Circular No. 230 — Communicates to BNDE, investment banks, and banks authorized to operate in foreign exchange, norms on external loans

CIRCULAR N. 000230

To the National Bank for Economic Development, to investment banks and to banks authorized to operate in foreign exchange

We communicate that the Board of Directors of the Central Bank of Brazil, in a session held on this date, having regard to the provisions of Resolutions No. 63, of 21.08.67, and No. 64, of 23.08.67, and considering the deliberation of the National Monetary Council adopted in a session of 28.08.74, decided to issue the following norms:

I - Alternatively to the application in National Treasury Notes referred to in item X of Circular No. 180, of 29.05.72, banks may deposit with the Central Bank of Brazil the amount in foreign currency corresponding to resources originating from abroad that are not employed in pass-through operations.

II - The deposit referred to in the preceding item shall be made in the currency of the external loan, through purchase from the Central Bank of Brazil of the respective amount in foreign currency at the exchange coverage rate then in force. The operation with the Central Bank of Brazil must be carried out, at the latest, until the first business day following the date of the initial settlement of the foreign exchange or the collection of the cruzeiros previously passed through in the Country.

III - The Foreign Exchange Operations Management of the Central Bank of Brazil will register the foreign currency deposit in the name of the depositing financial institution, with interest accruing from the date of the settlement of the foreign exchange contract with this Agency, at a rate that will be fixed based on the quotes prevailing in the London interbank market for deposits in the currency of the loan.

IV - At the request of the depositing institution, the Central Bank of Brazil will release the aforementioned deposit to meet external amortizations provided for in the payment scheme of the respective loan, or to effect pass-through in the Country. This release will be made through the sale of foreign exchange to the Central Bank, at the exchange pass-through rate then in force.

V - The interest credited by the Central Bank of Brazil, during the period of validity of the deposit, will be sent by it directly to the foreign creditor, at the request of the depositing institution, when the interest installment due under the scheme provided for in the external loan matures. Respecting the regime that has been adjusted between the depositing institution and the foreign creditor, the Central Bank of Brazil will assume the burden of income tax on the interest, in cases where this burden is the responsibility of the depositing institution or when, implicitly, it has been agreed that the same shall be added to the interest rate.

VI - Item X of Circular No. 186, of 01.09.72, shall enter into force with the following wording:

"X - At the request of the bank indicated by the creditor, the Central Bank of Brazil, when any of the hypotheses admitted in item V of Resolution No. 229 occurs, will remit directly to the foreign creditor the interest referred to in the preceding item. Respecting the regime adjusted in the operation preceding the delivery of the balance to the Central Bank of Brazil, it will assume the burden of income tax on the interest, in cases where the burden has been the responsibility of the last borrower or implicitly agreed that the same shall be added to the interest rate."

Brasília-DF, August 29, 1974

Fernão Carlos Botelho Bracher
Director"