On October 7, the Executive Branch forwarded to the National Congress Bill (PL) No. 5,387/19, which allows for implementation one of the objectives of the current management of the Central Bank of Brazil (BCB) mentioned by the president of that organization, in his inauguration ceremony in March of this year: “to make the market more open to foreigners, with a possible convertible currency[1] that serves as a reference for the region."

Submitted by the president of the BCB and the Minister of Economy to the Office of the President of Brazil on September 12, the Bill represents an important step towards liberalization of the Brazilian exchange rate regime from the historical fetters of the Vargas legacy,[2] already quite loosened, but partially in force since 1933.

Following the BC+ Agenda for modernization of the Brazilian financial system and in light of the diagnosis provided by the BCB's Director of Regulations that “many innovations practiced in international markets had no legal backing for implementation in Brazil,” the Bill proposes amendments to five orders for the Brazilian exchange rate regime.

First and from a formal point of view, there is a proposal for regulatory reorganization that includes the legal consolidation of 39 provisions that somehow deal with the foreign exchange rate regime. Although at least six other statutes continue to have relevant considerations on the matter and there continue to be various infra-legal rules, the National Monetary Council (CMN) and the BCB are tasked with adapting and remedying what is necessary, which is why the Bill provides for a vacatio legis of one year.

One may note that there was a change in the regulatory strategy, which bet on a tone more of principles, thus leaving a high degree of discretion to the CMN and BCB. This shows recognition that these entities are better able to adapt to changing circumstances, such as those currently witnessed by the growing influence of technology, and its trends, in the financial sector.

The table below summarizes the regulatory rules that may be amended and repealed, in whole or in part, by Bill 5,387/2019

Regulations affected by Bill 5,387/19


Partially repealed

Fully repealed

Decree 23,258/1933

Law 4,182/1920

Decree-Law 1,201/1939

Law 4,131/1962

Decree 23,258/1933*

Decree-Law 9,025/1946

Law 4,728/1965

Decree-Law 2,440/1940

Decree-Law 9,602/1946

Law 8,383/1991

Law 1,521/1951[3]

Decree-Law 9,863/1946

Law 10,912/2001

Law 3,244/1957

Law 156/1947

Law 11,371/2006

Law 4,131/1962*

Law 1,383/1951


Law 4,595/1964

Law 1,807/1953


Law 4,728/1965*

Law 2,145/1953


Law 5,409/1968

Law 2,698/1955


Decree-Law 1,060/1969

Law 4,390/1964


Law 6,099/1974

Decree-Law 857/1969


Decree-Law 1,986/1982

Law 9,813/1999


Decree-Law 2,285/1986

Executive Order 2,224/2001


Law 7,738/1989

Law 13,292/2016


Law 8,021/1990


Law 8,383/1991*


Law 8,880/1994


Law 9,069/1995


Law 9,529/1997


Law 11,371/2006*


Law 11,803/2008


Law 12,865/2013


Law 13,292/2016


Law 13,506/2017



24 (*5)


*Also in the amendments

From a substantive point of view, Bill 5,387/19 changes the framework, above all, for four topics. Of these, three are directly correlated with the aforementioned Vargas Era legacy, while the fourth and last refer to the recent demands of Prevention of Money Laundering and Combating Financing of Terrorism (AML) and data protection, which have had such an impact on the regulatory agenda of the financial system in recent years.

These changes are dealt with in more detail in the table below.

Main substantive changes contained in Bill 5,387/19


How it is

Proposed change

Legal tender

The scenarios for stipulation of payment in foreign currency for obligations enforceable in Brazilian territory are restricted to the five subsections of article 2 of Decree-Law No. 857/69

The scenarios for stipulation of payment in foreign currency for obligations enforceable in Brazilian territory were expanded to the eight subsections of article 13 of Bill 5,387/19. These scenarios include commercial lease agreements entered into between residents based on raising of funds abroad. In addition, the Bill makes it clear that indirect export operations are also excepted from the restriction. CMN may regulate other situations

Financial repression[4]

Article 4, “a”, of Law No. 1,521/1951 classifies as a crime the collection of goodwill higher than the official exchange rate on an amount exchanged for foreign currency.

The provisions of article 4, “a”, of Law No. 1,521/1951 no longer applies to foreign exchange operations carried out in accordance with Bill 5,387/19 (article 16)

Capital controls

Currently, BCB Circular No. 24/1966 prohibits financial institutions, by any means, from applying or procuring the placement abroad of funds collected in Brazil.

Only the persons listed in article 187 of BCB Circular No. 3,691/2013 may have a foreign currency account in Brazil.

Article 50 of Law No. 4,182/1920 prohibits “foreign exchange speculation” transactions (although, on some occasions, the CRSFN - National Financial System Funds Council - has found that this provision does not apply due to lack of proper specification of the elements of the crime)[5]

The maintenance of funds abroad, in foreign currency, related to the receipt of Brazilian exports of goods and services must comply with regulatory limits.

