Geert Bekaert and Campbell R. Harvey's


Chronology of Economic, Political and Financial Events in Emerging Markets




Major Political and Economic Events




Interest rate ceilings were removed. a1


The introduction of the Insider Trading Laws.a4


The first prosecution under the Insider Trading Laws.a4


Interest rate ceilings were re-imposed. a1


Import tax created, imposes a tax on purchases of foreign exchange for imports of goods and services.a


Resident Travel Rate was created. Tax placed on purchases of U.S. dollars by Brazilian residents going abroad.a


Personal Remittance Rate established. Tax placed on purchases of foreign exchange for personal remittances abroad.a


First exchange-traded overseas listing.a9


Resident Travel Rate and Personal Remittance Rate abolished. One Official Rate (peg) in place.a


Bank debt restructuring agreement.i


Banks and businesses allowed to make remittances abroad without Central Bank approval.a


System of comprehensive foreign exchange controls abolished.a


First civilian government in 21 years. President-elect dies before assuming power, and Vice-President Jose Sarney is sworn in as Head of State.a


Cruzado plan (price and wage controls).p


Bank debt restructuring agreement.i


Fixed nominal exchange rate abendoned.p


Major provisions of Cruzado plan abendoned.p


CVM Resolution 1289 Annex II limits foreign direct investment through special conditions. 


The Central Bank established a special short-term line of credit in foreign currency for domestic commercial bank.a3(first entry)


Regulations were issued governing the institution, operation, and management of foreign capital investment companies, funds, and stocks and bond portfolios.a3


Amortization payments on medium- and long-term loans granted or guaranteed by official creditors falling due during the period Jan.1, 1985-Dec. 31, 1986 were made subject to deposit at the Central Bank.a3


Buckberg's First Liberalization date.d


Equity Fund of Brazil. Net asset value was $105.3 million in December 1991.aa


Country funds allowed.d


A general framework for conversion of debt into equity was announced.a3


Late in 1988, debt conversions to equity are stopped because of fear that they result in inflation.i


New regulations on debt equity conversion were introduced.a3


Aracruz (Pulp and Paper) privatized, $130 million.p


The requirement that prepayments of principal or interest on external obligations be done through the banking system and be communicated to the Central Bank within two days of occurrence was introduced.a3


Regulations governing the participation of foreign capital in mutual funds were introduced.a3


Special tax treatments for profits earned from mutual funds owned by nonresidents were introduced.a3


Bank debt restructuring agreement.i


Investment abroad by Brazilian enterprises was allowed at the official exchange rate in an amount equal to direct foreign investment received by the enterprise, excluding investment from debt equity conversion.a3


Brady plan (adjustment packages that combined debt relief and market-oriented reforms).


Transfers abroad of the proceeds from sales of property and inheritance were permitted up to the limit of US $300,000 in other currencies, provided that transfers are made through an authorized dealer with supporting documentation.a3


Deposit rates were fully liberalized. Mehrez and Kaufmann Liberalization date. a1


Collor Plan introduced: introduced a new currency and taxed stock market transactions heavily.u


It was announced that repatriation of capital would be freed gradually.a3


Certain financial institutions were allowed to obtain resources from abroad by issuing commercial papers.a3


Brazil eliminates exclusive broker system and moves to system like the NYSE.i


Devalued cruzeiro by 16%.


The criteria for absorption or rebate of accumulated losses of foreign capital enterprises were defined.a3


The criteria for the conversion of debt into equity for private sector debt with maturities beginning 1991 were announced.a3


The conversion of external debt instruments of the federal public sector, bonds, and deposits denominated in foreign currency for use in the National Privatization Program was authorized.a3


The minimum term for exemptions of income tax on external loans was reduced to from 10 years to 5 years.a3


A preliminary agreement was reached with nonresident creditor banks for the elimination of arrears outstanding at the end of 1990. The agreement provided for payments of US$2 billion in 1991 and conversion of remaining amounts to bearer bonds when an agreement is reached on medium- and long-term debt.a3


Debt-service payments on certain public enterprises falling due from April 1, 1991 were allowed.a3


IFC Liberalization date.i


Bekaert/Harvey Official Liberalization date [Final and NBER].


