Brazil Has a New Law for Foreign Exchange with an Eye on Global Insertion

With the New Foreign Exchange Law, the Central Bank expects greater international use of the Brazilian Real and less bureaucracy in the foreign exchange market

Real Brasil
January 17, 2022 | 09:15 AM
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The New Foreign Exchange Law (Law 14.286/2021) was sanctioned yesterday and published today (Jan 17) in the “Diário Oficial” of the Union. With the new legal framework, there will be more stimulus to the insertion of Brazilian companies —including small and medium-sized ones — in global value chains, evaluated the Central Bank, in a note released this morning.

  • The Central Bank points out that the new legislation eliminates, for example, restrictions for exporters to use their resources freely, besides being able to count on more financing mechanisms to the buyers of their products
  • On the import side, the new legal framework allows that, in the case of financed imports, the product does not need to physically enter the country before the beginning of the payments, exemplified by the Central Bank. This is the case of the acquisition of inputs produced in a foreign country that will be incorporated into the final product in another foreign country, with subsequent direction to Brazil
  • According to the monetary authority, the gains in market efficiency brought by the new legislation also positively impact the attraction of foreign capital, both for investment in the financial and capital markets and for direct investment, including long-term investments and in infrastructure projects and concessions.

“Besides the greater international insertion, the Foreign Exchange Law contributes to the greater international use of the Brazilian Real, easing the use of the domestic currency in international financial operations, such as the permission of the entry and remittance of payment orders in Reais from Reais denominated accounts of foreign institutions held in banks in the country”, considered the Central Bank.

The new legislation also consolidates more than 40 legal provisions that began to be issued about 100 years ago, with scattered commands totaling more than 400 articles, many with archaic language, noted the Central Bank, adding that the new legislation is concise and has current language, which will bring a higher level of legal certainty to the issues addressed.

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There will also be a stimulus to the reduction of operational and legal structures of the participants of the exchange market, with more efficiency in the procedure of the operations and the sending of information determined by the Central Bank.

“There are also advances in the scope of the rules for transactions carried out by individuals, such as the permission to negotiate foreign currency between individuals on an occasional, non-professional basis, with a limit of up to US$ 500. Currently, this type of operation is forbidden. It was also extended to $ 10,000, or its equivalent in other currencies, the limit from which the traveler entering or leaving Brazil must declare the carrying of cash,” said the Central Bank.

Concerning foreign currency accounts in Brazil, the Central Bank noted that the new law does not bring any innovation regarding the specific situations in which such accounts are allowed, nor does it bring any indication of the expansion of these possibilities.