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Flag of Brazil
System of government: federal republic
Population: 204.3 million (2015)
Currency: Brazilian real (BRL)
FX regime: floating exchange rate
GDP: USD 2.244bn (2014)
IGTA member: no
FATF member: yes
Other professional financial/banking associations:

Federação Brasileira das Associações de Bancos (Brazilian Federation of Banks) Associação Brasileira de Bancos (Brazilian Association of Banks)

ANBIMA – Associação Brasileira das Entidades dos Mercados Financiero e de Capitais (Brazilian Financial and Capital Markets Association)

Financial regulatory framework

Bank supervision

The central bank, Banco Central do Brasil (BCB), is in charge of regulating, inspecting and supervising all financial institutions. At the same time, it is responsible for controlling monetary stability. Its main goal is to ensure the stability of the currency's purchasing power and a solid and efficient financial system. Regarding the latter, in May 2011 the BCB created a Financial Stability Committee (COMEF) as part of its organisation to evaluate financial stability in the country and to implement strategies to keep systemic risks under control. The Committee is made up of the BCB president and directors and all the deputy governors of the monetary authority. It centralises all the activities related to financial stability within the BCB. In addition to BCB's activities, the Securities Commission (CVM) also has regulatory and supervisory authority regarding the activities of investment banks, third party fund managements (such as mutual funds and foreign investment portfolio), intermediaries (such as commodities and future exchange and stock exchanges) and some settlement and custody systems.

Exchange controls

Resolution 3.265 dated 4 March 2005 has consolidated the two existing foreign exchange markets, commercial and tourism, into one single floating exchange rate market. This resolution helped to liberalise exchange controls. The BCB has announced several measures to help reduce structural exchange controls, including rulings for the consolida-tion of the Brazilian exchange markets into one single floating exchange rate market. As from 3 February 2014, the International Capital and Foreign Market Regulation (RMCCI) has been replaced by four new circulars (Circulars 3691, 3690, 3689 and 3688, of 16 December 2013), in a move aimed at making regulation clearer and simplifying foreign exchange policies. The following provisions were, however, maintained:

  • Obligation to register with BCB (particularly all foreign exchange transactions).
  • Obligation to record foreign exchange transactions via foreign exchange contracts for all transactions higher than USD 3,000.
  • Rules applicable to foreign capital investments and loans.
  • Requirement to observe operational procedures concerning the recording with BCB of data related to loans, investments and commercial transactions.

Restriction on foreign investment/ownership

In general, there are no restrictions for the participation of foreign capital in national activities. A few activities, however, are restricted as far as foreign investors are concerned. This is the case for postal services, health services, sanitation, nuclear energy and airlines with domestic flights. There are also certain restrictions on participation of foreign capital in financial institutions, insurance companies and in the media sector. With respect to financial institutions, however, the restrictions can be lifted with regard to national interest.

Restriction on non-residents' operations in domestic markets

Investments in financial and capital markets by non-resident investors follow Resolution 4.373 dated 2014. The two main restrictions are:

  • Enrolment with the Securities Commission and Internal Revenues Board.
  • Appointment of at least one representative in Brazil.

Taxation framework

Brazil has a complex and inefficient tax system. The tax burden was around 28% of the GDP in 2014. Federal taxes amount to 25% of the GDP and state and municipal taxes to the remainder.

Federal taxes

  • Income taxes – Personal income tax (IRPF) is levied at a rate that varies from 7.5% to 27.5% depending on the income level.
  • Corporate income tax (IRPJ) is levied at a rate of 15%. In addition, a 10% surtax is imposed on taxable income exceeding BRL 240,000 on an annual basis. Income, capital gains and profits are equally subject to corporate income taxes. There is no distinction with respect to the origin of the capital (foreign or domestic).
  • Finally, an income withholding tax is levied on certain domestic transactions (such as income derived from banking investments) and on non-residents' income that has a Brazilian source of payment. Rates vary but in general are within the 15% to 25% range.
  • Social charges – Social contribution tax (CSLL) is levied on entities subject to the IRPJ. The CSLL rate is 9% in general and 15% for financial institutions.
  • Social contribution for social security funding (COFINS) levied on gross income. Rates vary from 3% to 7.6%.
  • Other social charges include a contribution to the social integration programme (PIS) and a contribution for the intervention in the economic domain (CIDE), which is levied on fuel operations, on remittance to foreign individuals, on royalties and on technologic transfers.
  • Value-added taxes – The tax on industrialised products (IPI) is levied on industrial production, including industrialised imports but excluding exports. The average rate is 20%.
  • Financial taxes – The tax on financial transactions (IOF) is levied on credit operations, insurance premiums, securities trading and exchange transactions. Rates vary largely depending on the transaction. In the most recent years, the government has been using the IOF tax on foreign capital inflows with the goal to try to control exchange rate fluctuations. More recently, the government has been reducing and eliminating IOF taxes on foreign capital introduced in the last few years.
  • Other taxes – Other federal taxes include import and export taxes and a rural property tax (ITR).