Kim and Singal Liberalization date.


Buckberg's Second Liberalization date.d


Foreign investment law changed. Resolution 1832 Annex IV stipulates that foreign institutions can now own up to 49% of voting stock and 100% of non-voting stock. Economy Ministers approved rules allowing direct foreign investments; 15% tax on distributed earnings and dividends but no tax on capital gains. Foreign investment capital must remain in country for 6 years as opposed to 12 years under previous law. Bank debt restructuring agreement.i 


Exporters were allowed to issue medium-term debt instruments that are secured with future export receipts.a3


The issuance of debentures that are convertible into stocks in domestic enterprises was authorized.a3


Until July of 1991, foreign portfolio investors could invest in Brazil only through Brazil funds. Now foreign investors are allowed to set up omnibus accounts which are essentially portfolios of one or more shares held in local custody.e There are no minimum holding period restrictions.e


A facility for externally funded nonprofit organizations to undertake debt-for-nature swaps was introduced, with an initial limit on the total amount of $100 million.a3


The remittance abroad of late interest was exempted from specific authorization.a3


Rules for borrowing external resources through the ADR/IDR mechanism were adopted.a3


Borrowing abroad for the financing of agriculture development was permitted.a3


Privatization plan successfully started. Usiminas (Steel), Celma (Aircraft turbine repair), Mafersa (railway equipment) and Cosinor (steel) privatized.


Usiminas (Steel) privatized, $1,430 million.p


Congressional approval of fiscal reform package. Reactivation of privatization program.


The supplementary income tax related to remittances of profits abroad was abolished, effective Jan.1.a3


Entry barriers to the banking sector were reduced.a13


Privatization plan continued of Usiminas (steel), Celma (airplane engines), Mafersa (railroad transport), Cosinor (steel), Indag (fertilizer), Pirantini (steel). Restrictions placed on shares sold include no remittance of dividends for 12 years and ownership requirement of two years. Only small participation of foreigners recorded.i


Aracruz announces intention of listing an ADR on NYSE.aa


The Foreign Capital Law was modified, setting the max withholding tax rate for remittances of profits and dividends abroad at 25%, unless the comparable tax rates in their home countries are lower (except in a registered tax shelter).a3


The participation of foreigners in the privatization process was liberalized. The period that investments are required to remain in Brazil was reduced from 12 years to 6 years and the 2-year holding period was abolished.a3


The minimum average maturity of foreign funding obtained through issuance of securities must be 30 months (previously 23 months) for tax exemptions.a3


The average period of amortization must be at least 60 months to benefit from tax exemptions.a3


Resident private sector companies and selected public sector companies were authorized to hedge against changes in international interest rates.a3


Brazilian authorities ban issuance of international bonds with maturities less than three years. The authorities discourage maturities of 3-5 years.i Aracruz (pulp manufacturer) launches first international primary equity offering by Brazilian firm.i Paribus launches first ever warrants on Brazilian bank debt.i


Depository receipts were authorized to be issued abroad by Depositary Institutions with backing in securities held in specific custody in Brazil.a3


Foreign investors were authorized to operate in the options and futures markets related to securities, exchange, and interest rates.a3


Brazil reaches agreement on the term sheet in restructuring interest payments for debt. Deal will not be signed until November 1993.i


The Central Bank authorized corporation established in Brazil to issue and place abroad securities that can be converted into equities.a3


The Central Bank required that identification must be provided for transactions in excess of $10,000 in the "manual exchange market".a3


President Collor's under impeachment process and was forced to resign Election of Fernando Henrique Cardoso as president.


