A GUIDE

TO BANKING
AND
BUSINESS
BRAZIL

Contents
1 Introduction
2 Silicon Valley Bank and Brazil
3 DOING BUSINESS IN BRAZIL
3 General Business Climate
4 Climate for Foreign Entities
4 Forms of Investment in Brazil
5 Establishing Operations in Brazil
6 Foreign Exchange and Trade Restrictions
6 Taxation in Brazil
11 BANKING IN BRAZIL
11 Trade
12 Foreign Exchange
13 Accounts
15 Payments and Receivables
17 Liquidity Management and Investments
18 Financing
19 COUNTRY OVERVIEW
A GUIDE
TO BANKING
AND
BUSINESS
BRAZIL
1 SI LI CON VALLEY BANK: Doing Business in Brazil
Introduction
This guide provides insight into key business and banking
considerations in Brazil. Whether you are evaluating your
first business opportunity in Brazil or already have a well-
established South American operation and are looking to
the future, we hope this information serves as a valuable
resource for you.
In every country, there are challenges and opportunities.
The key is finding the right partnerone who understands
both the market and your business. Silicon Valley Bank
(SVB) focuses solely on emerging, growth and established
technology companies and the life science, venture
capital and premium wine markets. We also bring a deep
understanding of the global market, developed through
experience, and a level of expertise and advice that truly
differentiates us from other financial institutions.
2 SI LI CON VALLEY BANK: Doing Business in Brazil
Silicon Valley Bank and Brazil
Our Capabilities
Silicon Valley Bank provides expertise and a comprehensive
suite of services to support your business operations in Brazil,
including cross-border and in-country payments, foreign
exchange, trade finance and working-capital financing.
Your accounts, both domestic and foreign, can be managed
through SVBeConnect, our online banking platform.
Cash management. Make cross-border payments into
Brazil through wires in real (BRL) or US dollar (USD)
denominations.
Real accounts. Maintain real deposits in a local account
provided through our partner bank. Access your account
reporting directly through SVBeConnect.
Foreign exchange. Manage your companys cash flow by
sending local currency into Brazil and hedging foreign-
exchange exposure through options and non-deliverable
forward contracts.
Trade services. Accelerate cash flow and minimize risks
of nonpayment through the use of import letters of credit,
export letters of credit, documents against payment and
documents against acceptance.
Financing. Silicon Valley Bank offers multiple sources
of diverse debt capital, such as acquisition financing,
working capital, capital call lines, growth capital and capital
expenditure financing.
Most importantly, working with Silicon Valley Bank means
access to expert global treasury advisors, who can provide
you with strategic advice and support as your business
grows. As you identify new opportunities in the region,
please contact any member of your Silicon Valley Bank
team. We look forward to working with you and providing
the right solutions that help your business succeed in Brazil
and throughout South America.
General Business Climate
Economic and Political Overview
Brazils economy, the largest in Latin America, has earned
it a position as one of the BRIC (Brazil, Russia, India,
and China) countries, identified by Goldman Sachs as
collectively likely to be larger in economic terms than the
Group of Six (France, Germany, Italy, Poland, Spain and
the United Kingdom) by 2050. Brazil is a founding member
of the Mercosur (Southern Cone Common Market) and
the Latin American Integration Association. It is also a
member of the Bank for International Settlements, the
World Trade Organization and the Group of 20 bloc of
developing nations.
The government has adopted largely free-market, export-
oriented policies, and the Brazilian economy is well-
diversified across the agricultural, mining, manufacturing
and services sectors. Nevertheless it faces a number of
structural challenges, in particular narrowing the income
inequality gap and addressing unemployment and
underemployment.
These problems were to some extent exacerbated by the
global financial crisis of 20082009, which hit economic
growth. In common with many of its counterparts around
the globe, the Brazilian central bank adopted a policy of
reducing interest rates over the course of 2009. In April
2010, a stronger economy and inflationary concerns led
the central bank to raise interest rates from a record low
of 8.75 percent to 9.5 percent. The central bank cut the
interest rate to a record low of 7.25 percent in October
2012 to stimulate growth. Inflation stood at 6.59 percent
in March 2013.
After contracting by 0.3 percent in 2009, gross domestic
product (GDP) grew by 7.5 percent in 2010, its highest
annual increase in 14 years. In 2011 growth slowed to
2.7 percent and then fell to 0.9 percent during 2013.
Improved growth of 3.1 percent during 2013 is forecast
by Brazils central banks.
Doing Business in Brazil
Public debt remains an issue in Brazil; the public-debt level
stands at more than 40 percent of GDP, although Brazil
did paid off its outstanding USD 15.5 billion debt to the
International Monetary Fund in 2006. On the plus side,
Brazil has run a trade surplus for the past 10 years, although
2012 produced the lowest surplusUSD 19.4 billionover
that period.
Recent Developments
Brazils first female president, Dilma Rousseff, took office
on January 1, 2011, for a four-year term, having defeated
Jos Serra of the Brazilian Social Democracy Party in the
second round of the October 2010 presidential elections. As
the chosen successor of former president Luiz Incio Lula
da Silva from the ruling Workers Party, Rousseff provides
continuity in macroeconomic policy, although she has been
keen to demonstrate her own leadership style. Rousseff has
continued to tighten fiscal policy.
3 SI LI CON VALLEY BANK: Doing Business in Brazil
4 SI LI CON VALLEY BANK: Doing Business in Brazil
Forms of Investment in Brazil
Brazilian law provides for several business structures.
Joint Stock Companies
{
Public limited liability company. Shares in a public limited
company, or sociedade annima (S.A.), can be closely held or
tradable on a public stock market. In the case of the former, they
are not available to the general public. There are no minimum or
maximum capital requirements for the formation of an S.A.,
although a minimum paid-up share capital of 10 percent is
required before it can be established.
{
Private limited liability company. Shares in private limited
companies may change hands only with the consent of the
registered owners. They are not available to the general public.
