The Foreign Exchange Market and New Brazilian Regulations.
By: João Campanelli

Some time ago, I wrote a column about new exchange rate legislation, demonstrating some of the main changes and innovations that the Central Bank of Brazil (Bacen) planned to implement based on Law 14,826 of 29.12.2021, enacted by Brazil’s Congress.

We now face public consultation no. 90, which will clarify and reflect the changes called for by the market, with implementation scheduled for January 2023. Among the requirements disclosed, the main points that Bacen highlights are:

• Permission to use the authorized institution’s criteria to request or issue ancillary documentation for foreign exchange operations, considering the client’s assessment and the characteristics of the operation
• Simplification of classifying the purpose of foreign exchange transactions
• Free format for foreign exchange operations, in compliance with the requirements established by the Central Bank
• Reduction of asymmetries in the requirements for opening, maintaining, and using accounts in Brazilian reals held by non-residents compared with those required for residents’ accounts

These changes are essential and will have an enormous effect on the client’s relationship with institutions authorized to operate in foreign exchange, increasing transparency and aligning responsibilities with those involved in foreign exchange operations.

Let’s take a closer look at Public Consultation No. 90. We will see the qualification of responsibilities for information and the facilitation of the exchange process, among some major changes.

This will take Brazil’s foreign exchange market to a new level, closer to that found worldwide, mainly in more developed countries, where a foreign exchange operation is carried out the same way a day-to-day payment is made.

Although financial institutions, and those authorized to operate in foreign exchange, are the biggest beneficiaries of this new legislation, we also see there will be major changes in the day-to-day life of companies, which will be impacted by the assumption of responsibility for information and the correct classification of their operations, now being fully responsible for their actions. Even if this situation does not remove responsibility from agents authorized to carry out foreign exchange operations to recognize the classification as correct, companies now have complete control of their payments and, I believe, will have increasingly digitized and automated processes facilitating exchange rate deals every day.

I believe that this process of implementation and adjustment will go on for the next two to three years because there are many details to be sorted out, and many clash with each other in the current consultation. As Bacen says, from 2023, “important discussions that can be added to new legislation will be taken further.”

Finally, we can see that disruption in the foreign exchange market has begun, and we have a long way to go. The beginning is exciting but full of pitfalls that we need to be aware of, so change is made in the best possible way, without the need for a constant return to this issue.

In an ideal world, from now on, we would remain updated, so we are truly inserted in a global payment and receipt community that will offer Brazil a strong currency (the real), an increasingly healthy economy, and no internal or external influences, other than day-to-day, market forces.