At session of June 30, 2004, the National Monetary Council (CMN) decided to reshape de criteria applicable to the interest equalization system of the Brazilian Export Finance Program – PROEX, a matter dealt with by Resolution nº 3219, whose main provisions are commented on ahead.

Financing to the exportation of goods and services, including software1, qualify to PROEX. The equalization consists of the benefit given by the National Treasury to the financer or refinancer, as the case may be, sufficient to make financial charges (interest rates) compatible with those found in the international market, it being payable with National Treasury Notes series I (NTN-I). The National Treasury’s finance agent for PROEX purpose is Banco do Brasil S.A. During the financing time, equalization is fixed and shall not exceed the rates set by the Brazilian Central Bank (Bacen).

As to exportation of aircrafts regional aviation, equalization of interest rate is to be established on a case-by-case basis depending on the characteristics of each transaction, due respect being given to the commercial interest reference rate – CIRR published by the Organization for Cooperation and Economic Development (OCDE) for the currency and timing of financing.

Equalization may be granted when: (a) financing is to be given to an importer for payment on-demand of a Brazilian exporter (exporter established in Brazil); and (b) refinancing is to be given to a Brazilian exporter. Agents accredited to give financing to importers and refinancing to exporters (finance agents) are the following: (i) Brazilian banks, including multi-service, commercial, investment and development banks resident or domiciled in the country and the Special Industrial Finance Agency – FINAME; and (ii) foreign banks, including credit or financial establishments located abroad, including Brazilian banks’ offshore branches, as well as the Andine Corporation of Development (ACD).

"Credit or finance establishment located abroad" is any establishment properly and legally organized under the laws of the country of location, in whose organization document a provision is found allowing the granting of credit as loan and subject to governmental control. Bacen may lay down restrictions to the participation of said establishments if it, at its sole discretion, finds inappropriate the credit granting procedures used in the country of origin. Credit instruments relating exports or, if applicable, the respective letter of credit may be freely traded abroad and such trading does not suspend or forfeit the right to equalization.

The principal of financing and refinancing transactions may be repaid semi-annually. That 6-month period will start counting as of the date of shipment or delivery of goods, invoice, commercial or finance agreement, or the date shipments are consolidated and/or services are invoiced. Those dates are referred to as events. Interest will accrue on the balance and will be payable every six months starting on the date of the respective event. The maximum time for consolidation of shipments and/or invoicing of services is 30 days. The date for consolidation will be the date of last event making up the consolidation. Transactions of less than 360 days are allowed provided that the principal and interest are repaid and paid, respectively, on the same date.

We will now discuss how the amounts owing for equalization will be calculated. The equalization timing will be the same as the timing for interest calculation purpose. In the event of financing to importer, for payment on demand of the exporter, or refinancing to the exporter, by a Brazilian bank, the timing shall start counting on the date of the credit to the exporter’s current account or of the respective event, whichever the latest. If the financing or refinancing is granted by a foreign bank, the timing may start counting on the date: (a) of settlement of exchange contracts for the partial export amount or of the respective event, whichever the latest; or (b) of liquidation of exchange contracts for the full export amount or of the respective event, whichever the latest, where said partial amount corresponds to 15% minimum of the export amount and provided that the equalization timing does not exceed the timing of financing granted under Resolution nº 2575 of the CMN2. The calculation will be made with the debtor balance in each period, re-compounded based on the maximum equalizable timing, if applicable, using the 36,500 for division and factoring in the maximum grace period, for the principal, of six months as of the date of the respective event. In the event of transactions with tenor not exceeding 360 days, the equalization timing is established: (i) based on the maximum equalizable timing, up to the financing timing, for financing of up to 180 days; or (ii) re-compounded in two periods, the first one of 180 days, and the second for the balance of days, also based on the maximum equalizable timing and up to the timing of the financing, for financing with tenor of 180 days to 360 days. A Ministerial Act will set the maximum equalization rate for export and the maximum equalization timing. If the financing is denominated in currency other than the US dollar, the amounts will be converted into US$, at the parity on the first day of the first period of equalization, as published by Bacen.