There is no minimum share capital to be paid up before the
business can be established.
Partnerships
{
General partnership. In a general partnership (sociedade em
nome coletivo), all partners share full liability. There is no minimum
share capital.
{
Limited partnership. A limited partnership (sociedade em
comandita simples) has no minimum share capital requirement.
Silent partners have limited liability but cannot be involved in the
companys management. General partners have unlimited liability.
{
Partnership limited by shares. In a partnership limited by shares
(sociedade em comandita por aes), general partners have
unlimited liability, whereas the liability of others is limited to the
amount of their investment in the partnership.
{
Special partnership. A special partnership (sociedade em conta
de participao) is an unincorporated partnership in which only
the partner who manages the businesses of the partnership has
unlimited liability. Silent partners have no legal liability. This type
of partnership, however, has no legal identity.
{
Regulated professional partnership. A regulated professional
partnership (sociedade simples) may be formed to provide
professional services and may not engage in commerce.
Climate for Foreign Entities
Incentives for Direct Foreign Investment
Investment projects in economically disadvantaged areas
or areas undergoing industrial redevelopment are usually
eligible for regional aid, such as corporate tax exemptions,
low-cost or free industrial land sites, and financing from
federal, state and municipal governments.
Income tax reductions are available for investments in the
economically disadvantaged north and northeast regions
of Brazil. Investments that receive priority status in these
regions may benefit from a 75 percent reduction in income
tax due for up to 10 years.
Regional development banks offer medium- and long-term
financing to infrastructure, industrial and agricultural
projects that qualify under regional incentive programs.
Companies investing in new, locally made machinery
and equipment may qualify for subsidized financing from
the Brazilian National Bank for Economic and Social
Development (BNDES).
Investments in research and development and information
technology activities may benefit from tax and social security
exemptions. Companies in the aeronautics industry may
also qualify for tax and social security exemptions.
Investments in telecommunications, energy and mass-
transport projects and in environmental and social ventures
may qualify for subsidized financing from the BNDES.
Free-trade zones are operating in Manaus, Tabatinga,
Macap/Santana, Guajar-Mirim, Pacarama, Bonfim,
Cruzeiro do Sul and Brasilia/Epitaciolndia.
5 SI LI CON VALLEY BANK: Doing Business in Brazil
Cooperatives
There are numerous cooperatives (cooperativas) in Brazil
for various sectors.
{
Consortium. A consortium (consrcio) is an association between
two or more companies formed to pursue a specific project; it is
governed by an agreement that must be approved by the
shareholders of the constituent entities. Member firms preserve
their individual corporate identities. If the participants in a
consortium are not public limited liability companies, the
agreement must be filed with the correct commercial registry as
well as published in the Official Gazette (Dirio Oficial) and a
large-circulation newspaper.
{
Branches. Non-Brazilian companies may establish a branch in
Brazil, but this is recommended only if absolutely necessary
because the process is complex, time-consuming and expensive.
Although considered part of the companys head office and thus
not a separate legal entity, a branchs activities must adhere to
Brazilian company law. A number of documents must be filed
with the Brazilian government and the branch approved by
presidential decree. The certificate of decree and other documents
must be published in the Official Gazette as well as filed with the
correct commercial registry.
{
Representative offices. Foreign companies are entitled to
establish representative offices in Brazil, though they may not
sell directly within Brazil.
Establishing Operations in Brazil
There are no specific constraints on foreign investors
establishing a legal corporate entity in Brazil. Government
authorization is required for the establishment, by foreign
investors, of businesses in restricted industries.
Foreign investment must be registered with the central bank
within 30 days. The registration may be completed online.
Upon establishing a public limited liability company in
Brazil, the company must register its bylaws with the local
Board of Trade. The share capital must be subscribed by at
least two original subscribers. Nonresident shareholders must
obtain tax identification numbers from the Federal Revenue
Secretariat. The companys documents and certificate of
registration must be published in the Official Gazette and
another newspaper within 30 days of registration. The
company must be managed by a Brazilian resident.
Other requirements depend on the company type.
Foreign companies are permitted to establish branches and
representative offices in Brazil.
Branch. A branch is considered part of the entitys head
office and is not classed as a separate legal entity. Branches
are permitted to undertake sales activities within Brazil.
Establishing a branch in Brazil requires authorization by
presidential decree.
Representative office. A representative office is not
permitted to directly engage in trade.
Specific legal advice should be taken before establishing a
presence in Brazil.
6 SI LI CON VALLEY BANK: Doing Business in Brazil
Taxation in Brazil
Resident/Nonresident
A business is considered resident in Brazil if it is incorporated
in Brazil.
There are specific situations in which nonresidents may be
treated as residents because their branches, local agents or
representative offices operate in Brazil and are deemed to
be corporate taxpayers.
Tax Year
The tax year corresponds to the calendar year.
Corporate Taxation
Resident companies are subject to taxation on their
worldwide income. Nonresident companies are taxed on
income from activities carried on in Brazil and on income
originating in Brazil.
Generally, corporate income tax under the Lucro Real
(annual or quarter) system is assessed on net income
(before income tax and social contribution tax accruals)
and then adjusted for add-backs (non-deductible expenses,
such as tax penalties) and exclusions (non-taxable income
such as accounting adjustments relating to investments in
subsidiaries and dividend income).
Under the Lucro Presumido system (based on estimated
or deemed taxable income), businesses, subject to certain
restrictions, may elect to calculate corporate income tax
on a quarterly basis on revenue from the supply of goods
and services, financial income and any other revenue that
a company may have. In this case, the income tax depends
on a presumption of profit, and in some cases this method
may result in a reduction of the tax burden.
The federal corporate income tax rate is 15 percent (imposto
sobre renda de pessoa jurdica, or IRPJ).
There is also a 10 percent surtax on taxable income
exceeding BRL 240,000 per year.
