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Brazil was the country which attracted most foreign investment in Latin America in 1999, receiving $31 billion of the $97 billion directed to the region last year, according to a preliminary study conducted by the United Nations Conference on Trade and Development (UNCTAD).

UNCTAD has placed Brazil as the leading Latin American destination for foreign investment for the second year in a row.

Stock exchanges to merge

On January 27 2000, the presidents of the two leading Brazilian bourses, the São Paulo Stock Exchange (Bovespa), with around 95% of the market and the Rio de Janeiro Stock Exchange (BVRJ), with around 4%, signed a final merger protocol. Under the agreement, all stock transactions will be carried out on Bovespa, while the BVRJ will handle eventual trading of government debt bonds, concentrating on the secondary market for fixed income. Additionally, the São Paulo Exchange's clearing house, known as CBLC, will absorb Rio's clearing system, the CLC.

With respect to trading on regional stock exchanges, Bovespa is in the final stages of negotiations with the six smaller regional Brazilian Stock Exchanges to integrate them into a nationwide stock trading system.

BVRJ will continue carrying out privatization auctions until the end of the year, while stock trading should be transferred to São Paulo within two months.

New rules for foreign investments

On January 26 2000, the Brazilian National Monetary Council (CMN) issued Resolution 2689 which will alter, from March 31 2000, four of the current six special funds through which foreign investments enter the country.

Annexes I and II, which refer respectively to foreign investment funds and foreign investment societies, will be eliminated, and Annexes IV, regarding securities investment portfolios maintained by international investors, and VI, regarding investments in fixed income, will be adapted to the new regulations.

Annexes III and VI will remain untouched. Also known as the Brazil Fund, Annex III is formed by a fund established in the US for investments in Brazil, while Annex VI is geared towards investments in American Depository Receipts. In order for the capital to enter Brazil, foreign investors will have to set up an exchange contract and then nominate a legal representative in the country, who will be responsible before the authorities for the information regarding the investor.

Once the capital is in the Brazilian investment market, foreign investors will be allowed to move their money freely from one type of investment instrument to another, unlike at present, when foreigners seeking to switch between different investments first have to take the money out of the country and then bring it back in. In addition, foreign investors will be given access to the derivatives markets.


The National Monetary Council (CMN) enacted, on January 26 2000, Resolution 2656, which aims to stimulate the Brazilian market in receivable credits.

Since CMN's Resolution 2493, banks and other financial institutions were able to sell their credits to specific companies, known as Financial Credits Securitization Companies. However, the banks that sold receivable credits could not offer guarantees, and had to make a very large discount to sell such credits, which discouraged the receivable credits market in Brazil.

With the new Resolution, banks will be able to guarantee their receivable credits, diminishing the discounts to the securitization companies and enhancing the general interest in this market in Brazil.


The Brazilian Insurance Agency (SUSEP), published its Resolution 1/00 on January 27 2000, which reforms the Brazilian reinsurance system, ending the monopoly in the sector, paving the way for the privatization of the Brazilian Institute of Reinsurance (IRB) and allowing the entry into Brazil of international reinsurance companies.

According to this resolution, reinsurance companies in Brazil will be divided into 3 different categories: (i) the "domestic authorized reinsurer" which is constituted and organized in Brazil, or a Brazilian subsidiary of an international group, in either case subject to the local monitoring authority; (ii) the "admitted reinsurer" which is a company with its headquarters outside Brazil, complying with certain requirements and enrolled with SUSEP; and (iii) the "occasional reinsurer" which is a company with its headquarters outside Brazil, complying with certain requirements but not registered with SUSEP.

The next step for the completion of the reform of the industry is the approval by the National Monetary Council (CMN) of regulations on the bank accounts in foreign currency to be kept by local insurance and reinsurance companies, by foreign reinsures registered by SUSEP and by insurance brokers. This regulation which is expected to occur in the next few weeks.

Eliana Maria Filippozzi

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