It authorizes banking institutions to invest or perform credit and financing operations abroad with funds raised in Brazil, subject to the relevant regulations (article 15)

Although the matter has already been regulated by the BCB, the Bill makes it clear that it is incumbent on this regulatory authority to determine who may hold a foreign currency account in Brazil and the requirements and procedures by which this is possible (article 5).

It repeals the prohibition on “foreign exchange speculation” transactions (article 26).

The maintenance of funds abroad, in foreign currency, related to the receipt of Brazilian exports of goods and services, must no longer comply with regulatory limits (article 25).

It favors the use of the Brazilian Real in international business, as it allows, at the legal level, the receipt of payment orders from third parties from abroad from Brazilian Real-denominated accounts held by foreign banks. The matter has already been regulated by the BCB through Circular No. 3,691, but the measure favors the development of the international banking correspondence market (article 6).

The concept of foreign capital in Brazil has become broader, extending the guarantee of non-discrimination (article 9).

The BCB may provide for situations in which private offsetting of receivables or amounts between residents and non-residents is permitted (article 12).

The CMN and the BCB may authorize other types of institutions to carry out international remittances of domestic or foreign currency (article 14).

Foreign currency trading requirements and prohibitions no longer apply to purchase and sale transactions between individuals, on an occasional and non-professional basis, up to US$ 1,000. This provision may drive the development of peer-to-peer currency trading platforms, as seen in other countries (article 18).

It repeals the characterization of certain transactions as illegitimate (article 26).

Informational duties

Institutions subject to the BCB’s regulations must comply with a number of registration, record, and monitoring requirements focused on AML, but there are few proportionality considerations in the standard and there are technology companies whose subjection to the BCB’s regulations is still uncertain.

Supplementary Law No. 105/2001 and Law No. 13,709/2018 impose a number of restrictions and obligations on the processing and sharing of data from users of the financial system, and there are no specific provisions for a differentiated regime for extraction of macroeconomic and research data.

It on various occasions details the obligation of recording, registering, and monitoring precautions, with a focus on AML. These forecasts are contained in passages in which the Bill changes the current regime to give greater freedom of action to private agents, emphasizing proportionality between rights and duties.

The BCB may require from residents information necessary to compile official macroeconomic statistics. This information may be made available by the BCB to support research, provided that the confidentiality of the holder is protected (article 11).

In regulating the reporting obligation, the BCB must take into account the reasonableness of the compliance cost.

As may be seen from the table above, there is a greater concern regarding the proportionality of regulatory requirements, which is also the result of the repeated questions submitted by new entrants to the financial system not only regarding historically high entry barriers, but also about the rationality and reasonableness of the regulatory requirements, which are sometimes anachronistic.

But bolder goals, such as the convertibility of the Brazilian Real and the possibility for individuals to hold foreign currency accounts in Brazil, remain far from the regime proposed by the Bill, as acknowledged by the president of the BCB.

Thus, rather than being revolutionary in its content, Bill 5,387/19 focuses on giving the monetary authority the conditions to carry out the mission of liberalizing the Brazilian foreign exchange market when, and if, the necessary political and macroeconomic conditions allow it.

[1] Until the end of the gold standard in 1914, the concept of a convertible currency was related to those that could be exchanged for gold at a fixed official rate. Subsequently, the idea of convertibility was no longer related to the possibility of exchanging a particular currency for gold, but exchanging one currency for another at a par exchange rate. From 1946 to 1978, the International Monetary Fund (IMF) enshrined, in article VIII of its Articles of Agreement, the concept of convertibility, implying: (i) the absence of restrictions on payments for current transactions; (ii) non-application of discriminatory monetary practices; and (iii) the possibility of converting its currency balances in the power of monetary authorities of other countries. In 1978, however, under the floating exchange rate system, the concept of convertibility became more fluid and was replaced, in the IMF’s Articles of Agreement, by freely usable currency. Pursuant to the terms of article XXX, “f” of the Articles of Agreement, a freely usable currency is one which is widely used to make payments for international transactions and widely traded in the major organized markets. More commonly, however, the concept of a convertible currency is currently used to define a currency over which there are no restrictions on movement, trading, and use by issuing countries.

[2] In particular, one may highlight: (i) Decree No. 22,626/1933, which limited interest rates and contributed to the establishment of a financial repression regime (see footnote 4) in Brazil; (ii) Decree No. 23,258/1933, which classifies various types of foreign exchange operations as illegitimate, establishing strict foreign exchange controls; and (iii) Decree 23,501/1933 (repealed and partially replaced by Decree-Law No. 857/1969), which prohibited the indexation of contracts to foreign currency or gold, imposing a legal tender for the national currency.

[3] Partially repealed in a tacit manner, with partial removal of effectiveness.

[4]According to Edward Shaw's conception of the idea, financial repression is the phenomenon seen when the government limits the free flow of money to reduce the remuneration obtained by savers and to favor certain borrowers of funds. To this end, the government limits the possibility of investments in other jurisdictions, such that financial repression is normally accompanied by closed capital accounts and strict limits on financial investments abroad.

[5] See the appellate decisions pertaining to appeals 4,298, 4,339, 4,341, 4,380, and 4,400.