In general, the social contribution tax (contribuio social
sobre o lucro lquido das pessoas jurdicas, or CSLL) at a
rate of 9 percent is also imposed on net income. Financial
institutions and insurance companies are assessed at a rate
of 15 percent (instead of 9 percent).
Foreign Exchange and Trade Restrictions
Funding Operations
Nonresidents may hold accounts in either domestic or
foreign currency in Brazil, though foreign-currency accounts
are restricted to international organizations, embassies and
foreign delegations, foreign transportation companies,
reinsurance companies, Brazilians living abroad and
foreign citizens traveling in Brazil. Nonresident domestic-
currency accounts held by foreign entities are convertible
into foreign currency. These accounts may not be used to
effect international real transfers for third parties.
Repatriation
Foreign investors are permitted to repatriate profits,
dividends and capital.
7 SI LI CON VALLEY BANK: Doing Business in Brazil
Income tax and social contribution tax are paid on a
quarterly basis under the Lucro Presumido and Lucro
Real Trimestral (quarterly) systems and through monthly
advance payments with a final adjustment by the year-end
under the Lucro Real Anual (annual) system.
Tax losses incurred in one fiscal year may be carried forward
indefinitely, but the amount of carry-forward is limited to
30 percent of taxable income in each carry-forward year.
The carrying back of losses is not allowed.
Corporate income tax returns must be filed by the end of
June following the calendar year-end.
Profits generated by affiliated foreign subsidiaries (including
capital holdings of at least 10 percent) or branches are
taxable to resident companies whether or not distributed.
If such profits are subject to income tax in the sourcing
country, this tax may be offset against Brazilian tax if
certain conditions are met.
Dividends and other profit distributions paid to nonresidents
out of profits are exempt from income tax.
Financial Instruments
Gains and losses on financial instruments are taxed
as ordinary income. Nevertheless, investments in the
Brazilian financial and capital markets by nonresident
investors may be subject to beneficial tax rates when certain
conditions are met. To benefit from these advantageous
tax rates, the nonresident must follow the provisions of
Resolution CMN 2,689/00 and must not invest into Brazil
from a low-tax jurisdiction.
Interest and Financing Costs
General anti-avoidance rules apply. Under these rules, any
amount paid, credited, delivered, used or remitted directly
to an entity or individual incorporated or resident in a
tax haven jurisdiction or benefiting from a preferential tax
regime may be deducted only if the taxpayer can:
{
identify the beneficial recipient of the proceeds;
{
provide proof that the entity or individual has the operational
capacity to carry out the transaction for which the payment is
made; and
{
submit documentation showing the price paid and the receipt of
the goods or rights or the use of services.
Foreign Exchange
In general, companies do not need prior authorization for
foreign-exchange transactions, although a record of the
transaction must be filed (online) with the central bank. The
central bank requires registration of all foreign investments
(equity or debt) in Brazil.
Advance Tax Ruling Availability
Brazilian taxpayers may consult the tax authorities regarding
the tax consequences of a specific transaction.
Capital Gains Tax
Capital gains are treated as ordinary income for tax
purposes.
Capital gains realized by nonresident entities may be subject
to withholding tax at a rate of 15 percent (25 percent if
the recipient is located in a low-tax jurisdiction that does
not impose income tax or imposes it at a rate lower than
20 percent).
Capital losses realized in the current year may be relieved
against ordinary income as well as capital gains.
Capital losses may also be carried forward indefinitely, but
they can be offset only against capital gains.
8 SI LI CON VALLEY BANK: Doing Business in Brazil
Stamp Duty
There is no stamp duty in Brazil.
Withholding Tax (Subject to Tax Treaties)
Payments to Interest Dividends Royalties/Fees
Resident companies 0%22.5% 0% 0%
Nonresident companies in
non-tax-treaty country
15%25% 0% 155%25%
No withholding tax is imposed on dividend distributions
that are paid from profits earned from January 1, 1996.
Interest paid to nonresidents is generally subject to a
15 percent withholding tax unless reduced by an applicable
tax treaty. The rate is 25 percent if the recipient is resident
in a jurisdiction that is deemed to be low-tax.
Royalty payments to nonresidents are generally subject
to withholding tax at a rate of 15 percent, as well as
10 percent CIDE (see Royalty and Technological Services
Taxation). The rate is increased to 25 percent if the
recipient is resident in a jurisdiction that is deemed to
be low-tax.
Tax Treaties/Tax Information Exchange Agreements
Brazil has signed double-taxation treaties with a number of
countries in various parts of the world and is negotiating
similar treaties with countries in the Americas and Europe.
Currently, Brazil has tax treaties in force with the following
countries: Argentina, Austria, Belgium, Canada, Chile,
China, the Czech Republic, Denmark, Ecuador, Finland,
France, Hungary, India, Israel, Italy, Japan, Korea,
Luxembourg, Mexico, the Netherlands, Norway, Peru,
the Philippines, Portugal, Slovakia, South Africa, Spain,
Sweden and Ukraine.
In most cases, tax treaties do not reduce the Brazilian
withholding tax rate on cross-border payments (e.g., interest
and royalties).
Brazil has not signed Tax Information Exchange Agreements
with other countries.
Thin Capitalization
Brazils first thin capitalization rules took effect on January
1, 2011, for IRPJ purposes and March 16, 2010, for CSLL
purposes. Under the rules, interest paid to related parties
that are not located in a tax-haven jurisdiction or that do
not benefit from a preferential tax regime may be deducted
on an accrual basis for corporate income tax purposes if
the expenses are necessary for the companys activities and
both of the following thresholds are met:
{
the related-party debt-to-equity ratio does not exceed 2:1 based
on the proportion of related-party debt to direct equity investment
made by related parties; and
{
the overall debt-to-equity ratio does not exceed 2:1 based on
the proportion of total debt to total direct equity investment made
by the related parties.
