Financing instruments for ventures in Brazil

The Brazilian National Social and Economic Development Bank (BNDES) is the main federal institution providing financing solutions for long term investment projects in all sectors of the economy, acquisition of industrial machinery and equipments, exports of national goods and services, and capital structuring for private enterprises. As part of its 2009-2014 Plan, BNDES promotes strong corporate policies on giving emphasis to the aspects of innovation, local and regional development and environmental and social responsibility of all its supported initiatives.

The financial support is negotiated either directly (BNDES and entrepreneur) or indirectly (through a formal financing agent such as The Bank of Brazil or other regional banks), and conducted in respect to the size of the enterprises, defined according to its annual gross operating revenues as follows: Micro (R$ 2,4mi), Small (R$ 16mi), Medium (R$ 90mi), Medium – Large (R$ 300mi), Large (over R$ 300mi).

BNDES has specific products and programs to support exporting and internationalization of Brazilian ventures. Among the main productsout stands BNDES Exim, which is a financing line that supports production of goods and services that are intended for commercialization in international markets, and BNDES Finem, which is a financing line for the amount of over R$ 10mi for implementation of projects of expansion and modernization of enterprises, internationalization and acquisition of machinery and equipments.

Drawback Regime for manufacturing exports in Brazil

The Drawback Regime was created in 1996 by the Brazilian government with the purpose of suspending import taxes of raw material intended to the manufacturing of exporting goods. Legislation has improved over time and today the regime can also be applied to raw material bought within the domestic market, as long as the production is bound to exports.

Tax suspension is applied to the following taxes: Import Taxation (II); Industrialized Product Taxation (IPI); Contributions to the Social Inclusion Program, Formation of Public Servant Patrimony and Social Security Financing (PIS/Pasep/Cofins); Additional Freight for the Renewal of the Merchant Navy (AFRMM); and Circulation of Goods and Services Taxation (ICMS).

In order to adopt the Drawback Regime, the company needs to be licensed for international trade operations (Radar) by the Brazilian Federal Reserve and file a request within SECEX (Federal Secretariat of International Trade),assuming the commitment of exporting production after transforming the raw material which is to be applied to the program. SECEX will then authorize the purchase of the raw material either from the domestic or foreign markets. This operation is registered through SISCOMEX, the Brazilian Integrated International Trade System utilized for all national import/export operations control.

The Drawback tax exemption regime may be applied to product transformation, processing, assembly and renovation or refurbishing of exports from any economic segment. Company may also file a request to purchase tax exempt raw material that is intended to replace inventory that has been used for the production of previously exported goods. The company benefiting from the regime may not necessarily be the company exporting the product, whereas it can be exported by an intermediary company such as a trading company or another manufacturing company that has used the product for further complex production.

More information can be found through the following links: