Economy

Brazil's new exchange market regulation will expand the use of foreign currency

The new regulation facilitates international transactions using Brazilian currency and allows banks and financial institutions to invest abroad

Photo: Marcello Casal Jr/ Agência Brasil
  • The new regulation allows Brazilian banks and financial institutions to invest abroad the funds raised in the country or otherwise;
  • Some changes affect individuals, like the limit of cash that each person can carry when leaving or entering Brazil and buy-and-sell transactions in foreign currency;
  • The bill now has to be analyzed by the Senate.

Brazil’s lower house of Congress approved this week the new exchange market regulation, a project that expands the Central Bank‘s autonomy to regulate the exchange market. The bill now has to be analyzed by the Senate.

In general, the new regulation facilitates international transactions using Brazilian currency and allows banks and financial institutions to invest abroad the funds raised in the country or abroad.

Some changes affect individuals: the limit of cash that each person can carry when leaving or entering the country will increase from BRL 10,000 to $10,000 (or the equivalent of $10,000 in another currency). At the current exchange rate, the new limit amounts to about BRL 50,000.

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Buy and sell transactions involving amounts of up to $500 (or the equivalent in any other currency) will also be released without tax.

The new legislation also brought great expectations about the possibility of people and companies being able to have a banking account in dollars or other currencies within Brazil. But the bill delegates this decision to the Central Bank, which would need to define the rules of how international accounts would work beforehand. On different occasions, however, Brazil’s monetary authority representatives already said that this wouldn’t happen anytime soon when it comes to individuals; companies are a higher priority.

Currently, this type of account is restricted to embassies, foreign exchange brokers, and tourism agencies, among other exceptions.

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The project also expands the list of cases in which the payment of financial obligations will be allowed in foreign currency, such as in leasing contracts made between residents in Brasil and in export contracts with companies operating in infrastructure sectors, such as ports.

The proposal gives autonomy to the National Monetary Council to provide for other situations in which the payment in foreign currency may reduce the exchange risk or increases the business efficiency.

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