Setting Up A Financial Institution In Brazil Control By Foreign Investors

By Eduardo Amaral Gurgel Kiss1

The Brazilian economy has been performing reasonably well in recent years and international investors become interested in setting up financial institutions in Brazil. We present below the basic requirements for that purpose.

Before setting up a financial institution, the interested investor must obtain authorization from the Brazilian authorities.

The procedure to obtain the authorization comprises two phases.

The first phase is aimed to obtaining a decree by the Brazilian President. Such Decree is necessary whenever the investment will result in an increase of the foreign investment in the financial system.

The Brazilian Central Bank is the governmental agency that reviews the application and gives the initial approval. Subsequently the application is submitted to the National Monetary Council and, finally, it must be reviewed and approved by the President of Brazil for the issuance of the required Decree.

At the Central Bank In addition to various legal documents and data related to the interested investor, he/she/it must present a business plan which must cover at least the projection for the first 5 years of the company's activities. The following is a summary of the contents of a business plan, in accordance with the Central Bank requirements. The Central Bank expects a business plan to contain:

an introduction or executive summary; macroeconomic premises; corporate governance standards; market plan; operating plan; human resources plan; risk management plan; economic-financial feasibility analysis (financial plan). The following is a brief summary of the contents of the above items.

1. Executive Summary

This section should detail the line of business the company will be engaged in, with a brief history of the economic group applying for the authorization. Additionally, the summary should also point out the list of controllers, holders of qualified interest (individuals holding 5% or more of the prospective investor), and the managers of the applicant, as the case may be. The investor should indicate the countries in which he operates and the business conducted in those countries. The Central Bank can consult with the financial authorities of the country in which the investor has its head office with respect to the investor's status and his plans to set up a subsidiary in Brazil.

2. Macroeconomic premises

The main macroeconomic premises used in the projections utilized in the project must be explained to...