Leasing contracts were authorized to be made for at least 2 years and they must be at least 5 years for total tax exemption.a3


Issue and placement of securities that can be converted into stocks by companies and institutions headquartered in Brazil were allowed, subject to prior authorization.a3


Private nonfinancial Brazilian residents were authorized to invest abroad up to $1 million without prior authorization.a3


The minimum maturity of external debt was lengthened from 1 year to 30 months.a3


New tax regulation.


Poliolefinas (petrochemical) privatized.


Compania Siderurgica Nacional (CSN) Acominas (steel mill) privatized.


The minimum term for external borrowing was extended to 36 months and from 60 months to 96 months for income tax exemption on interest.a3


Private firms were authorized to make hedging operations with financial or stock market institutions.a3


Financial institutions were authorized to trade gold among themselves and with domestic customers of foreign financial institutions.a3


Foreign capital was not allowed to be applied to fixed-income instruments.a3


Temporary financial transactions tax (of .25%) declared unconstitutional. President Franco ordered a new Financial Operations Tax of .75% to 3.2% with exemption after investment of 15 days.


ADR effective date. (Company=COMPANHIA SUZANO DE PAPEL & CELULOSE , Exchange=OTC) a11


Bank debt restructuring agreement.i


The proceeds of foreign borrowing converted into domestic currency were subject to an IOF of 3%. Portfolio investment by foreign investors in fix-income instruments was restricted to a single class of fixed-income funds, and subject to an IOF of 5%.a3


Foreign capital was not allowed to be applied to investments in debentures. a3


The portfolio compositio of FRF-CE was restricted by excluding transactions in derivative markets yielding fixed or predetermined returns.a3


National Monetary Council Resolution No. 2042 authorized certain institutions to conduct swap operations involving gold, exchange rates, interest rates, and price indices in the over-the-counter market. a3


National Monetary Council Resolution No. 2046 modified the provisions of Regulation No. 1289 of March 20, 1987 concerning the constitution, operation, and administration of foreign capital, investment companies, and stock and bond portfolios maintained in the country by foreign institutional investors. a3


The regulations on the financial transactions tax were revised whereby up to 25% may be applied on the issue of bonds abroad and on foreign investments in fixed-income securities, when the Government considers it necessary to raise the tax rates from the current levels of 3% and 5%, respectively. a3


Automatic authorization for issuing bonds, commercial paper, and other fixed-income instruments abroad was terminated. Circular No. 2410 altered the provisions that govern the prior authorization and registration of foreign credits through issues of securities on the international market. Circular No.2411 permitted foreign currency deposits resulting from excess exchange buyer positions to be made in cash. a3


Brazil completed arrangements to reschedule its external debts to commercial bank creditors. a3


National Monetary Council Resolution No. 2079 modified the provisions of Regulation No. 1289 of March 20, 1987, concerning the constitution, operation, and administration of foreign investment companies and stock and securities portfolios. a3


The minimum period for external export prefinancing was extended to two years. a3


Prepayment of foreign borrowing and import financing was permitted (Resolution No.2105). The 20% limit for import financing down payments was eliminated (Circular Letter No. 2486). a3


The constitution and operation of Foreign Investment Funds were regulated by Resolution No.2111 and Circular No. 2485. a3


Inflows of resources in the form of advances for future capital increases and bridge investment in anticipation of future conversions of debts into investment were prohibited (Circular No.2487). a3


National Monetary Council Resolution No. 2115 altered the provisions of Regulations No.1289 of March 20, 1987 pertaining to the constitution, operation, and administration of foreign investment companies and stock and securities portfolios. The financial transaction tax on foreign investment in fixed-income instruments was increased from 5% to 9%. (1)The financial transaction tax was levied on foreign investment in stocks at the rate of 1%; (2)inflows of resources through operations involving anticipated payment of exports were suspended; and (3) the financial transaction tax on foreign borrowing was increased from 3% to 7%. a3


New 15% tax on all consumer loans and installment payments by banks and businesses. Tax on foreign investment introduced (1% on trading value).