The amounts calculated as above will be payable to the financing agents (Brazilian or foreign banks) granting financing or refinancing under NTN-I, which nominal value is restated at the FX variance. In the calculation of the FX variance, the selling rate for US at the end of the last business day of the free exchange rates market prior to the issuance and of the business day preceding the maturity, published by Bacen will be used. The issuance of NTN-I is in the form of book-entry of the respective credit rights in the name of the financing agents (Brazilian and foreign banks), in the Special System of Settlement and Custody (Selic), whereby redemptions occur. The financing agents not participating in the Selic should enter into an agreement with a participant thereof, which agreement must provide: (a) the custody service for receipt of NTN-I; (b) use of the "Bank Reserves" account for financial activities resulting from equalizations, as well as from instrument trading; (c) authorization to carry out exchange transactions and respective transfers to or from abroad resulting from the redemption or trading of NTN-I, if the non-Selic participant agent is located abroad; (d) legal representation services for the necessary arrangements with the National Treasury Finance Agent for PROEX.

The NTN-Is are issued after the financing agent or the bank appointed as the legal representative states to the National Treasury Finance Agent for PROEX that it is in possession of documents that prove that the requirements ahead have been met, in the event of financing to importer, for payment on demand of the exporter, or refinancing to the exporter, by a Brazilian bank. For financing or refinancing is granted by a Brazilian bank, the following evidence is necessary: (i) shipment of goods and, if applicable, invoicing of services; (ii) deposit to the exporter’s account of the amount in Brazilian reals equivalent to the amount financed; (iii) liquidation of the FX transaction for the non-financed portion, if any; and (iv) copy of the credit instruments connected with the exportation, properly accepted and endorsed or, as the case may be, the respective letter of credit, in the refinancing granted to exporters. In the case of financing or refinancing granted by foreign bank, the following evidence is necessary: (i) shipment of goods and, if applicable, invoicing of services; (ii) settlement of FX transactions for the full or partial amount of the exportation, as the case may be; and (iii) copy of the finance agreement entered into by the parties or credit instrument connected with the exportation, properly accepted and endorsed or, if applicable, of the respective letter of credit. Resolution nº 3219 explains it may be required in the future the presentation of other related to the credit granted in Brazil or abroad.

If exchange contracts relating the entry of the sum in foreign currency corresponding to part of the principal or of the Interest remain unsettled, the financing agent must return the amount received for the redeemed NTN-Is, pro rata to the amount in foreign currency that failed to enter the country, plus charges calculated at the Selic rate accruing since the NTN-I redemption date and the business date immediately preceding the date of the return. To that end, Bacen may charge via the Central Bank’s Entry System – SLB the amounts owing by the financing agent or, as the case may be, by the bank appointed as its legal representative.

As the Finance Agent of the National Treasury for PROEX, Banco do Brasil S.A. is tasked with: (a) receiving the goods, services and software export financing or refinancing qualification forms; (b) submitting to the Export Financing and Guarantee Committee – COFIG3, preliminarily, any request for exportation of services and aircrafts for domestic aviation; (c) presenting to the COFIG the approval forms for other export transactions which, after examination, have characteristics other than those required; (d) preparing accreditation letters for approved transactions; (e) submitting to COFIG the appeals; (f) following up on and controlling the financial and budgetary performance of the PROEX; and (g) laying down instructions about the operational processing of PROEX and giving exporters information required in the use of that Program. COFIG may set the authorities, delegate other duties and recommend procedures to Banco do Brasil S.A. When analyzing the qualification application forms forwarded to COFIG, the criteria used by this Committee will be the same as the financing conditions found in the international market.

The Ministry of Finance, Ministry of Development, Industry and Foreign Trade and the Bacen, within their respective authorities, will law down complementary rules that may be necessary in the implementation of PROEX.


