New Foreign Exchange Bill (2019)- Why Post a Photo of 2008? (Photo blocked)

Because the new foreign exchange bill sent to Congress in early October (PL5387 / 2019) deepens the foreign exchange liberalization that took place over the past two decades in Brazil. Today I will comment on the simplification of international remittances that began in 2008 and will, if approved be a factor in strengthening financial citizenship.

The VII Central Bank Microfinance Seminar (Belo Horizonte - 2008) was the first time that international remittances were treated as an aspect of financial inclusion at the Central Bank of Brazil. That year, as Deputy Governor for International Affairs, responsible for foreign exchange regulation, under Henrique Meirelles's administration, studies were conducted and measures taken to make life easier for citizens receiving international remittances and to liberalize other aspects of foreign exchange legislation 1/.

The Foreign Exchange Bill proposes two changes regarding remittances, both subject to subsequent Central Bank regulation:

• The ability to comply with orders sent abroad through bank accounts in Reais. Receipt of payment orders in Reais has been possible since 2008. 2 /

• The possibility of authorizing other types of institutions - read fintechs - to process international remittances subject to the customer and recipient identification requirement. Nowadays fintechs can send abroad remittances of up to $ 3000 directly. Above this amount, they can only act as bank correspondents. The first simplification in this area was also carried out in 2008. 3 /

Only ten years after the first measures, the Central Bank of Brazil took another step in simplifying small international remittances by approving Circular 3914/2018. What was the news? Thereafter the transferring organization, whether a financial institution or not, may consolidate several payment orders, remit them in aggregate to a financial institution in Brazil and make only one foreign exchange transaction in the country, provided that the original amounts of each order are up to Reais 10,000.  This change enables a reduction in the transaction cost for the person receiving the money. In the 2008 regulation, remittances in Reais were to be made individually.

Because they are not as significant in Brazil as in other Latin American countries, remittances did not receive the same attention of policymakers as  in the case of Mexico and Central American countries where they are an important share of GDP. However, they are of great relevance to citizens and have a very significant financial and transactional costs.

There exists clear inefficiencies in the area of international remittances and, therefore, room for new technologies and less bureaucracy to thrive. I really believe that remittances can undergo a disruptive transformation soon. Facebook intends to attempt in this area and even if it does not succeed with Libra, other heavyweight competitors may emerge.

NOTES

1 / Details in an article by Arraes, Maria Celina published in the Central Bank Attorney General's Magazine - v. 9 - no. 2 - ten. 2015, page 36. https://revistapgbc.bcb.gov.br/index.php/revista/issue/view/7

2 / Law No. 11,803, of November 5, 2008, allowed banks authorized to operate in the foreign exchange market to comply with payment orders in Reais, received from abroad, through the use of funds in national currency maintained deposit accounts held by banks, domiciled or headquartered abroad. Under the aforementioned Law, National Monetary Council (CMN)  issued Resolution No. 3,657 of 2008, making it possible for bank correspondents in Brazil, in national currency, to foreign banks, with the same function performed by correspondents abroad of Brazilian banks, to money order execution in foreign currency.

3 / CMN Resolution No. 3,568, 2008, extended the possibility of hiring correspondents also to purchase and sell foreign currency with customers, subject to certain conditions. These are the so-called foreign exchange correspondents, with a broader scope than bank correspondents, as they include companies hired by any member of the National Financial System authorized to operate in the foreign exchange market, including non-bank institutions, such as brokers and distributors.

The service provided by the correspondent in foreign exchange operations is limited to the amount equivalent to US $ 3,000.00 and should be contractually restricted to the following operations: i) purchase and sale of foreign currency related to international travel, the so-called manual exchange; (ii) active or passive execution of a payment order relating to unilateral transfer to or from abroad; and iii) receiving and forwarding proposals for foreign exchange operations. (In the first issue, only tourism agencies registered with EMBRATUR / Ministry of Tourism NA had been authorized as correspondent banks).

The exemption from the use of foreign exchange contract in operations up to US $ 3,000 had been established by Law No. 11,371 of November 28, 2006, as a way to reduce transaction costs in small value operations. Extracted from Magela, Geraldo. Exchange and International Capital. Aduaneiras. 2016.