Two new options products introduced. Constitutional amendment passed allowing private investment in the oil industry. Cancellation of plans to tax gains on foreign investment.


Constitutional amendment allowing private investment in the oil industry. Cancelled plans to tax gains of foreign investment capital.


All banks were required to meet the 8% BIS capital-adequacy ratio.a8


Banking crises (1994-1995): two large state banks and the seventh largest private bank were insolvent; licenses of 11 small banks were revoked. Causes: (1) dissipation of inflation tax which brought weaknesses (high operating costs, poor portfolio, excessive loan concentration) in public banking system to surface; (2)deficiencies in regulatory and accounting framework as well as inadequate bank supervision in public banking system; (3) directed credit programs and lending to SOEs. Negative net worth of selected state and federal banks was estimated at 5-10% of GDP. Overall change in macro policy: implementation of Real Plan, and attempt by government to de-index wages, contracts, etc.a2


The reserve requirement of 15% on Advances for Export Contracts (ACC) was eliminated (Circular No. 2534). The anticipated payment for export operations was reinstated with a minimum term of 360 days (Circular No. 2538). The maximum period for ACCs was lengthened from 90 days to 180 days for large exporters and from 150 days to 180 days for small exporters (Circular No. 2539). For products considered essential to internal supply, the maximum period was increased from 30 days to 60 days. a3


Announcement that Electrobas (hydroelectric plant) will be included in privatization program. 


Announcement that Telebras may be privatized.


Financial Operations tax cut from 15% to 9%.


A new exchange rate system based on bands was introduced. The band was set at R$0.86-R$0.90 per US dollar until May 2, when it would be changed to R$0.86-R$0.98 per U.S. dollar. a3


The minimum period for the renewal and extension of foreign credit operations through floating rate notes, fixed rate notes, floating rate certificates of deposits, fixed rate certificates of deposits, private and public bonds, notes, and commercial paper was lowered from 36 months to 6 months. The limits of the long position of banks and dealers in the fluctuating foreign exchange market were lowered from US$1 million to US$0.5 million, respectively. The long position of banks in the commercial foreign exchange market was lowered from US$50 million to US$5 million. The IOF was reduced from 7% to zero percent on foreign loans, from 9% to 5% on investments in fixed-income funds, and from 1% to 0% on investment in stocks. The minimum term for contracting financial loans was lowered from 36 months to 24 months. The minimum term for relending operations related to Resolution No. 63 was lowered from 540 days to 90 days. The permission granted for anticipated payment of financial loans and import financing was revoked. a3


The exchange rate band was changed to R$0.88-R$0.93 per U.S. dollar for an undetermined period of time. The Central Bank specified that it would intervene in the foreign exchange market using electronic auctions. a3


Financial institutions of the National System of Rural Credit were allowed to contract foreign resources with a minimum maturity of 180 days for the financing of investment, marketing, and other expenses in the agricultural sector. The resources were exempted from the minimum period of three years for credit operations and fixed at 180 days, and from the financial taxation of 5%. a3


The 5% financial operations tax on foreign investment in fixed income instruments is annulled. Privatization timeline of Rio de Janeiro Servicios de Electricidad expected to shorten.


The limits on the short position of banks in the fluctuating and commercial foreign exchange markets were increased by 50%.a3


Real is devalued. Trade policy turns inward as import quotas are introduced and tariffs are increased.


Financial institutions were allowed to contract resources with a minimum maturity of 720 days for the financing of the construction and acquisition of new real estate ventures.a3


51% stake in Espirito Santo electricity company (Escelsa) sold marking the first privatization of a public utility company.


The tax on financial transactions (IOF) for interbank operations in the floating foreign exchange markets among financial institutions abroad and in Brazil was extended . The IOF rate for these operations was set at 7%, and the IOF rate were raised for financial loans from zero to 5%, and for investments in fixed income funds, from 5% to 7%. Foreign investors were prohibited from channeling resources into operations in the future and option markets.