1. Law nº 9,609, of February 19, 1998, referred to in Resolution nº 3219, makes provisions on the software and industrial property protection. The definition of software found in article 1 of Law nº 9609/1998 is the following: "Software is the expression of an organized set of instructions in natural or code language, contained in a physical support of any kind, necessarily employed in automatic machines for the manipulation of data, devices, tools, or peripheral equipment, based on digital or analog technique, so they will operate in the way and with the purposes determined."

2. Resolution nº 2,575/1998 of the National Monetary Council determines that Brazilian exports of goods and services and software can be financed with PROEX funds in the following situations: (a) negotiation of respective export instrument and documents; or (b) finance contract entered into by and between the Brazilian government and foreign entities. It also determines that the PROEX funds may not be used for creation of credit facilities. This resolution does not set minimum timing for the contracting of export financing, but sets prior presentment of evidence as a condition to release funds to exporter: (i) shipment of goods and, as the case may be, invoicing of services; (ii) settlement of the exchange transaction relating the non-finance portion, if any; and (iii) pledge of guarantees securing the full repayment of financing granted and accruing interest. This resolution allows the following guarantee: (a) aval guarantee, guarantee, letter of credit or instruments similar to aval guarantee and guarantee, pursuant to the laws and regulations of the guarantor country, signed by major credit or finance establishments; (b) commercial letters of credit (créditos documentários) or instruments issued or aval guaranteed by accredited institutions in the country participants of the Reciprocal Payment and Credit Agreement (CCR), after satisfaction of all automatic reimbursement formalities; (c) insurance of export loan; (d) aval guarantee by the government or official banks in the importing country, in the event of transactions with public entities; or (e) others, at the discretion of the Export Credit Committee (CCEx). The duties of CCEx are now incumbent on the Export Financing and Guarantee Committee – COFIG. There is no recourse by the National Treasury against the exporter if the guarantee is represented by the instruments indicated in items (a) or (b). In the case of insurance to export loans, exporter’s liability is limited to the repaid debt not covered by the credit insurance. In the case of item (d), the relevant body (formerly CCEx and now COFIG) may, exceptionally, waive the right of recourse against the exporter, informing CMN immediately thereof.

3. COFIG is a collegiate body, part of the Foreign Trade Chamber – CAMEX, whose duties include to approve and follow up on PROEX and Export Guarantee Fund– FGE transactions, setting the parameters and conditions for the financial support to exports and pledge of guarantee of the Union. COFIG fathers the duties formerly discharged by CCEx, referred to in Resolution nº 2575/1998 of the CMN, and of the Steering Committee of the Export Guarantee Fund – CFGE, expediting support to exporters in financing and export guarantee transactions. COFIG is made of a permanent representative and the respective alternate, appointed by: (i) the Executive Secretariat of the Ministry of Development, Industry and Foreign Trade, which presides over it; (ii) the Ministry of Finance, which operates the Executive Secretariat of the Committee; (iii) Ministry of Foreign Affairs; (iv) Ministry of Agriculture, Livestock and Supply; (v) Ministry of Planning, Budget and Management; (vi) Chief of Staff of the Presidency of the Republic; and (vii) Secretariat of the National Treasury, of the Ministry of Finance. The decisions and deliberations of COFIG are made by consensus. Participating in the COFIG, without right to vote, there is a permanent representative and respective alternate, appointed by: (a) Banco do Brasil S.A.; (b) the National Bank for Social and Economic Development – BNDES; (c) IRB – Brasil Resseguros S.A. (The Brazilian Reinsurance Company); and (d) Seguradora Brasileria de Crédito à Exportação S.A. – SBCE (The Brazilian Insurer of Export Loans). COFIG meets monthly or whenever called by its Chairperson (see Decree nº 4993, of February 18, 2004, and Resolution CAMEX nº 7, of March 4, 2004.)

Walter Douglas Stuber is an expert in Banking Law and Capital Markets, Foreign Investments, M & A, Commercial and Corporate Law, and partner of Stuber - Advogados Associados.

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