Interest paid to an entity or individual located in a tax haven
or that benefits from a preferential tax regime (regardless of
whether the parties are related) is deductible if it is necessary
for the companys activities and both of the following
thresholds are met:
{
the amount of the Brazilian entitys indebtedness to the tax-haven
resident does not exceed 30 percent of the net equity of the
Brazilian entity; and
{
the Brazilian entitys total indebtedness to all entities located in
a tax-haven jurisdiction or benefiting from a preferential tax regime
does not exceed 30 percent of the net equity of the Brazilian
entity.
Any excess interest is treated as a non-deductible expense
for IRPJ and CSLL purposes.
Transfer Pricing
Brazilian transfer pricing rules apply to transactions
between related parties or carried out with entities resident
in countries considered by the Brazilian tax regulations as
tax havens or as a privileged tax regime (PTR) (see Tax
Haven/Privileged Tax Regime). The concept of related
party included in the Brazilian transfer pricing rules may
9 SI LI CON VALLEY BANK: Doing Business in Brazil
also encompass parties under exclusive arrangements. The
Brazilian transfer pricing rules deviate from the Transfer
Pricing Guidelines of the Organisation for Economic
Co-operation and Development and require statutory
profit margins rather than the application of the arms
length principle.
Profit-based methods are not allowed in Brazil. The
regulations provide specific methods for import and export
transactions. Calculations must be carried out on a product-
by-product basis.
Safe harbor provisions may be applicable to export
transactions and are usually based either on the volume
of transactions with related parties or on a minimum
5 percent profitability (before tax). In addition, if the
taxpayer is able to prove that the price of the related-party
export transaction is at least 90 percent of the average
price applied in domestic sales prices to Brazilian unrelated
customers, the taxpayer is exempted from the application
of the transfer pricing methods.
Tax Haven/Privileged Tax Regime
The Brazilian government published guidance on June 7,
2010 (Normative Instruction No. 1,037/2010), that expands
the list of jurisdictions considered tax havens and introduces
a new list of regimes designated as privileged tax regimes.
The latter list includes such entities as Danish, Hungarian,
Icelandic, Maltese, Netherlandic, Spanish and Uruguayan
holding companies and other specified vehicles, as well as
US limited liability companies.
Although PTRs are not deemed tax havens, stricter thin
capitalization and transfer pricing rules may apply to
payments benefiting PTR residents.
Cash Pooling
Brazil has no specific tax rules relating to cash-pooling
arrangements.
Sales Taxes/Value-Added Tax/Excise Tax
Two different value-added taxes (VATs) are imposed in
Brazil on the importation and the supply of goods and
certain services.
The IPI (imposto sobre produtos industrializados) is a
federal VAT usually imposed on importation and at the
manufacturing level of the economic chain. The IPI
standard rate varies generally from 5 to 25 percent. The
rate can reach 360 percent in such cases as cigarettes.
The ICMS (imposto sobre a circulao de mercadorias e
prestao de servios de transporte interestadual e intermunicipal
e de comunicao) is a state VAT imposed on the importation
and the supply of goods and communication and certain
transport services. The ICMS standard rate is 18 percent,
although it may vary from one state to another. Interstate
supplies are subject to ICMS at rates of 7 to 25 percent.
Brazilian municipalities also impose a services tax, the ISS
(imposto sobre servios), on the supply of services not subject
to the ICMS. The ISS standard rate is 5 percent, although
it may vary from 2 to 5 percent.
The importation of goods and services is subject to
social security taxes (see Payroll and Social Security
Contributions) at a combined rate of 9.25 percent.
10 SI LI CON VALLEY BANK: Doing Business in Brazil
Financial Transactions/Banking Services Tax
The IOF (imposto sobre operaes financeiras) is levied on
financial transactions such as loans, foreign exchange,
insurance, and securities and gold transactions. The
standard IOF financial rates vary from 0 to 25 percent,
depending on the type of transaction.
Royalty and Technological Services Taxation
The CIDE (contribuio e interveno no domnio econmico)
is a federal tax levied at a rate of 10 percent on the payment
or credit of certain royalties (except software) and technical
services to nonresidents.
The burden of CIDE lies with the Brazilian payee. CIDE
is not a withholding tax and does not generally qualify for
foreign tax credit.
Federal Social Security Contributions on Turnover
COFINS (contribuio para o financiamento da seguridade
social) is a federal social security contribution levied monthly
at a rate of 7.6 percent on gross revenues. Input credits
may be available to offset COFINS liabilities. COFINS is
deductible for income tax purposes.
PIS (programa de integrao social ) is a similar federal social
contribution. It is imposed on monthly gross revenue at a
rate of 1.65 percent. Input credits may be available to offset
PIS liabilities and are deductible for income tax purposes.
Special COFINS and PIS rules may apply to specific
industries such as pharmaceuticals, automotive,
telecommunications, and financial and insurance services.
A different set of rules applies in relation to COFINS and
PIS for companies under the Lucro Presumido system, and
the combined tax rate for these taxes under this system is
3.65 percent.
Payroll and Social Security Contributions
Companies are responsible for the advance deduction
of withholding income tax from employment income at
progressive rates up to 27.5 percent, depending on salary.
Companies are also responsible for the collection of
employees social security contributions, which are
deductible from employees monthly salaries at rates
varying from 8 to 11 percent, depending on the salary.
The maximum amount to be deducted from an employees
monthly salary is limited to BRL 405.86.
The employers share of social security contributions is
equivalent to 20 percent of the employees monthly base salary.
Employers are also required to deposit into a severance
fund an amount equivalent to 8 percent of the employees
monthly base salary. A former employee is entitled to a
penalty equivalent to 50 percent of the severance fund
balance when a contract of employment is terminated
without cause; this is in addition to the former employees
right to withdraw the amounts deposited into the fund.
Employers must also pay an amount equivalent to one
months salary as an indemnification for terminating
employees contracts without cause.
Every employee is paid an additional monthly salary by
the end of each calendar year (50 percent of which is due
before the end of November, with the balance payable
before Christmas).
