Annual Report on Exchange Arrangements and Exchange Restrictions, 2007
Chapter

BRAZIL

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2007
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(Position as of July 31, 2007)

Status under IMF Articles of Agreement
Article VIIIDate of acceptance: November 30, 1999.
Exchange Measures
Restrictions and/or multiple currency practicesNo restrictions as reported in the latest staff report as of December 31, 2006.
International security restrictions
Other security restrictionsYes.
References to legal instruments and hyperlinksDecree 3,267, dated November 30, 1999; Decree 3,755, dated February 19, 2001; Decree 3,976, dated October 18, 2001; Decree 4,150, dated March 6, 2002; Decree 4,599, dated February 19, 2003, for the implementation in the National Territory of UNSC Resolution 1,267, dated October 15, 1999; Resolution 1,333, dated December 19, 2000; Resolution 1,373, dated September 28, 2001; Resolution 1,390, dated January 16, 2002; Resolution 1,455, dated January 17, 2003; Decree 4,775, dated July 9, 2003, for the implementation in the National Territory of UNSC Resolution 1,483, dated May 22, 2003; Decree 5,096, dated June 1, 2004, for the implementation in the National Territory of UNSC Resolution 1,532, dated March 12, 2004; Decree 5,489, dated July 13, 2005, for the implementation in the National Territory of UNSC Resolution 1,596, dated April 18, 2005; Decree 5,694, dated February 7, 2006, for the implementation in the National Territory of UNSC Resolution 1,643, dated December 15, 2005; Decree 5,470, dated June 16, 2005, for the implementation in the National Territory of UNSC Resolution 1,591, dated March 29, 2005.
Exchange Arrangement
CurrencyThe currency of Brazil is the Brazilian real.
Exchange rate structureUnitary.
Classification
Independently floatingThe exchange rate of the real is determined by supply and demand in the foreign exchange market. Transactions in the exchange markets are carried out by banks, brokers, tourist agencies, and providers of tourist accommodation that are authorized to deal in foreign exchange.
Brokers may conduct: (1) transactions in banknotes, bank drafts, or traveler’s checks; (2) foreign exchange transactions related to exports and imports up to US$20,000; and (3) foreign exchange transactions up to US$10,000 related to financial operations. Tourist agencies deal only in banknotes, bank drafts, and traveler’s checks. Providers of tourist accommodation may buy only banknotes, bank drafts, and traveler’s checks.
Exchange taxA 5% tax is applied to inflows related to external loans with a minimum maturity of up to 90 days. A 2% tax is applied to remittances related to obligations of credit card administration companies to pay for purchases by their clients. The tax is zero for other foreign exchange transactions.
Exchange subsidyNo.
Forward exchange marketBanks are permitted to trade foreign exchange on a forward basis within statutory limits (bought and sold) of the exchange position; such transactions must be settled within 750 days.
References to legal instruments and hyperlinksLaw 9,069 (1995); Decree 4,494 (2002); Resolution NMC 3,265 (2005); Communiqué CBB 6,565 (1999).
Arrangements for Payments and Receipts
Prescription of currency requirementsPrescription of currency is required only in foreign exchange transactions related to the LAIA covenant. These transactions must be made in dollars.
Use of foreign exchange among residentsThe use of foreign exchange for pricing or settlement of transactions among residents is prohibited.
Payments arrangementsAll interbank transactions and clearinghouse operations must be effected through the Central Bank of Brazil’s (CBB) real-time gross settlement payments system.
Regional arrangementsBrazil is a member of the LAIA.
Clearing agreementsPayments between Brazil and Argentina, Bolivia, Chile, Colombia, the Dominican Republic, Ecuador, Mexico, Paraguay, Peru, and Uruguay, and República Bolivariana de Venezuela may be made through special central bank accounts within the framework of the multilateral clearing system of the LAIA.
Administration of controlThe National Monetary Council (NMC) is responsible for formulating the overall foreign exchange policy. Foreign trade policy is formulated by the Chamber of Foreign Trade, which consists of the minister of development, industry, and foreign trade (head); the minister of the civil house; the minister of finance; the minister of planning, budget, and administration; the minister of foreign affairs; and the minister of agriculture and supply. The Ministry of Development, Industry, and Foreign Trade is in charge of implementing trade policy, through the Secretariat of Foreign Trade (SECEX).
