According to Treasury Secretary Rogerio Ceron, the move is expected to mitigate financial and political risks seen by private investors, especially foreign ones, attracting funding for projects such as the construction of daycare centers and sanitation facilities, which are dear to the new government of President Luiz Inacio Lula da Silva. During a news conference, he announced that the Inter-American Development Bank (IDB) had confirmed the availability of credit lines for operations within this framework, which are also being assessed by development bank BNDES, state-owned Banco do Brasil and other private lenders. Brazil's Secretary of Economic Reforms, Marcos Barbosa, said the measures aim to strengthen the credit market in the long term, paving the way for the country's capital market to become as robust or larger than the 5 trillion reais ($988 billion) banking market. The package includes a decree to allow the issuance of bonds with an income tax exemption for investments in sectors such as healthcare, education, and public security.
Following the prior government's proposition of income tax exemption for foreigners investing in domestic corporate bonds, which is yet to be voted on by Congress, Barbosa declared that the ministry intends to address this topic in a future income tax reform. In addition, the government will propose a bill so that pension fund resources can be used as collateral for credit operations with financial institutions, lowering the interest rates of loans. The government also plans to introduce legislation to enhance safeguards for minority investors in the capital market against harm caused by unlawful actions of controlling shareholders and administrators.
The bill, which comes after the high-profile bankruptcy of retailer Americanas SA , will offer investors "additional legal options to pursue against controllers who engage in illegal acts, with the goal of mitigating the financial fraud risks that pose significant harm to the country," said the ministry in a presentation.
Finance Minister Fernando Haddad on Monday had indicated that the package would also feature a measure to lower revolving credit card rates. However, Barbosa mentioned that a modification in this regard is complicated as it involves several players in the sector. Therefore, the reduction in interest rates for this category is currently being assessed and discussed with the central bank, he added.
Below is a list of the initiatives, which also include projects that are already under consideration in Congress:
Measure Format
#1 Treasury guarantees for public-private Amendment to
partnerships of states and cities Treasury
manual
#2 Tax exemption for bonds involving social Issuance of a
and environmental infrastructures decree
#3 New framework for collaterals Bill already
in Congress
#4 Collaterals based on pension fund New bill
resources
#5 Lower bureaucracies for private bonds New bill
issuance
#6 Increased efficiency in sharing fiscal Revenue
data with financial institutions service act
#7 Legal basis for the central bank digital New bill
currency "digital real"
#8 Simplification of bank resolution regimes Bill already
in Congress
#9 Change in the monthly income value of the Issuance of a
super-indebted consumers from 303 reais decree
to 600 reais
#10 Increased protection for investors in the New bill
capital market
#11 Improvement of legislation on financial New bill
market infrastructures
#12 Expansion of activities for insurance New bill
cooperatives
#13 Improvement of regulations on private Bill already
insurance in Congress
(Reporting by Marcela Ayres; Editing by Angus MacSwan)
