Two important legal developments have been taking place in Brazil on the financing front. Both have been long-lasting requirements of the market in the country, which little by little seems to be overcoming a number of relevant legal issues which have historically hampered credit transactions.
The first improvement relates to the insertion of a provision in the new Mining Code under discussion at the Congress of the possibility of borrowers offering mining exploitation rights to lenders as security for financial transactions. Though detailed regulation of the matter is still expected once the Mining Code is finally enacted, the bill expressly opens room for transactions backed by rights over long-term mining concession agreements (e.g. 40 years renewable) upon evidencing to lenders the production potential of mineral deposits bid by the Government, similarly to energy purchase and sale agreements, which are usually offered as security for lenders, specially the Brazilian Development Bank – the BNDES.
Agribusiness financing, in turn, which legislation was significantly improved in the country over recent years to serve Brazil's strongest potential in the global economy, also seems to take one step ahead with the creation by the National Monetary Council of the so-called Rural Credit-Related Interbank Deposit (Depósito Interfinanceiro Vinculado ao Crédito Rural - DIR). The mechanism aims to facilitate the transfer of funds from the national rural credit system (i.e. Brazilian Banks) to cooperatives. With the DIR, cooperatives are now able to raise funds directly from Banks through a shorter proceeding, which ultimately leads to better funding for Brazilian rural producers (with the traditional mechanism – the so-called "mother-certificate" or "cédula-mãe" – the process used to a minimum of 15 days, term deemed long by the market).
The above breaking news in Brazil seem to be relevant for local market players amidst a number of important legal developments reached in recent years in the country to trigger financings, secondary-market credit trades and business in general.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.