New foreign exchange law is in force in Brazil

In Brazil, the new foreign exchange law passed at the end of 2021 came into force on December 31, 2022, after regulation by the central bank and the National Monetary Council (CMN). 

According to the central bank, the new law is based on the free movement of capital and the reduction of bureaucracy in foreign exchange market transactions. 

The Central Bank of Brazil argues that the previous foreign exchange legislation, which is no longer in force, arose in 1920 in a context of foreign exchange shortages, which is no longer compatible with the globalized economy. 

Analysts believe the new legislation will help reduce the cost of buying and selling US dollars, provide more legal certainty and increase the convertibility of the real – in other words, conducting transactions with the rest to make the world easier.

BUYING AND SELLING FOREIGN CURRENCIES

Now it is possible to buy and sell foreign currency between individuals. The goal is to satisfy very occasional needs. 

For example: to allow the sale of leftover currency between known people after the end of an international trip. 

The activity of the so-called “Doleiros”, who do this again and again, remains forbidden.

VALUE TO DECLARE

Previously, travelers who entered or left the country with more than R$10,000 (US$1,8900 in cash had to make a declaration. Now it’s valued at US$10,000. The new cap, which will be expressed in US dollars, is in line with what is common in other economies, according to the central bank.

TRANSFERS IN REAIS

Transfers in reais are authorized outside of Brazil through reais accounts abroad. The central bank’s goal is to allow international use of the real on terms similar to other currencies.

EXPORTS

Exporters are allowed to make foreign currency payments in Brazil in certain situations. According to the new law, this is now also possible for exporters’ contracts if the other party comes from the infrastructure sector. 

In the future, the National Monetary Council (CMN) may determine other situations for the use of foreign currency, if this is necessary to reduce the exchange rate risk (sudden fluctuations in the value of the currency) or to increase the efficiency of the company.

EXPORT FINANCING

Brazilian banks will be able to finance the purchase of Brazilian exports abroad. 

The change is intended to help Brazilian products and services become more popular and competitive abroad, the central bank said. 

Transfers to pay for the financed imports can also be made without bringing the goods to Brazil.

ENTRY OF FOREIGN INVESTORS

The law includes provisions designed to reduce red tape for foreign investors wishing to invest in equity or fixed income securities in Brazil. 

The new foreign exchange law imposes higher limits on travel, dollar bills and international Pix. Pix is an instant payment platform created and managed by the Brazilian Monetary Authority, the Central Bank of Brazil, which allows for the fast execution of payments and transfers. 

Pix was announced in Summer 2019 and was fully operational on November 16, 2020.

DOLLAR ACCOUNTS IN BRAZIL

The most controversial point of the proposal is that the National Monetary Council (CMN) will give the central bank the power to allow new sectors of the economy to hold foreign currency accounts in the country. 

Currently, dollar accounts are only available to certain segments, e.g. foreign exchange brokers, issuers of credit cards for international use, insurance companies and tourism service providers. 

When approving the project in 2021, the director of regulation of the institution, Otavio Damaso, explained that the project allows this expansion to other segments “as part of a medium and long-term process, obviously within the framework of the convertibility of the real, that is one of the objectives of the project”. 

New sectors have not yet been approved.

INTERNATIONAL PIX

The new foreign exchange law also paves the way for the future introduction of the so-called international Pix, i.e. the possibility of transferring funds abroad in real time via a tool developed by the institution. 

The new functionality is currently being reviewed by the Central Bank. According to the institution, the new foreign exchange legislation, with its greater liberality, also favors the introduction of the digital real. 

The central bank assumes that the virtual currency will be available within three years. The digital reality will focus on new technologies, such as the so-called “Internet of Things” – a technological development that will connect more objects to the Internet – and smart contracts (which guarantee the security of contract execution through blockchain technology).

With information from latinapress