All tax information supplied by Deloitte Touche Tohmatsu
(www.deloitte.com) and Deloitte Highlights 2012 and may
be subject to change.
11 SI LI CON VALLEY BANK: Doing Business in Brazil
Trade
Trade Finance
Factoring
Brazilian financial institutions make available a range of
factoring services, including discounting trade bills and
postdated checks and collection of the receivables financed.
Factoring companies are common providers of credit to
small firms, and some run operations for microentrepreneur
credit societies known as SCMs (sociedades de crdito ao
microempreendedor).
Supplier Credit
Counterparties often settle on cash terms, though foreign
suppliers are permitted to provide credit for up to one
year at an agreed margin over LIBOR (London Interbank
Offered Rate).
Trade Rules
General Rules
The Foreign Trade Chamber, Foreign Trade Secretariat
(SECEX), Federal Revenue Secretariat and Banco Central
do Brasil (BCB) share responsibility for foreign trade.
Brazil applies the relevant Mercosur customs policies
and regulations. Mercosur meanwhile has established
economic complementation agreements with Bolivia,
Chile, Colombia, Cuba, Ecuador, Mexico and Peru. Free-
trade zones are operating in Manaus, Tabatinga, Macap/
Santana, Guajar-Mirim, Pacarama, Bonfim, Cruzeiro do
Sul and Brasilia/Epitaciolndia.
Prohibited Imports
Brazil forbids a limited range of imports for public health
and national security reasons. These include certain
agrochemical products, weapons and unlicensed drugs.
Prohibited Exports
Brazil prohibits the export of amber, wild fauna and flora
and their derivatives, certain types of wood and plants,
white types of honey, and antiques more than 100 years old.
Banking in Brazil
Importing
Taxes and Tariffs
Mercosur countries apply a common external tariff ranging
from 0 to 20 percent, although a rate of 35 percent may be
levied on certain automotive products.
In September 2011, the Brazilian government increased
the rate of the IPI industrial production tax on imported
motor vehicles and vehicles built from imported parts by
30 percentage points from between 7 percent and
25 percent to between 37 percent and 55 percent. Carmakers
sourcing at least 65 percent of their parts locally and vehicles
imported from Mexico and other members of the Mercosur
trade bloc are exempt from the tax increase.
In March 2012, Brazil imposed temporary quotas on car
imports from Mexico. Under the terms of the renewed
free-trade deal on vehicles, Mexico will limit duty-free car
exports to Brazil to an average of USD 1.55 billion per year
over the next three years.
In October 2012, the rate of import tax on 100 products
ranging from iron pipes and chemical and pharmaceutical
products to glass, rubber tires and potatoes was increased
by up to 25 percent to help protect local industry. The
measure is valid for 12 months but can be extended until
December 2014.
Licenses
Brazil does not require licenses for imports from Mercosur
member countries other than for automobiles and sugar.
SECEX maintains a database accessible only to registered
importers. The majority of imports are subject to automatic
licenses, but specific authorization from the appropriate
agency or ministry may be required for some. Licenses are
generally valid for 90 days.
11 SI LI CON VALLEY BANK: Doing Business in Brazil
12 SI LI CON VALLEY BANK: Doing Business in Brazil
Financing Requirements
In the case of external financing of imports for more than
360 days, such arrangements must be registered with the
BCB, which has a five-day period within which it may
refuse authorization.
Documentary Requirements
Importers must be listed in the SECEX Importer and
Exporter Register. A customs declaration, commercial
invoice, packing list, pro forma invoice (for imports
requiring a license) and, in certain cases, certificate of origin
are required.
Risk Mitigation
There is no national risk mitigation program for importers.
IRB-Brasil Resseguros S.A. (IRB-Brasil Re), a state-
controlled reinsurance company, provides cover for
political and extraordinary risks; private insurers cover
commercial risks.
Exporting
Taxes
Certain animal skins, leathers and hides are subject to an
export duty of 9 percent. There is also a duty of 150 percent
on exports of cigarettes to Latin American countries and on
exports of weapons and ammunition to Central and South
America, with exceptions for Argentina, the Caribbean,
Chile and Ecuador.
Licenses
SECEX authorization is needed for the export of a limited
range of restricted items, including animals, plants, tobacco,
minerals and fuel weapons. Exports of mahogany, certain
pinewoods, Brazilian walnut and virola are subject to
licenses with quotas. An export license is also required for
ethyl alcohol and sugars eligible for tax exemption.
Financing Requirements
None.
Documentary Requirements
Exporters must be listed in the SECEX Importer and
Exporter Register. A customs declaration, commercial
invoice, bill of lading, packing list, international shipment
notification and, in certain instances, certificate of origin
are required.
Risk Mitigation
There is no standard export protection program. IRB-
Brasil Re provides state-supported export credit insurance
against political and extraordinary risks; private insurers
cover commercial risks.
PROEX (Programa de Financiamento s Exportaes), run
by Banco do Brasil, provides finance for the export of capital
goods. The Brazilian National Development Bank provides
a pre- and post-shipment financing program.
Foreign Exchange
Central Bank and Bank Supervision
The Banco Central do Brasil, established in 1964, operates
autonomously under the 1988 Complementary Law of
the National Financial System. The BCB is responsible
for monetary policy and oversees the countrys payments
and settlement infrastructure. It also acts as Brazils main
banking regulator. The Securities Commission (Comisso
de Valores Mobilirios) regulates the securities market.
Central Bank Reporting Requirements
Foreign-currency transactions between residents and
nonresidents must be conducted through authorized
financial institutions and must be reported to the BCB
electronically. For real transactions between residents and
nonresidents, the BCB runs a voluntary survey system in
which companies are encouraged to participate. Residents
are also required to report annually to the BCB any assets
held abroad when they exceed USD 100,000.
