New Exchange Law: The Central Bank of Brazil opens public consultation on proposal for regulation on brazilian capital abroad

On November 04, 2022, the Central Bank of Brazil (“BCB”) opened for Public Consultation, through Public Notice No. 93, a normative act proposal aimed at regulating aspects related to Brazilian capital located abroad, pursuant to Law No. 14,286, of December 29, 2021. This Law provides for the Brazilian exchange market, the Brazilian capital located abroad, foreign capital in the country and the provision of information to BCB (“New Exchange Law”).

Interested parties may submit suggestions and comments to BCB on the normative act draft until December 03, 2022.

The proposal was presented to regulate certain aspects of the New Exchange Law, which should enter into force on December 31, 2022, and aims to increase market efficiency, enhance the business environment in Brazil, in addition to facilitating the application of Brazilian capital and the insertion of Brazilian companies in international markets.

Among the main innovations brought by the proposed regulation, the following stand out:

• the maintenance of the minimum amount to be stated for reporting requirement purposes and the frequency of statements currently in force for the provision of information about the Brazilian capital abroad;

• the equalization in the Brazilian capital located abroad of:
  (i) direct loans and commercial credits granted in Brazil to non-residents, and
  (ii) foreign currency in kind held in Brazil by a resident legal entity;

• the possibility of investing the capital in any modality regularly practiced in the international market;

• the need to comply with legal requirements, based on economic grounds. In addition, entities subject to specific sectoral regulations must comply with their own regulatory requirements upon the investment of Brazilian capital abroad; and

• the prohibition regarding the characterization of reciprocal participation between Brazilian and foreign companies, in cases of investment in company’s capital carried out through an international conference of shares or other assets. For such cases, the proposed rule seeks to establish the concept of “international conference of shares or other assets”, referring to cases of:
  (i) payment of Brazilian company’s capital by a non-resident in Brazil, through payment with assets (dação) or exchange (permuta) of equity interest held in a foreign company, headquartered abroad or, still,
  (ii) payment of foreign company’s capital, through payment with assets (dação) or exchange (permuta)carried out by a resident in Brazil, of interest held in a Brazilian company.

Moreover, the proposal consolidates the rules and simplifies the regulations and requirements, incorporates advances brought to the New Exchange Law, and provides for the submission of information on Brazilian capital abroad to BCB.

The draft attached to the Public Notice is available at BCB’s website (general profile menu “Financial stability”, “Regulation”, “Public consultations”, “Active consultations”). Contributions must be made upon completion of a form available at the aforementioned electronic address, with in addition to the spreadsheet available here. Contributions sent by other means or in other formats will not be considered.

Our Banking and Financial team is already working on the submission of comments to BCB and remains available to provide any further clarifications that may be necessary.