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)There are three separate markets for gold transactions: the financial, exchange, and commercial markets. Transactions that occur in the financial market and foreign exchange market are regulated by the NMC. The first domestic transaction of newly mined gold on this market is subject to a financial transactions tax of at least 1%. Rules regarding gold transactions for industrial purposes are defined separately by the federal states, which also establish different rates for the commercial tax levied thereon.
On external tradeThe CBB and authorized institutions may buy and sell gold for monetary use on the international market. Imports and exports of gold for nonmonetary use are subject to the same procedures as those that are applied through the SECEX with respect to other products.
Controls on exports and imports of banknotesTravelers may take out or bring in domestic or foreign banknotes, checks, or traveler’s checks without restriction but must declare to customs any amount over R$10,000 or its equivalent.
Companies that transport cash and valuables must declare to Brazilian customs the amount being transported. The recipient of the valuables, in the case of a transfer to the country, or the sender of the valuables, in the case of a transfer from another country, should be a bank authorized to operate in the foreign exchange market in Brazil.
References to legal instruments and hyperlinksLaws 4,595 (1964), 9,069 (1995), and 10,192 (2001); Resolutions NMC 2,524 (1998) and 2,882 (2001).
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyThese accounts may be held by authorized foreign exchange dealers, tourist agencies not authorized to deal in foreign exchange, the Brazilian Post Office Administration, credit card administration companies, companies responsible for the development and execution of projects in the energy sector, and insurance and reinsurance companies and reinsurance brokers.
Held abroadn.r.
Approval requiredn.r.
Accounts in domestic currency held abroadn.r.
Accounts in domestic currency convertible into foreign currencyYes.
References to legal instruments and hyperlinksDecree 42,820 (1957).
Nonresident Accounts
Foreign exchange accounts permittedThese accounts may be held by embassies, foreign delegations, international organizations, foreign transportation companies, foreign citizens in transit in the country, Brazilian citizens living abroad, and reinsurance companies.
Domestic currency accountsYes.
Convertible into foreign currencyNatural and juridical persons (financial and nonfinancial institutions) may hold these accounts. Use of these accounts to conduct international transfers in Brazilian reais on behalf of third parties is prohibited.
Blocked accountsNo.
References to legal instruments and hyperlinksDecree 42,820 (1957); Resolution NMC 3,265 (2005).
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsExternal financing of imports for periods in excess of 360 days must be registered in the CBB’s Financial Operations Registry, an electronic system. The CBB must be informed about prepayments of import financing at least 30 days in advance.
Advance payment requirementsYes.
Documentation requirements for release of foreign exchange for importsAll importers must be included in the SECEX Importer and Exporter Register; registration automatically occurs with the first transaction. Imports must be registered in the import subsystem of the Integrated Foreign Trade System (SISCOMEX/IMPORT), which allows importers, carriers, banks, and brokers to register the various stages of an import process directly through the interlinked computers of the SECEX, customs, and the CBB. Imports are grouped into the following three categories: (1) imports that do not require automatic licenses (which are the general rule), (2) imports that are subject to automatic import licenses, and (3) imports that are subject to nonautomatic import licenses.
Import licenses and other nontariff measuresIn general, imports are exempt from prior approval requirements. However, some imports require prior approval (i.e., an import license) from the SECEX or another government agency. This approval is promptly given to importers whenever the licensing requirements are fulfilled. As a rule, licenses are valid for 60 days, except for imports of custom-made capital goods. The Secretariat of Federal Revenue issues clearance certificates for certain groups of commodities to special bonded warehouse importers. Import licenses for a number of specified imports may be obtained after the commodities have been landed and customs clearance obtained. The importation of certain products requires approval of the Ministry of Science and Technology. For some products, eligibility for exemption from import duties may be precluded by the existence of a satisfactory domestic equivalent.
Negative listImports are prohibited of agrochemical products not authorized under Brazilian regulations; weapons; and certain drugs that are not licensed, for reasons of security, health, or morals.
Licenses with quotasIn addition to imports under Brazilian concessions covered by the LAIA agreement, goods imported through the Manaus and Tabatinga free zones are subject to an annual quota. Foreign goods up to the equivalent of US$2,000 imported into the Manaus free trade zone may be transferred to other parts of Brazil (as a passenger’s baggage) free of import taxes. The tariff rate on imports of toys is 20%.
Other nontariff measuresSanitation and measurement requirements must be observed.