Exchange Controls
The Ministry of Development, Industry and Foreign Trade
implements trade policy through SECEX. The National
Monetary Council (CMN) formulates foreign-exchange
policy, whereas the BCB administers exchange controls.
The exchange rate of the real is floating. Banks are permitted
to trade foreign exchange on a forward basis but must settle
within 750 days for interbank and export transactions and
360 days for all other transactions.
13 SI LI CON VALLEY BANK: Doing Business in Brazil
A range of financial transaction taxes (IOF) are applied to
specific foreign-exchange transactions:
{
A 6 percent tax applies to inflows related to external loans with
a minimum coverage maturity of up to 360 days.
{
A 6.38 percent tax applies to remittances involving credit card
administration companies payment obligations for client
purchases (raised from 2.38 percent in March 2011).
{
A 0.38 percent tax applies to foreign-exchange transactions
associated with service imports.
{
A 1 percent tax applies to foreign-exchange transactions related
to the purchase of local stocks and derivative products.
{
A 6 percent tax applies to transactions related to foreign
investments in local fixed-income instruments.
Certain types of transactions are zero-rated for IOF tax
purposes. These include interbank transactions between
institutions operating in the foreign-exchange market;
foreign-exchange transactions related to investment funds
investments in the international markets; foreign capital
returns; outflows of interest on shareholders equity; and
dividend remittances.
Direct foreign investments in certain economic activities
are subject to restrictions, and all direct foreign investments
must be registered with the BCB.
Royalty payments are possible only if the underlying patent
or trademark is registered in Brazil and the country of
origin. Royalty and fee remittances abroad are not permitted
to exceed 5 percent of gross sales. A certificate of approval
from the BCB and the National Institute of Industrial
Property is required for such remittances.
Accounts
Bank Account Availability
Regulations
Residents are permitted to open domestic-currency (BRL)
accounts in Brazil and abroad. Resident accounts in reals are
not freely convertible into foreign currency. The following
resident entities are entitled to open foreign-currency
accounts domestically: authorized foreign-exchange
dealers, Brazilian citizens abroad, the Brazilian Post Office
Administration, credit card companies, companies involved
in energy-sector projects, tourist agencies not permitted to
deal in foreign exchange, insurance companies, reinsurance
companies and reinsurance brokers.
Nonresident domestic-currency accounts in Brazil are
convertible into foreign currency. These accounts may not
be used to effect international real transfers for third parties.
The following nonresident entities may open foreign-
currency accounts domestically: foreign citizens traveling
through Brazil, international organizations, embassies,
foreign delegations, foreign transportation companies and
reinsurance companies.
To be considered resident, a company must be incorporated
in Brazil.
Electronic Banking
All major banks in Brazil offer comprehensive retail and
corporate Internet-banking facilities. Large companies may
use banks proprietary systems to exchange data with banks
and business partners. Balance and transaction reporting
and transaction initiation services are commonly used by
both domestic and foreign-owned companies in Brazil.
Internet banking is widespread at the retail level, with rapid
growth over the past decade. Internet-banking services were
used by 42 million companies and consumers in 2011.
14 SI LI CON VALLEY BANK: Doing Business in Brazil
How to Open a Bank Account
Account-opening forms must be completed and submitted
alongside a list of officially authorized signatures plus a copy
of the company registration documents.
AntiMoney Laundering Rules
{
Brazil has implemented antimoney laundering legislation (Law
No. 9.613 of 1998, amended by Law No. 10.467 of 2002, Law No.
10.701 of 2003 and Law No. 12.683 of 2012 plus associated
regulations). The Conselho de Controle de Actividades Financieras
(COAF) has also issued a series of resolutions.
{
A Financial Action Task Force (FATF) member, Brazil observes
most of the FATF-49 standards.
{
Brazil is also a member of the Financial Action Task Force on
Money Laundering in South America and the Organization of
American States/Inter-American Drug Abuse and Control
Commissions.
{
Brazil has established a financial intelligence unit, the COAF,
which is a member of the Egmont Group. The COAF is a separate
entity within the Ministry of Finance.
{
Account-opening procedures require formal identification of the
account holder and controllers of accounts opened by legal
entities. (Beneficial owners of private accounts do not have to
be identified.)
{
The identification requirement for insurance purposes, at present,
extends only to third-party payments above BRL 10,000 or to
guarantee insurance contracts regardless of the thresholds.
{
Since 2005 banks have been required to report to the COAF
identifying data on both parties for all foreign-exchange
transactions and money remittances, regardless of the amount
of the transaction.
{
Financial institutions in the broadest sense are required to report
suspicious transactions.
{
Institutions in the banking, securities, insurance and pension
industries must report to their respective regulators, who then
report to the COAF, whereas all other obligated entities must
report directly to the COAF.
{
Financial institutions remitting more than BRL 10,000 must make
a declaration to the BCB. Banks must report to the BCB all cash
transactions exceeding BRL 100,000.
{
Individuals transporting more than BRL 10,000 in cash, checks
or travelers checks into or out of Brazil must file a customs report
that is sent to the BCB.
{
All records must be kept for at least five years after the completion
of the last transaction or the termination of the relationship.
Antimoney laundering information supplied by BCL
Burton Copeland (www.bcl.com). Data are as of January
2013 and may be subject to change.

15 SI LI CON VALLEY BANK: Doing Business in Brazil
Payments and Receivables
Payments
Payment Volumes and Values
Transactions (million)
% Change
2011/2010
Traffic (value) (BRL billion)
% Change
2011/2010
2010 2011 2010 2011
Checks* 1,675 1,588 5.2 2,691 2,786 3.5
Credit transfers** 7,716 8,439 9.4 20,669 23,464 13.5
Debit cards 2,929 3,607 23.2 153 207 31.0
Credit cards 3,394 3,946 16.3 344 426 23.8
Direct debits* 3,584 4,156 16.0 5,490 5,845 6.5
Total 19,298 21,736 12.6 29,352 32,728 11.5
*Includes inter- and intrabank transactions.
