New Rules On Export Financing Transactions In Brazil

With the general shortage of credit in the international market which resulted of the global crisis, the Brazilian Government decided to reverse a measure adopted in last March, reducing the cost of short-term financing to Brazilian exports and increasing the number of originators of resources (lenders) for these transactions. To be classified as "short-term financing" the transaction must have a maximum repayment term of 360 days. The reversion which is now being implemented will also facilitate the entry of United States Dollars into Brazil.

On March 1, 2012, the Board of the Central Bank of Brazil (Banco Central do Brasil - Bacen) issued Circular No. 3580 limiting the anticipation of funds to the Brazilian exporter by way of advance export receipt (recebimento antecipado de exportação ), also known as Advance Payment (Pagamento Antecipado - PA), to the importer (the foreign buyer of the Brazilian goods or services), as lender1. On that occasion no other type of lender was admitted.

By means of Bacen Circular No. 3604, of June 28, 2012 (Bacen Circular 3604/2012), from now on, in addition to the importer, any legal entity headquartered abroad, including a foreign financial institution, is expressly authorized to lend PA funds to the Brazilian exporter. Consequently, the number of lenders has been substantially increased.

Bacen Circular 3604/2012 consolidates all the applicable rules on PA transactions, which are outlined below.

The payment of interest on the PA must fulfill the following conditions: (a) the count of time limit for payment of interest and principal shall be less than the drawdown date or the date of entry of the funds into Brazil; (b) interest shall be accrued on the outstanding balance; (c) the interest rate is freely agreed by the parties, unless any legal limitation is imposed on the transaction; (d) the beneficiary of the interest is the one who made the advance payment of export; (e) alternatively, the amount due as interest can be settled by the embarkation of the goods abroad.

For values sent to Brazil as PA, within up to 360 days one of the following situations shall occur: (i) the shipment of the goods or the provision of the service; or (ii) the conversion by the Brazilian exporter, with the prior written consent of the foreign payer, in direct investment (equity) or loan currency, registered with...