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• 7 January 2022
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The main changes brought by the New Foreign Exchange Law

The New Foreign Exchange Law (“Law 14,286/21”), published on December 30, 2021 in the official federal gazette aims to modernize, simplify and bring more efficiency to the foreign exchange market in the country. The new rule also provides for Brazilian capital abroad, foreign capital within the country and the compilation of official macroeconomic statistics. The Presidency of the Republic has sanctioned without vetoes the text of Bill No. 5.387/19, approved by the Chamber of Deputies in February 2021 and by the Federal Senate on December 8, 2021.

As part of the so-called BC# Agenda, promoted by the Central Bank of Brazil (“BCB”), Law 14,286/21 aims to modernize the Brazilian foreign exchange legislation, which today comprises a diffuse set of more than 40 laws, many of them in force since the beginning of the 20th century, when Brazil faced a shortage of international currency. Law 14,286/21 brings Brazilian foreign exchange legislation closer to international standards, in addition to compiling the theme in a single legal text.

Below, we list the main changes brought by Law 14,286/21, which will come into force one year after its official publication, that is, as of December 30, 2022. Furthermore, we emphasize that the BCB and the National Monetary Council (“CMN”) will issue regulations concerning the matters addressed in Law 14,286/21.

1. Circulation of Reais Abroad

Article 6 of Law 14,286/21 authorizes banks operating in the foreign exchange market, in the form of a regulation to be issued by the BCB, to comply with payment orders in reais received from abroad or sent abroad, through the use of accounts in reais held at banks, held by institutions domiciled or headquartered abroad and that are subject to financial regulation and supervision in their country of origin. The objective is to increase the circulation of reais abroad, while overturning a historical limitation on the investment abroad of funds raised in the country.

2. Payment in Foreign Currency of Feasible Obligations in National Territory

Article 13 of Law 14,286/21 lists the situations in which obligations enforceable in national territory can be paid in foreign currency. Among them, item VII stands out, which provides for contracts entered into by exporters in which the counterparty is a concessionaire, licensee, authorization holder or lessee in the infrastructure sectors. In view of this, the landmark Decree-Law No. 857, of September 11, 1969, which, together with the Real Plan Law, were the main normative bases of the matter until then, is revoked.

3. Equal treatment between resident and non-resident accounts in Brazilian reais.

Article 5, §4 of Law 14,286/21 establishes that accounts in reais held by non-residents will have the same treatment as accounts in reais held by residents, except for the requirements and procedures that the BCB may establish. This is expected to be a breakthrough from a practical point of view in this matter.

4. Private Compensation between Residents and Non-Residents

Article 12 of Law 14,286/21 authorizes the private offsetting of credits or values between residents and non-residents, in the cases provided for in the regulation of the Central Bank of Brazil. Under current legislation, such compensation is prohibited.

5. Competence for Exchange Operation Classification

Article 4, §§ 2 and 3 of Law 14,286/21 transfers to the taxpayer the responsibility to classify their own exchange operation, as provided for in the regulation to be issued by the BCB. Until then, this duty belonged to the financial institutions, which could even be penalized in case of erroneous classification of the nature of the operation. However, Law 14,286/21 obliges financial institutions to provide assistance, whenever necessary, to their clients for the correct classification of said operations.

6. Documents Required by Institutions in Foreign Exchange Transactions

Article 27 of Law 14,286/21 prohibits institutions authorized to operate in the foreign exchange market from demanding documents, data or certificates from their clients that are available in their databases or in public and private databases with wide access. Such provision is intended to make the business environment simpler for citizens. However, the client is entitled to present the aforementioned documents, data or certificates.

7. Investment of Funds Raised in Brazil in Operations Abroad

Article 15 of Law 14,286/21 extends to financial institutions and other institutions authorized by the BCB (including payment institutions) the competence to allocate, invest and allocate for credit and financing operations, in Brazil and abroad, the funds raised in the Country and abroad, subject to regulatory and prudential requirements established by the CMN and the BCB. This is a technical change that formalizes and increases the legal certainty of a regulation in force with a similar wording.

8. Centralization of Regulatory Capacity in the BCB

Law 14,286/21 determines the centralization of the regulatory capacity of the Brazilian foreign exchange market in the figure of the BCB in several articles, among which article 18 stands out, granting the BCB the ability to establish special requirements and procedures for market operations exchange rate more effectively.

9. Need to declare amounts greater than US$ 10,000.00 (ten thousand United States dollars) in foreign currency in cash, upon entry and exit from the country

Article 14, §1 of Law 14,286/21 raises the amount that must be declared in foreign currency in cash, upon entry in or exit from the country, from BRL 10,000.00 (ten thousand reais) to US$ 10,000.00 (ten thousand US dollars). This change is due to the historical context that defined the previous value, referring to the genesis of the Real Plan, where the parity against the dollar was 1:1. Thus, there was only an adjustment in order to reflect the current international macroeconomic situation.

Additionally, §2 of the same article, in its item II, provides that the BCB will regulate which types of institutions authorized to operate in the foreign exchange market that cannot enter the country and leave the country of national or foreign currency, considering the size, nature and business model of the institutions, in line with the principle of regulatory proportionality.

Our office has a team specialized in Banking Law. For clarification on this subject, or others that might be of interest, please contact our professionals.

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