**Includes interbank high-value credit transfers, special credit transfers, credit order documents and bloquetos (collection slips).
Source: Bank for International Settlement, September 2012.
There is a strong trend in Brazil to move from paper to
electronic payment instruments. The use of checks has,
for example, declined sharply in recent years, though
they remain one of the most common cashless payment
instruments. Card payments and electronic credit transfers
are now the leading cashless payment instruments in the
country by volume and value, respectively. Cash is still
widely used for retail transactions.
Payment Systems
The BCB operates Brazils national real-time gross
settlement system, known as the Reserves Transfer System
(STR). The STR processes high-value and urgent interbank
transfers and settles interbank obligations from Brazils
other clearing systems.
High- and low-value credit transfers can also be processed
and settled on a net basis through the Interbank Payments
Clearing Houses CIP-SITRAF and CIP-SILOC subsystems,
respectively. The Interbank Payments Clearing House is
owned and operated by Brazils commercial banks.
Banco do Brasil operates Brazils national check clearing
house, COMPE (Centralizer Clearance for Checks and
Other Documents), for check payments of less than
BRL 250,000.
TecBan provides clearing and settlement for Brazils shared
Banco24Horas automated teller machine (ATM) network.
Cielo (formerly known as VisaNet) and Redecard provide
clearing and settlement for debit and credit card payments.
Cross-border payments can be processed via SWIFT using
banks bilateral correspondent banking arrangements.
Cross-border transfers can also be conducted via ITR
(International Transfer of Reals). Meanwhile, bilateral trade
transactions between Argentina and Brazil can be settled
via the Payment System in Local Currency in both reals
and Argentine pesos, eliminating the need for US dollar
payments in trade transactions between the two countries.
Checks
Despite their relative decline in use, checks remain a popular
method of payment in commercial transactions. Check
usage for retail transactions has also declined, though
postdated checks (cheques pr-datados) are commonly used
by consumers.
Checks for less than BRL 250,000 are truncated and cleared
electronically through COMPE. Checks equal to or above
that amount are settled bilaterally between banks through
the STR.
16 SI LI CON VALLEY BANK: Doing Business in Brazil
Electronic Wallet
Electronic money is at a relatively early stage of development
in Brazil. The most popular electronic wallets are single-
purpose cards for telephones and public transport. Albeit
less common, stored-value Visa and MasterCard cards are
also issued by banks. Transactions are cleared through
TecBan, Cielo and Redecard. There were 247.4 million
retailer cards and 2.3 million cards with an e-purse function
in circulation at the end of 2011.
Receivables (Collections)
Direct Debits
Direct debits (dbitos diretos) are commonly used in Brazil to
make regular payments. Most direct-debit payments are made
intrabank between the originator and the receiver. TecBan
offers interbank direct-debit services, but usage is low.
Credit Transfers
High-value credit transferstransferncias eletrnica
disponvel (TEDs)are cleared via the STR or the CIP-
SITRAF net settlement system. TEDs can be used for any
transfer of BRL 3,000 or more and clear with same-day
value in both systems. They are obligatory for any transfer
of BRL 5,000 or more.
Credit order documentsdocumentos de transferncia
crdito (DOCs)and special credit transferstransferncias
especiais de crdito (TECs)are used for low-value transfers.
They are generally cleared electronically in batches and
can be submitted at a bank branch or electronically using
Internet-banking services or ATMs. Both are cleared via
CIP-SILOC, DOCs on a T+1 basis and TECs on a same-day
basis. There is a maximum value limit for both instruments
of BRL 4,999.99.
Payment Cards
Both credit and debit cards account for an increasing share
of non-cash retail payments. The number of credit cards in
circulation grew by 159.7 percent between 2005 and 2010
to 175.44 million. The number of credit cards in circulation
fell in 2011 to 169.14 million. Between 2007 and 2011, the
number of debit cards in circulation rose by 27.9 percent to
233.33 million. Visa, MasterCard, American Express and
Hipercard are the principal credit card issuers. Meanwhile,
Visa Electron, Maestro and TecBans Cheque Eletrnico
are the leading debit card brands.
Cielo and Redecard clear and settle most Visa and
MasterCard/Maestro card transactions in Brazil.
ATM/POS
At the end of 2011, there were approximately 174,000 ATMs
and 3.52 million point of sale (POS) terminals operating in
Brazil. In addition to the major Brazilian banks proprietary
ATM networks, 34 financial institutions participate in the
shared Banco24Horas ATM network. Additionally, the Rede
Verde-Amarela ATM network, operated by ATP Banking
Technology on behalf of the Brazilian Association of State
and Regional Banks, connects the ATMs of approximately
10 commercial banks.
17 SI LI CON VALLEY BANK: Doing Business in Brazil
Liquidity Management and Investments
Liquidity Management
Because of exchange controls, it is difficult for Brazil-based
entities to participate in cross-border liquidity management
structures.
Cash Concentration
Cash concentration, in the form of zero balancing, is now
widely used in Brazil as a result of the introduction in 2008
of a more favorable tax treatment of interaccount transfers.
Nonresidents can participate in cash concentration structures,
though lifting fees may apply on transfers between resident
and nonresident accounts. Such transfers must also be
reported to the BCB for balance-of-payments statistics.
Nonresident entities are not permitted to participate in cross-
border sweeping structures in Brazil. Resident companies
may establish cross-border cash concentration structures
where one multi-currency account acts as a header account,
but these structures may not include BRL-denominated or
domestic bank accounts.
Notional Pooling
Notional pooling is not permitted in Brazil.
Investments
Interest-Bearing Checking and
Demand Deposit Accounts
Banks in Brazil may not offer interest on current accounts
or demand deposits.
Time Deposits
Maturities for time deposits in reals range from 30 to 120 days.
They are known as fundos de investimentos financeiros (FIFs).