State taxes

  • Value-added taxes – The tax on goods, communications and transportation (ICMS) varies from 4% to 25% depending on the state. It averages 18%. Exports are exempt.
  • Other taxes – Other state taxes include an inheritance and gifts tax and a tax on the ownership of motor vehicles.
  • Municipal taxes – Municipal taxes include a tax on urban properties, a tax on real estate transfers and a tax on services, which applies to a set of specific services.

Banking system

Since the launch of the Real Plan in 1994, the Brazilian financial system has experienced a deep process of restructuring, mainly the consolidation of the number of banks, reduction of a public sector presence in the market and an increase in the participation of foreign banks. Since 2008, however, there has been a sharp expansion of state-owned commercial and development banks and credit from public sector banks now represents 52% of the total credit market in Brazil, which compares to 34% in 2007. Brazil has implemented Basel III standards. As the monetary authorities noted, domestic institutions are in a relatively good position to meet the new capital requirements, given their current capital levels and the Brazilian prudential regulation now in force. In line with Basel III provisions, financial authorities have established a schedule of gradual deployment of capital requirements from 2013 to 2019.

Clearing and payment systems


The launch of the Sistema de Tranferência de Resevas – STR (Reserves Transfer System), in April 2002, marked the beginning of a new phase in the Brazilian payment system. The focus of the system was redirected to risks management from dealing with high inflation. With this system, operated by the Central Bank, Brazil joined the group of countries whose interbank funds transfer can be settled irrevocably and unconditionally on a real-time basis. The core features of the payment system are:

  • Clear definition of the role of the BCB in the payment system and establishment of a well-founded legal basis to allow better risk control.
  • Setting up of a large-value fund transfer system at the BCB, operating under a real-time gross settlement (RTGS) mode and a real-time monitoring of bank's reserve account balances to avoid the possibility of overdrafts at any time.
  • Enabling clearing houses to assume certainty of settlement through the establishment of proper safeguard mechanisms.
  • Clear definition of all the risks involved in every stage of the pre-settlement and settlement process.


  • Cheques – In 2014 cheques represented 4% of the total number of transactions. This payment instrument market share has been decreasing in the last years as payment cards have been gaining in importance (cheques' share was 62% in 1999).
  • Payment cards – The use of credit and debit cards has evolved significantly in the last few years. According to the Central Bank, transactions with payment cards represented 38% of total transactions in 2014. In 2011, the BCB implemented Resolution 3.919 to set a new and more modern legal basis for the sound development of the payment card industry in Brazil.
  • Credit transfers – Increasingly, companies are using banks for their electronic payrolls. Since direct payroll credit is now mandatory for most companies, banks have developed special services targeted at employees and are actively pursuing payroll accounts, mainly because the choice of bank where the employee would receive the salary was made by the companies and not by the employee. Since 2006, a regulation implemented by Central Bank, Resolution 3.402, allows the employees of private companies to choose the bank that their salary will be credited to; for public sector companies this regulation started in 2009. In 2014, 38% of all payment operations were made through credit transfers.
  • Direct debit – The number of transactions in which the customer allows a company to make charges to his or her bank account automatically increased from practically zero in 2008 to 20% of total payment transactions in 2014.
  • Electronic payments – There has been a strong government push towards electronic tax payment methods by corporations and financial institutions.
  • Collections – The basic collection service consists of specialised collection slips (boletos) that customers use when paying by cash or cheque at the teller windows for their commercial or consumer merchandise or services. Such payments can also be electronic. Collection slips are the main method of payment in Brazil. Boletos services are highly sophisticated, evolving to a full paperless process. The bank collects the funds, prepares detailed reports and provides them to their corporate customers either electronically or in paper form. While large banks with an operating services franchise still have in-branch collection windows for their corporate customers, cheaper new alternatives based on centralised electronic funds transfer are frequently used.

Benchmark rates

The benchmark interest rate used locally is the SELIC (Sistema Especial de Liquidação e Custodia, or Special System of Clearance and Custody). The SELIC rate is the BCB's overnight lending rate. The BCB has increased the SELIC rate fourteen times from the record low level observed at the end of 2012 and beginning of 2013 (7.25%) to 13.75% in June 2015. The current tightening cycle is aimed at containing Brazil's highest inflation in over a decade.

Corporate governance

In May of 2008 the Bolsa de Valores de Sao Paulo (BOVESPA) and the Bolsa de Mercadorias e Futuros (BM&F) announced their merger. The new stock exchange institution is among the main stock exchanges in the world, the second in the Americas and the leader in Latin America. Both government authorities and representatives of financial markets have been studying the adoption of measures to transform the city of Sao Paulo into a global financial hub.



Ministry of Finance

Central Bank – Banco Central do Brasil

Securities Commission – CVM

Macroeconomic analysis of the country by BBVA

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