outdated economic contexts and configuration of global economic relations radically different from the current ones, and which have become obstacles to economic activity, providing a business environment that is less bureaucratic and more attractive, including for foreign capital.

Simplification

The proposal allows the introduction of requirements proportional to the business amounts and the risks involved. It allows rationalizing the requirements for foreign investments in Brazil, as well as for Brazilian investments abroad.

It also improves the rules for the Central Bank to obtain information for the collection of statistics.

The Central Bank further says that companies operating in foreign trade will be among the most benefited segments since one of this project’s main goals is to promote greater integration of Brazilian companies in the international market.

Among the various improvements, the new bill will allow the safe elimination of excessive bureaucracy currently in force in the process of contracting foreign exchange for import and export, eliminate restrictions on the use of exporters’ revenues held in their overseas accounts and also ease the greater integration of these companies in global chains.

According to the Central Bank, by allowing new business models to act in accordance with the regulations, it is expected that there will be greater competition and market efficiency, which should particularly benefit people with small amounts to receive or send abroad and who pay the expenses related to exchanging transactions.

Likewise, the PL allows for flexibility in the requirement to register foreign credit operations for low- value operations, as it happens in loans within families involving residents and non-residents in Brazil.

Finally, the PL should ease the participation of foreign investors in the financial and capital markets by improving the efficiency of the registration process with the Central Bank, says the monetary authority.

Source: Agência Brasil