Import taxes and/or tariffsThe MERCOSUR Customs Union agreement stipulates a CET ranging from zero to 20%, though higher rates may be applied in particular cases, such as 53 products pertaining to the automotive sector, to which a rate of 35% applies. In addition, the MERCOSUR countries have approved the use of temporary national tariff exceptions, according to which Brazil exempts from the CET 100 tariff lines until January 31, 2008. Exemptions for 77 tariff lines pertaining to telecommunications expired June 30, 2007. The Common Regime for Capital Goods that are not made in MERCOSUR countries will be effective January 1, 2009. For this reason the reduction in the import taxes for capital goods and integrated systems (ex-tarifarios), totaling 2,480 tariff lines, will remain effective according to the term fixed by the Camex Resolution, which established them. The government established two taxes of 1.65% and 7.65%. Some exceptions to these taxes are mentioned in Law 10,865 (2004) and in Law 10,925 (2004).
Taxes collected through the exchange systemForeign exchange transactions related to imports of goods are exempt from the tax on financial operations, and foreign exchange transactions related to imports of services have a tariff of zero.
State import monopolyImports of petroleum and its derivatives are subject to prior disclosure from the National Petroleum Agency.
References to legal instruments and hyperlinksLaw 11,371 (2006).
Exports and Export Proceeds
Repatriation requirementsYes.
Surrender requirements
Surrender to authorized dealersEffective August 4, 2006, 30% of the proceeds from exports are exempt from surrender requirements. Effective October 27, 2006, the deadline for surrender of export proceeds was extended to the last business day of the twelfth month following the shipment of merchandise or rendering of services. Previously, proceeds were required to be surrendered before 210 days from the shipment date for operations not subject to the Credit Register date for financed operations.
Financing requirementsNo.
Documentation requirements
Preshipment inspectionInspection is required for commodities subject to standardization.
OtherDocumentation includes invoices, international shipment notification, and export registration. There is a simplified arrangement for foreign exchange transactions related to exports up to the equivalent of US$20,000.
Export licensesExports are prohibited of wild animals and their hides, hair, feathers, or eggs in any form; jacaranda-da-Bahia wood; ipecacuanha plants; amber and white varieties of honey; and antiques more than 100 years old. Exports of certain goods require prior approval of the SECEX, including those effected through bilateral accounts, exports without exchange cover, exports on consignment, reexports, and exports requiring prior authorization from government agencies. The SISCOMEX integrates activities related to the registration, monitoring, and control of foreign trade operations into a single computerized flow of information. The SISCOMEX comprises two subsystems (exports and imports). The exports subsystem allows exporters, carriers, banks, and brokers to register the various stages of an export process directly through the interlinked computers of the SECEX, customs, and the CBB.
With quotasExports of sawed or cut pine wood, mahogany, Brazilian walnut, and virola are subject to quotas.
Export taxesIn general, exports are exempt from export taxes or are subject to a tax of zero. However, export duties apply to the following: (1) fume products exported to Paraguay and Uruguay, 105%; (2) cigarettes to Central America, the Caribbean, and South America, 150%; (3) tanned leather and skins, 7% as of January 1, 2006, and 9% as of January 1, 2007; and (4) weapons and ammunition to Central America, the Caribbean, and South America (except Argentina, Chile, and Ecuador), 150%.
References to legal instruments and hyperlinksLaw 11,371 (2006); Decree 23,258 (1933); Resolution NMC 3,389 (2006).
Payments for Invisible Transactions and Current Transfers
Controls on these transfers
Trade-related paymentsThere are established rules and surveillance procedures for unloading and storage costs related to operations freely conducted in the commercial market. Regulations on insurance and reinsurance transactions in foreign currency are set by the National Council on Private Insurance.
Investment-related paymentsNonresident investments must be registered electronically at the CBB.
References to legal instruments and hyperlinksResolution NMC 3,265 (2005).
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsYes.
Surrender requirements
Surrender to authorized dealersSeventy percent of the proceeds from software copyrights, franchising, trademarks, patents, and specialized technical services must be sold to ADs.
Restrictions on use of fundsNo.
References to legal instruments and hyperlinksResolution NMC 3,265 (2005).
Capital Transactions
Controls on capital transactionsNonresident capital transactions must be registered electronically with the CBB.
Repatriation requirementsNo.