The IOF rate for foreign resources for the agricultural sector was set at zero.a3


Differential IOF rates for financial loans with different maturities were established.a3


The conversion of federal public sector entities' foreign debt into investments, in the framework of the National Privatization Program, was regulated. The initial discount of 25% was reduced to zero.a3


Capital gains tax discussed. Foreign investors banned from futures market. Pension funds limited to 2% of capital in futures or options investments. Announcement of government's plan to sell its 47.5% stake in Eletropaulo


Resources originating from the liquidation of ACCs must be used to pay the credit lines provided by foreign financial institutions for such purposes to financial institutions in Brazil that came under bankruptcy, extrajudicial liquidation, or intervention.a3


The government instituted a program to facilitate the restructuring of the private banking sector known as PROER.a8


5% market entrance tax introduced.


Profits and dividends remitted abroad were exempted from income tax, while the tax rate applied to profits on direct investments and interests remitted abroad were reduced from 25% to 15%. Profits from investments listed in Annexes I to IV of the Resolution No.1289/87 were subject to a 10% income tax if they originated in variable income assets and to a 15% tax if they originated in fixed-income assets.a3


The resources obtained abroad under the terms of Resolution No.63 may be invested in interbank on-lending operations and leasing operations, and in acquiring credit rights tied to exchange rate floating. The minimum average term for contracting, renewing, or extending foreign loans was increased from 24 months to 36 months, except for some kinds of loans. The IOF rate for foreign investments in Privatization Funds was extended to 5%, and for investment in Real Estate Investment Funds and Mutual Investment Funds in Emergent Enterprises, over sale, redemption, or transferring value, for applications in quotas of the fund, was set at 10% when the fund has not been constituted or has not begun to work regularly, 5% when the fund has been constituted and is working regularly, and up to one year after its constitution, and zero after one year of the fund's constitution.a3


Certain foreign investors were prohibited from acquiring Agrarian Debt Securities (TDAO), National Development Fund Obligations (OFND), and debentures issued by Siderurgia Brasileira S.A.(SIDERBRAS). Foreign investors were allowed to buy quotas of Real Estate Investment Funds, Mutual Investment Funds in Emergent Enterprises, constituted with authorization from the Securities and Exchange Commission-CVM.a3


The resources obtained abroad under the terms of Resolution No.63 may be invested in national currency deposits in the Central Bank, without remuneration.a3


$8.2 billion bailout of Banco do Brasil.T


The operations carried out by the states, Federal District, the municipalities, and their respective semi-autonomous agencies were restricted according to several criteria.a3


Government plans privatization of Cia. Vale do Rio Doce CVRD (mining).


Financial transactions tax approved by Senate. A 0.2% charge on all stock market and financial transactions. Foreign investors invited back into market under Annex IV after two year ban. 


Launch of electronic exchange. Announcement of plans to privatize mobile phone industry. Compania Electrica do Estado do Rio de Janeiro sold.


Cia. Riogradense de Telecomunicacoes privatized. Telecommunications bill outlines privatization plans for industry and confirms plans to split Telebras into 4 entities.


Sao Paulo and BOVESPA agree to allow securitized debt of state-owned companies which can be used to buy shares when the companies are privatized.


President Fernando Henrique Cardoso's party gained the majority in both houses of Congress. Telecommunications industry would be allowed full foreign ownership in 1999. State workers a 29% salary increase granting.


Electric utilities privatization was expected and a petroleum deregulation bill was passed. The state-mining company CVRD announced that 45% of its voting shares would be sold on the Rio exchange.


An increase in local calling rate. S&P upgraded Brazil's foreign currency rating to "BB-" from "B+". A tax cut on fixed-income securities and foreign currency loans.


