Embed Size (px)
Citation preview
1
Alexandre Schwartsman
March 2004
Financing Brazilian Trade
2
Recent developments in the trade front
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
jan/
80
jan/
81
jan/
82
jan/
83
jan/
84
jan/
85
jan/
86
jan/
87
jan/
88
jan/
89
jan/
90
jan/
91
jan/
92
jan/
93
jan/
94
jan/
95
jan/
96
jan/
97
jan/
98
jan/
99
jan/
00
jan/
01
jan/
02
jan/
03
jan/
04
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
110,000
120,000
130,000
ExportsImportsTotal trade
3
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
4
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
5
Export process and controls
Shipment
Pre-shipmentcontrol
FX market
SISBACEN
Bank onshore
FX contract
Bank offshore
Foreign currency
Post-shipment control
Exporter Importer
SISCOMEX
6
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
7
Export financing recovery – total flows
50,000
55,000
60,000
65,000
70,000
75,000
80,000
jan/0
1
mar
/01
mai/
01jul
/01
set/0
1
nov/
01
jan/0
2
mar
/02
mai/
02jul
/02
set/0
2
nov/
02
jan/0
3
mar
/03
mai/
03jul
/03
set/0
3
nov/
03
jan/0
4
Exports (cash) Exports (shipment)
8
Export financing recovery - balance
-5,000
-4,000
-3,000
-2,000
-1,000
0
1,000
2,000
3,000
4,000
jan/0
1
mar
/01
mai/
01jul
/01
set/0
1
nov/
01
jan/0
2
mar
/02
mai/
02jul
/02
set/0
2
nov/
02
jan/0
3
mar
/03
mai/
03jul
/03
set/0
3
nov/
03
jan/0
4
Cash minus shipment
9
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
10
Share of ACCs in export financing
29.5%
30.0%
30.5%
31.0%
31.5%
32.0%
32.5%
33.0%
33.5%
34.0%
dez/
02
jan/0
3
fev/
03
mar
/03
abr/0
3
mai/
03
jun/0
3jul
/03
ago/
03
set/0
3
out/0
3
nov/
03
dez/
03
jan/0
4
fev/
04
11
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
12
13
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
14
Trade finance lines survey
8 043
6 560
2 000
3 000
4 000
5 000
6 000
7 000
8 000
9 000
10 000
11 000
Export financing Import financing
15
Complete trade financing lines statistic
Dec-99 Dec-00 Dec-01 Dec-02 Sep-03 Dec-03Private 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
16
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
17
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