Controls on capital and money market instruments
On capital market securities
Shares or other securities of a participating nature
Purchase locally by nonresidentsLimitations apply to participation in certain economic activities.
Sale or issue locally by nonresidentsShares of foreign enterprises from MERCOSUR countries may be sold in Brazil through share custody certificates or directly. Other foreign securities may be sold through Brazilian Depository Receipts (BDRs), which allow the placement of certificates representing these shares in the Brazilian market.
Purchase abroad by residentsEffective September 27, 2006, there are no restrictions on making transfers abroad of individual or corporate interest. Transfers of funds for investments abroad by institutions authorized to operate by the CBB and funds of any nature must observe specific regulations. Effective April 26, 2007, regulations on investments abroad by investment funds were liberalized further, subject to prudential rules set by the Securities and Exchange Commission of Brazil. Previously, residents could invest only in stock exchanges in MERCOSUR countries. Outside MERCOSUR countries, Brazilians were allowed to purchase ADRs issued abroad by companies headquartered in Brazil and BDRs issued in the country by companies headquartered abroad. Employees of firms belonging to foreign economic groups could purchase shares of the main company without limit (previously, there was a limit of up to the equivalent of US$20,000 for each employee, for a period of not less than 12 months).
Sale or issue abroad by residentsEffective September 27, 2006, no controls apply. Previously, corporations could issue only depository receipts abroad. In the MERCOSUR countries, Brazilian enterprises could operate through share custody certificates or directly.
Bonds or other debt securities
Sale or issue locally by nonresidentsNonresidents may offer these instruments only through private placements.
Purchase abroad by residentsEffective September 27, 2006, no restrictions apply on making transfers abroad by residents. Transfers of funds for investments abroad by institutions authorized by the CBB to operate and funds of any nature must observe specific regulations. Previously, residents could purchase bonds or other debt securities through Brazilian external debt funds.
On collective investment securities
Sale or issue locally by nonresidentsn.r.
Sale or issue abroad by residentsn.r.
Controls on derivatives and other instrumentsForeign investors have access to derivative markets. They are required to register locally for identification purposes.
Purchase abroad by residentsPrivate sector entities may engage in hedging operations with financial institutions or stock exchanges abroad to protect themselves against the risk of fluctuations in interest rates, exchange rates, and commodity prices. Payments and receipts in foreign currency scheduled or expected to occur in the future in connection with commercial or financial rights or obligations may also be protected by hedging.
Controls on credit operations
Financial credits
By residents to nonresidentsLending by financial institutions to nonresidents is not allowed.
Controls on direct investment
Outward direct investmentEffective September 27, 2006, no restrictions apply on making transfers abroad by individuals or corporations. Transfers of funds for investments abroad by institutions authorized to operate by the CBB and funds of any nature must observe specific regulations. Investments abroad by institutions authorized to operate by the CBB require prior approval of the CBB’s Department of Financial System Organization. In addition, the institutions must meet specific conditions, especially that prudential regulations on minimum paid-in capital be effectively operational for a minimum time span and strictly observe fixed-asset-to-net-worth ratios. Previously, only Brazilian nonfinancial enterprises could make transfers for outward direct investment purposes without limitation. Exchange operations in which the purchaser of the foreign exchange was an entity belonging to the direct or indirect public administration were subject to prior authorization by the CBB.
Inward direct investmentThere are legal limitations on participation in certain economic activities.
Controls on liquidation of direct investmentNo.
Controls on real estate transactionsNo.
Controls on personal capital transactionsNo.
References to legal instruments and hyperlinksLaws 4,131 (1962) and 11,371 (2006); Decree 55,762 (1965); Resolutions NMC 2,337 (1996), 2,689 (2000), 2,770 (2000), 3,265 (2005), 3,412 (2006), 3,350 (2007), 3,452 (2007), and 3,455 (2007); Circular CBB24 (1966); CBB 3,305 (2005); and 3,348 (2007).
Provisions Specific to the Financial Sector
Provisions specific to commercial banks and other credit institutions
Lending to nonresidents (financial or commercial credits)Lending to nonresidents is not allowed.
Lending locally in foreign exchangeAll contracts, securities, and other documents, as well as any obligations executable in Brazil that require payment in foreign currency, are null and void. Consequently, financial institutions are prohibited from granting foreign currency loans within Brazil. However, this regulation does not apply to the on-lending of external foreign currency loans.
