Apresenta��o Alexandre Schwartsman BID 2004 by Pnh6FNS9

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									Financing Brazilian Trade




            Alexandre Schwartsman

                       March 2004
                                    1
         Recent developments in the trade front

80,000                                    130,000

                                          120,000
70,000        Exports
              Imports                     110,000
60,000        Total trade
                                          100,000
50,000
                                          90,000

40,000                                    80,000

                                          70,000
30,000
                                          60,000
20,000
                                          50,000
10,000
                                          40,000

    0                                     30,000
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                                                    2
               Peculiarities of FX regulation in Brazil

 Brazilian law requires exporters to repatriate proceeds of their foreign
sales


A detailed ritual specifies how trade transactions should occur
     Exporters (and importers) need to celebrate FX contracts with financial institutions
    before or after the shipment
     Export proceeds must be deposited in the account of a Brazilian bank abroad
     The bank then repatriates the hard currency and provides domestic currency for
    exporter
     “Export surrender” is the basis of Brazilian FX regulation

In response to these requirements a complex and sophisticated control
system was put in place


                                                                                             3
            Foreign trade requirement controls - 1

 The Federal Revenue Service controls shipment and inflow of exports
and imports through SISCOMEX, an online register system


SISCOMEX data are then transferred to the Central Bank in a daily basis


Banks input FX contract data into Central Bank own system (SISBACEN),
which includes SISCOMEX reference


The Central Bank then checks the consistency of the data




                                                                           4
                           Export process and controls


                                   Shipment
        Exporter                                     Importer




                                  SISCOMEX
                   Pre-shipment
FX contract           control                             Foreign currency



                                  SISBACEN
                                              Post-shipment
                                               control

          Bank                                        Bank
         onshore                  FX market          offshore



                                                                             5
             Foreign trade requirement controls - 2

 Exporters can sign FX contracts up to 360 days before shipment




 Settlement of FX contracts is defined by either the credit in the exporter’s
bank account abroad, or by another payment instrument




 Export FX contracts must be settled up to 180 days after shipment




                                                                                 6
         Export financing recovery – total flows

80,000


75,000
                Exports (cash)   Exports (shipment)

70,000


65,000


60,000


55,000


50,000
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                                                                  1,000
                                                                              2,000
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                 -5,000
                          -4,000
                                   -3,000
                                            -2,000
                                                     -1,000
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                                                                          Cash minus shipment




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                                                                                                                Export financing recovery - balance




8
                                                     Financing exports

 Alternatives for export financing:


     Anticipated payments
     Pre and post export financing (ACC and ACE)
     Public financing
     Private financing with interest rate equalization
     Self-financing


ACCs and ACEs are the most important sources of export financing, and
both are tightly related to the controls discussed before, in particular the FX
contracts


                                                                                  9
     de
        z




                   29.5%
                           30.0%
                                   30.5%
                                           31.0%
                                                   31.5%
                                                           32.0%
                                                                   32.5%
                                                                           33.0%
                                                                                   33.5%
                                                                                           34.0%
            /0
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                                                                                                   Share of ACCs in export financing




10
                       Financing and controls: ACCs - 1

 Pre-export financing (ACC): bank can advance to exporter the proceeds
of the sales associated to a particular FX contract (up to 360 days)
 From a legal standpoint ACC is not financing, but an advance
     In case of bankruptcy of either the exporter or the intermediary, advances are
    not included in the assets to be shared among different creditors
     Hence, proceeds associated to the exports in question are destined to the
    amortization of the trade financing line underlying the ACC
     This feature is likely to be maintained in the new bankruptcy law

 Post-export financing (ACE) shares the same features, except that it
takes place after the shipment (180 days limit)
 In addition to the lower credit spread, ACCs and ACEs are exempt from
income and financial taxes
 Not by chance, ACCs and ACEs represent the most relevant mechanism
of export financing
                                                                                       11
12
                                                            Monitoring

 Since the end of 1998 the Central Bank closely monitors inter-bank credit
lines, including trade related lines
 This monitoring covers about 90-95% of these lines, specifying:
     Creditor
     Type of credit (exports/imports/loans/etc.)
     Country
     Currency
     Value
     Cost
     Maturity


In addition to that, the Central Bank keeps the registers of both investment
and loans
                                                                                13
     ja




                                                                                        10 000
                                                                                                            11 000




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                          3 000
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                                                              7 000
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                                                      6 560




     m 3
                                                                                         Export financing




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                                                                                         Import financing




            04
                                                                        8 043




14
                                                                                                                     Trade finance lines survey
                Complete trade financing lines statistic


                                             Dec-99   Dec-00   Dec-01   Dec-02   Sep-03   Dec-03
Private sector and public financial sector   23 291   24 842   27 231   23 285   18 889   20 152
    Interbank credit lines                   12 869   12 403   10 863    8 241    8 650    8 667
       Exports                                7 539    7 309    6 640    5 349    6 912    6 566
       Imports                                2 333    2 294    2 597    1 321    1 110    1 038
       Other                                  2 998    2 799    1 625    1 571      628    1 063
    Bank-companies credits                    1 691    1 726    2 233    1 743     738      650
       Imports                                1 278    1 249    1 290    1 279      343      287
       Loans                                    413      477      943      464      395      363
    Companies-companies credits                 571      642      628    1 023     383      428
    Other                                     8 160   10 071   13 507   12 279    9 118   10 407




                                                                                                   15
                       Balance of payments monitoring
 As a rule, the Central Bank has a very accurate online system of balance
of payments monitoring




 The Central Bank discloses monthly data on the entire balance of
payments (some 300 plus different lines related to the current and financial
accounts)




 In practice, these data are available on a daily basis




 The requirement that exporters repatriate the hard currency is the main
responsible for the complex monitoring system
                                                                               16
                                              Some conclusions
 The detailed regulation and control of the Brazilian FX market implies
some costs to the private and public sector


 These costs notwithstanding, balance of payment statistics are very good
and can be obtained very fast




 Hence, monitoring of trade financing lines, for both prudential and
balance of payments reasons, takes place on a daily basis, with online
information


Reform proposals of the FX regulation should try to preserve as much as
possible the reliability and speed of the data

                                                                             17

								
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