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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 Bacen pursuant to Law No. 4131, of September 3, 1962, as
amended by Law No. 4390, of August 29, 1964, and relevant
regulation.
The entry of the funds into the country may be effected through
international transfer of Brazilian currency (Real),
including payment orders expressed in Brazilian currency originated
from abroad, or exchange contract either for immediate settlement
(liquidação pronta) or for future settlement
(liquidação futura), to be settled before
the shipment of goods or the provision of the service.
The repatriation of the funds which entered into the country for
PA is also admitted but in this case the transaction will be
subject to the same tax treatment given to loans which are not
destined for export financing.
In both situations in which the export transaction does not
occur, namely: (i) conversion of the PA in direct investment or
loan currency and (ii) repatriation of funds, the Brazilian
exporter will have to evidence before Bacen the payment of the
Brazilian withholding income tax due by foreign residents with
respect to the interest eventually remitted abroad and regarding
the installment whose goods have not been embarked or whose service
has not been rendered.
Footnotes
1. The justification for this restriction was based on
the growth of around 40% in the first couple of months of this
year, compared with the same period in 2011, in anticipation for
long-term operations (with more than 360 days). There was a
suspicion that much of these funds was sent to Brazil for another
purpose as to speculate with currency exchange. From January to
February of 2012, the anticipation of resources to finance exports
totaled US$ 8.9 billion, of which US$ 5 billion in long-term
transactions and US$ 3.9 billion in short-term.
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