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specific purpose of relending (repassing) the corresponding
borrowed funds in Brazilian currency to Brazilian companies (repass
borrowers). The charges paid by a repass borrower to a Brazilian
bank were in the same proportion as the charges paid by the
Brazilian bank to the foreign lender. The loan between the foreign
lender and the Brazilian bank was independent of the loan between
the Brazilian bank and the repass borrower. The foreign lender had
no legal relationship with the repass borrower and in general did
not know the repass borrower's identity.
Foreign loans which were repassed under Resolution 63 were
subject to the same restrictions on the receipt and exchange of
foreign currency as other foreign loans. Circular 266 provided
that in the case of a Resolution 63 loan, the bank receiving the
foreign loan was required to transfer the total value of the
pecuniary benefit to the borrower receiving the repass funds, and
in cases in which the foreign loan was transferred to several
repass borrowers, the pecuniary benefit was transferred
proportionately to each of such borrowers.
I. Details of Repass Borrowing Under Resolution 63
Generally, a foreign lender was concerned only with the credit
risk of the Brazilian bank. The initiative to borrow foreign funds
for lending to local companies under Resolution 63 was that of the
Brazilian bank, which would repass loans if and when local
borrowers were available. In making Resolution 63 loans to
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