Certificates of Deposit
Certificates of depositcertificados de depsito bancrio
(CDBs)are an established short-term investment
instrument with larger companies. They are issued by
Brazils leading commercial banks for terms ranging from
30 to 360 days.
Treasury Bills
The National Treasury auctions Treasury securities on a
weekly basis, which are available via the Internet (Tesouro
Direto). Treasury securities issued include Treasury bills
letras do tesouro nacional (LTNs) and letras financeiras
do tesouro (LFTs)and Treasury notes, notas do tesouro
nacional (NTNs).
The BCB also auctions its own central bank billsletras
do banco central (LBCs)on a daily basis.
Commercial Paper
Commercial paper is issued by large Brazilian companies
and is a popular short-term investment vehicle.
Repurchase Agreements
Repurchase agreements are seldom used in Brazil.
Money Market Funds
Money market and bond funds are available in Brazil.
18 SI LI CON VALLEY BANK: Doing Business in Brazil
Financing
Overdrafts
Overdrafts (conta garantida) are not typically used for
funding, as they may be arranged only for very short-term
financing needs (typically up to 48 hours).
Bank Lines of Credit/Loans
Commercial and investment banks offer working-capital
loans (capital de giro) for maturities ranging from 30 to
90 days. Subsidized finance is available from the National
Bank for Economic and Social Development.
Trade Bills
Trade bills (desconto de duplicatas) and promissory notes may
be discounted by banks to provide between 30 and 60 days
of funding to customers in good standing. Companies may
also borrow on a discounted basis against foreign-exchange
contracts, known as adiantamentos de contratos de cmbio
(ACCs). Because these are typically at US dollar interest
rates (lower than real rates) with an average tenor of 180
days, such loans are considered attractive.
Factoring
A range of factoring services is available in Brazil, including
collection of the financed receivables. Sociedades de crdito
ao microempreendedor (SCMs) provide credit to small firms
via funding from the National Bank for Economic and
Social Development.
Commercial Paper
Commercial paper issued in reals must be placed through
a bank or broker, and the issuer must first register with the
Brazilian Securities Commission.
Intercompany Borrowing
Non-financial institutions are not permitted to engage in
regular lending practices.
Country Information
Capital: Brasilia
Area: 8,514,877 km
2
Population: 201.01 million
International dialing code: 55
Monetary Unit
Real (SWIFT code: BRL)
Government
Head of state and government: President Dilma Rousseff
(since January 1, 2011)
Brazil is a federal republic with the president occupying the
functions of both head of government and head of state.
Presidential elections take place every four years. President
Dilma Rousseff was elected in 2010 to succeed Luiz Incio
Lula da Silva, taking office on January 1, 2011.
Brazil has a bicameral legislature. The Congresso
Nacional consists of the 81-member Federal Senate
(Senado Federal) and the 513-member Chamber of
Deputies (Camara dos Deputados).
Members of the Federal Senate serve eight-year terms.
Each of Brazils 26 states, plus the federal district, elects
three senators. Elections are held every four years for a
portion of the seats. The Chamber of Deputies is elected
via proportional representation every four years. The next
presidential election and the next legislative elections are
in October 2014.
Bank Holidays
2013: January 1, February 11, 12, March 29, April 21,
May 1, 30, September 7, October 12, November 2, 15,
December 25, 31
2014: January 1, March 3, 4, April 18, 21, May 1, June 19,
September 7, October 12, November 2, 15, December 25
2014: January 1, February 16, 17, April 3, 21, May 1, June 4,
September 7, October 12, November 2, 15, December 25
Source: www.goodbusinessday.com.

Country Overview
19 SI LI CON VALLEY BANK: Doing Business in Brazil
20 SI LI CON VALLEY BANK: Doing Business in Brazil
Economic Statistics
2007 2008 2009 2010 2011
2012
Q1 Q2 Q3 Q4 YEAR
General Unit
Population m 188 190 192 193 195 197
Unemployment rate % 10.0 9.3 7.9 8.1 6.7 6.0 5.8 5.9 5.4 4.9
Consumer price (year-on-year) % +4.2 +3.6 +5.6 +4.9 +5.0 +6.6 +5.8 +5.0 +5.2 +5.6
Interest rate* % 15.28 11.98 12.36 10.06 9.80 11.66 10.31 8.75 7.72 7.07
Gross Domestic Product (GDP)
GDP local currency bn (BRL) 2,369 2,661 3,032 3,239 3,770 4,143
GDP (USD) bn (USD) 1,089 1,367 1,654 1,620 2,143 2,477
GDP per capita USD 5,795 7,201 8,633 8,384 10,993 12,594
GDP volume growth (year-on-year) % +4.0 +6.1 +5.2 0.3 +7.5 +2.7 NA NA NA NA
Trade
Exchange rate** (BRL/USD) 2.1753 1.9471 1.8338 1.9994 1.7592 1.6728 1.7672 1.9627 2.0282 2.0579
Current account bn (USD) 14 2 28 24 47 52
Current account as % of GDP % 1.3 0.1 1.7 1.5 2.2 2.1
Total reserves*** bn (USD) 85 179 193 237 287 350 363 372 377 370
Source: International Financial Statistics, IMF April 2013.
*Money market rate.
**Period average.
***Total reserves minus gold.
21 SI LI CON VALLEY BANK: Doing Business in Brazil
Trade Statistics
Major Export Markets Major Import Sources
Country % Country %
China 17.0 USA 15.1
USA 10.8 China 14.5
Argentina 7.5 Argentina 7.5
Germany 6.7
South Korea 4.5
Country Credit Rating
Fitch Ratings last rated Brazil on April 26, 2013, for issuer
default as:
Term Local-Currency Rating Foreign-Currency Rating
Short F2
Long BBB BBB
Long-term rating outlook Stable
Source: www.fitchratings.com, May 2013.
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Phone 408.654.7400
svb.com
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are registered trademarks. B-11-11735. Rev. 07-23-13