Purchase of locally issued securities denominated in foreign exchangeDomestic operations in foreign currencies are prohibited.
Differential treatment of deposit accounts in foreign exchangen.r.
Differential treatment of deposit accounts held by nonresidentsn.r.
Investment regulations
Abroad by banksYes.
In banks by nonresidentsYes.
Open foreign exchange position limitsEffective January 2, 2006, the requirement to deposit long positions exceeding US$6 million with the CGG was abolished. The exchange positions are unlimited, provided the total amount of combined exposure in gold, assets, and liabilities in foreign exchange does not exceed, effective June 11, 2007, 30% of each financial institution’s base capital. The previous limit was 60% (effective December 5, 2006, before which it was 30%). Effective July 2, 2007, the bank’s capital requirement is 100% of the foreign exchange exposure (previously, 50%), and foreign exchange amounts cleared internationally by bank conglomerates are considered to be part of the net foreign exchange position.
For licensed dealers (brokerage firms; securities distributors; and credit, financing, and investment enterprises), the ceiling on the long exchange position is the equivalent of US$500,000, and short exchange positions are not allowed.
Provisions specific to institutional investors
Insurance companies
Limits (max.) on securities issued by nonresidentsn.r.
Limits (max.) on investment portfolio held abroadInstitutional investors may invest up to 10% of their technical reserves in investment fund shares abroad.
Currency-matching regulations on assets/liabilities compositionn.a.
Pension funds
Limits (max.) on securities issued by nonresidentsn.a.
Limits (max.) on investment portfolio held abroadPrivate social security agencies may invest up to 50% of their reserves, together with other investments up to the same ceiling, in shares of open companies, publicly issued convertible debentures, bonds for subscriptions to shares issued by open companies, and certificates of deposit for shares issued by companies headquartered in MERCOSUR countries.
Limits (min.) on investment portfolio held locallyn.a.
Currency-matching regulations on assets/liabilities compositionn.a.
Investment firms and collective investment funds
Limits (max.) on securities issued by nonresidentsn.a.
Limits (max.) on investment portfolio held abroadThe regulations on investments abroad by investment funds were liberalized further, subject to prudential rules set by the Securities and Exchange Commission of Brazil.
Limits (min.) on investment portfolio held locallyn.a.
Currency-matching regulations on assets/liabilities compositionn.a.
References to legal instruments and hyperlinksLaw 10,192 (2001); Resolution 2,606 (1999); Circulars CBB 3,307 (2005); and 3,352 (2007).
Changes during 2006
Exports and export proceedsJanuary 1. Exports of tanned leather and skins were made subject to export duty of 7%.
August 4. Thirty percent of the proceeds from exports were exempted from surrender requirements.
October 27. The deadline for surrender of export proceeds was extended to the last business day of the twelfth month (previously, 210 days) following the shipment of merchandise or rendering of service.
Capital transactions
Controls on capital and money market instrumentsSeptember 27. The restrictions on making transfers abroad by individuals or corporations were abolished. Transfers of funds for investment abroad by institutions authorized to operate by the CBB and funds of any nature must observe specific regulations.
September 27. Controls on the sale or issue of securities abroad by residents were eliminated.
Provisions specific to the financial sector
Provisions specific to commercial banks and other credit institutionsJanuary 2. The requirement to deposit with the CBB in dollars long positions exceeding the equivalent of US$6 million was abolished.
December 5. The limit on the combined foreign exchange exposure by domestic banks was increased to 60%, from 30%, of each bank’s base capital.
Changes during 2007
Imports and import paymentsJune 30. Exemptions expired for 77 tariff lines relating to telecommunications.
Exports and export proceedsJanuary 1. The export duty on tanned leather and skins was increased to 9% from 7%.
Capital transactions
Controls on capital and money market instrumentsApril 26. The regulations on investments abroad by investment funds were liberalized further, subject to prudential rules set by the Securities and Exchange Commission of Brazil.
Provisions specific to the financial sector
Provisions specific to commercial banks and other credit institutionsJune 11. The limit on the combined foreign exchange exposure by domestic banks was reduced to 30% from 60% of each bank’s base capital.
July 2. The banks’ capital requirement of foreign exchange exposure was raised to 100% from 50%.
Provisions specific to institutional investorsApril 26. The regulations on investments abroad by investment funds were liberalized further, subject to prudential rules set by the Securities and Exchange Commission of Brazil.

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