- 5 -
process, the Central Bank set the range of acceptable interest
rates and periodically established the minimum repayment terms of
loans. Once the Central Bank approved a loan, the foreign lender
remitted the proceeds in foreign currency to the Brazilian
borrower via a commercial bank in Brazil (the exchange bank).
The exchange bank converted the foreign currency into Brazilian
currency by means of an exchange contract, whereby the borrower
sold the foreign currency to the exchange bank in exchange for
Brazilian currency at the official exchange rate.
The Brazilian borrower received a Certificate of
Registration that enabled the borrower to effect payment of
interest and principal in the foreign currency in which the loan
was made. Remittances abroad required the recording of each
payment on a Certificate of Registration. The Certificate of
Registration had to be presented to the Central Bank for
approval. Before approving the payment of interest, the Central
Bank would verify that the amount of the interest payment
corresponded to the amount indicated on the Certificate of
Registration for that loan and that all required tax payments had
been made.
Brazilian law imposed a withholding tax on interest paid to
foreign lenders and prohibited remittance of an interest payment
to a foreign lender without proof of payment of the withholding
tax. Certain Brazilian commercial banks were authorized to
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011