Alerts
Covid-19 | Updates – Emergency support measures presented by the main public agents of the financial market
In another round of updates, we have selected below the main economic measures launched last week by different financial markets agents to fight back the economic impacts resulting from Covid-19, as well as other matters of interest to the financial markets:
Central Bank of Brazil (BACEN)
Circular BACEN No. 4,002 of 04.16.2020
- extended the maximum period between contract and settlement of exchange export contracts from 750 to 1,500 days;
- established a single term of up to 1,500 days between the date of contract and of settlement of an export transaction, also allowing the shipment to occur within such period;
- the new provisions are valid for foreign exchange contracts: (a) entered into as from 03.20.2020; and (b) entered into on an earlier date and in good standing as of 03.20.2020. The application of this new provision depends on the agreement of the parties to the exchange contract; and
- extended the deadline for imports prepayment from 180 to 360 days, also applying to imports prepayment that have already been made
Circular BACEN 4,004 of 04.16.2020
- changed the Special Temporary Liquidity Line backed by Guaranteed Financial Bills (LTEL-LFG), so that the maximum limit on loans taken by cooperative banks is 100% of the Adjusted Net Equity calculated based on the Combined Balance Sheets of the Cooperative Systems, rather than based on 100% of the Reference Equity;
- the limit on loans that cooperative banks can take under LTEL-LFG increased from R$ 3.3 billion to R$ 41.5 billion; and
- LTEL-LFG will have a cost of 0.60% per year and loans will be granted through monthly funds releases, which requests can be made as from 04.20.2020.
Amazon Bank (BASA)
Based on BACEN Resolution No. 4,798/2020, BASA will automatically extend the financing installments of the debts of the Constitutional Financing Funds of the North (FNO) for micro, small and medium-sized companies, in up to 12 months;
Additionally, on 04.14.2020, BASA launched the special FNO credit line, based on BACEN Resolution No. 4,798/2020, which has the following main features:
- working capital financing, limited to R$ 100 thousand per beneficiary, and investment financing, limited to R$ 200 thousand per beneficiary;
- interest rate of 2.5% per year;
- term for repayment: (i) working capital financing, 24 months; and (ii) investment financing, deadlines set out by the Deliberative Councils of the Constitutional Funds; and
- 31.2020 is the deadline for contracting all credit lines and applying for the grace period.
Federal Government and External Financing Commission (Cofiex)
Resolution Cofiex No. 02 of 04.13.2020
The Resolution aims at accelerating the release of resources from international organizations such as the World Bank, the New Development Bank (NDB), the Inter-American Development Bank (IDB), the Latin American Development Bank (CAF), among others, for public financing. The Resolution has the following main features:
- Cofiex will decide within 10 days on each application received;
- simplification of analysis criteria, which, for the time being, will stick to the Payment Capacity (Capag) and to a technical analysis;
- it will be possible to apply for more activities (that may mitigate the public calamity in the country) in already contracted transactions; and
- the changes, on an extraordinary basis, will be valid as long as the public calamity lasts, and are valid for projects that use external financing guaranteed by the Federal Government.
Judicial Decision of the 9th Federal Court of the Federal District (DF)
By means of a class action filed by Carlos Roberto Lupi, president of the Democratic Labor Party (PDT), against the Federal Government and the President of BACEN, judge Renato Coelho Borelli, of the 9th Civil Court of the Federal Justice of DF, granted an injunction relief providing that:
- all institutions of the National Financial System refrain from increasing the interest rate or intensifying the requirements for granting credit during the public calamity period due to the COVID-19 pandemic; and
- the Federal Government and BACEN adopt measures in order to condition the granting of liquidity benefits, resulting from the reduction in the percentage of reserve requirements, to the effective performance by the benefited banks’ of new credit lines and portfolios in favor of the domestic productive market.
The decision is still subject to appeal by the Federal Government and BACEN.
Our team of Project Finance, Credit Operations, Banking Law and Capital Markets will be available for any clarification required and to assist in respect of the above measures.
