Senate approves bills of individuals in dollars in Brazil, and text goes to sanction

This Wednesday (8), the Senate approved a bill that promotes a series of changes in the Brazilian foreign exchange market. The proposal also opens the way for individuals to have bank accounts in foreign currencies, such as the dollar or the euro.

The text was approved in a symbolic vote. As it had already been processed by the Chamber of Deputies, it goes straight to the sanction of President Jair Bolsonaro (PL).

Among other changes, the project allows Brazilians to leave or enter the country with up to US$ 10,000 without having to declare them to the Federal Revenue. Currently, the limit is R$ 10 thousand.

The proposal was sent to Congress in 2019 by the federal government, being an initiative of the Central Bank and the institution’s president, Roberto Campos Neto. The objective would be to modernize the foreign exchange market, but the authorities said that this permission for accounts in foreign currencies would take place gradually, concurrently with other reforms and macroeconomic adjustments.

The initiative increases the Central Bank’s autonomy to regulate the exchange market.

The basic text of the bill had already been approved by federal deputies in December 2020, but outstanding votes were still pending. The proceedings in the Chamber of Deputies were fully completed in February this year.

The current foreign exchange legislation is spread over more than 40 laws and other provisions and also seeks to adapt Brazil to the recommendations of the OECD (Organization for Economic Cooperation and Development).

The version that goes to presidential sanction allows the Central Bank to edit regulations so that individuals can open and maintain accounts in foreign currency in Brazil.

Currently, this practice is only possible in some specific situations, such as embassies, consulates and exchange brokers.

“Transactions in the foreign exchange market can be carried out freely, without limitation of value, observing the legislation, the guidelines established by the National Monetary Council and the regulation to be published by the Central Bank of Brazil”, states the text.

The possibility of opening a foreign currency account in the country has been authorized since 1957. As the project only empowers the Central Bank to regulate accounts in foreign currency, there is no definition of what the FGC (Credit Guarantee Fund) guarantee would be like in the type deposits.

The project brings other changes to the foreign exchange market. It removes, for example, the ban on foreign banks that have an account in reais in the country to make payments abroad. Currently, the institution can only use the account to make payments in Brazil.

The text also makes it easier for international institutions —such as foreign central banks and institutions domiciled abroad— to have deposit and custody accounts in reais. It also expands the legal provisions so that the real can be used in business abroad.

These measures “simplify the participation of international investors in the transaction of government bonds – denominated in reais – abroad, allowing for an increase in the negotiation of the national currency in global financial markets”, says the text by the rapporteur in the Senate, Carlos Viana (PSD-MG ).

Viana kept the text that had been approved by the Chamber of Deputies unchanged.

“The possibility that individuals and legal entities hold accounts in foreign currency in Brazil brings the country closer to something common in developed economies, as well as in the main emerging economies. The use of foreign currency accounts can increase efficiency in some situations. For example , companies that supply inputs to exporting companies could eventually have accounts in foreign currency, which allows the realization of a natural hedge for exporting companies that have revenues in foreign currency,” stated the rapporteur in his text.

“This reduces costs for companies in the Brazilian market that belong to the production chain of the export or import market, increasing exchange efficiency and, ultimately, benefiting the consumer. The cost of this financial innovation without proper insertion in the global economy can be a an increase in demand for a more stable foreign currency in the face of any exchange crisis,” he adds.