Brazil: Senators push to ease FX law
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Foreign Exchange

Brazil: Senators push to ease FX law

Tough regulations hold back trade volumes.

Brazil’s 70-year-old foreign exchange laws have always been a headache for exporters. Lawmakers backing a bill to overhaul the complex rules say companies such as Brazilian aircraft maker Embraer lose up to 4% of their annual revenues because they are obliged to convert US dollar-denominated earnings from exports into reais and then back again to pay for imported components. Now two leading Brazilian senators, with the support of the country’s powerful industrialists, aim to dismantle the tough regulations, which date back to 1933, arguing that the growth of Brazil’s international trade is being held back by them.

Brazil's overvalued currency
The real strengthening vs the US dollar
Source: Reuters

One of the central tenets of the bill is that companies should be allowed to keep export dollars abroad or hold them in new foreign currency bank accounts in Brazil for longer than 210 days, removing the limit that forces exporters to convert their dollar sales into reais once a transaction has gone through. That would also permit companies to choose when to move dollars into reais depending on their judgement on the prevailing exchange rate.

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