(Controls on capital and money market instruments) The IOF fixed-income fund was reduced to 2% from 7% and that for real property investment funds was eliminated. The IOF ceased to be levied on IOF loans contracted by residents, including banks.a3


A Credit Risk Center was instituted as a database of information regarding loans of more than R50,000 in value.a8


Privatization of the telecom and oil companies. Central Bank allows foreign investment in futures contracts on the BOVESPA stock index and interest rates on Brazilian CDs.


(Controls on derivatives and other instruments) Resources of societies, portfolios, and investment funds established under Resolution 1289(1987) could be used to regulate derivatives in futures markets for the purpose of maintaining their current market values.a3


Concerns on Brazilian real devaluation.


A plan to sell 28 state-controlled communications companies by mid-1998. Central Bank President Gustavo Franco reaffirmed that the current foreign exchange policy would remain unchanged. Comments by IMF's Michael Camdessus that Brazil needs to reduce its current account deficit.


Brazil stock market suffered from the domino effect caused by Hong Kong market crash. $5 billion of reserves were used to defend the currency.


The approval by Brazil's legislature of an austerity package.


Individual income tax cut. Foreigners who invest in special fixed-income funds were exempted from a 15-20% investment tax. Raising limits on short dollar positions.


Laeven's banking liberalization (FLI) dates.a13


The benchmark government rate was cut to 34.5% from 38%.


(Controls on credit operations) The minimum average maturities for external loans were increased to two years for new loans and to one year for renewed loans.a3


The central bank's announcement of a sharp cut in the prime lending rate based on recovery of foreign reserves, prospects to pass key reforms, and investor perception of a lower country risk.


The deaths of Communications Minister Sergio Motta and congressional leader Luis Eduardo Magalhaes.


The central bank increases the currency-trading band. 


Moody's revised its sovereign ratings on Brazilian bonds and on the country's foreign currency ceiling from stable to negative.


Government announced that its budget deficit had worsened by 1.1 billion reals from April to May, rising to 5.9 billion reals or 6.52% of GDP. Industrial production fell 1.5% over the first half of the year as a result of rising interest rates


Moody's downgraded sovereign foreign and local currency bonds to "B2" and "Caa1". Government announced $10.8 billion worth of fiscal deficit-reduction measures to compensate for increasing interest payments on public debt. Central bank raised interest rates to 49.75%.


G7 announced they would back the IMF credit lines to Brazil.


The IMF agreed to grant Brazil a $41.5 billion emergency credit line on November 13. The central bank cut interest rates down to 34.4%. 


Opposition lawmakers voted against a plan to tax active and retired civil servants that would have saved $2.2 billion.


The central bank announced that the government would giving up the defense of  the real, so-called 'Real Plan', on January 15, having the real plunge  41% after its free float.  the states of Minas Gerais and Rio Grande do Sul announced they would not make debt payments to the federal government.


(Controls on credit operations) The minimum average maturity for external loans were reduced to 90 days.a3


(Provisions specific to commercial banks and other credit institutions) The ceiling on banks' short-exchange position became equal to each banks's net worth.a3


The minimum share of Brazilian Brady bonds in FIEX funds has been increased to 80% from 60%.a3


A 21% appreciation of the real in March. Internet trading begun on March 29.


Government returned to capital markets with a sovereign bond issue in April as well as the resumption of Brazil’s privatization program.


(Provisions specific to commercial banks and other credit institutions) Open positions in foreign exchange are not to exceed 60% of capital, and banks must increase capital by 50% of the excess of their open positions over 20% of capital.a3


(Controls on capital and money market instruments) A 0.38% tax was levied on all financial transactions.a3


(Controls on capital and money market instruments) A 15% tax was levied on foreign investment profits from Brazilian fixed-income funds.a3


(Controls on derivatives and other instruments) The CBB allowed forwards, future, and options transactions in farm products by nonresidents.a3


The central bank lowered the overnight rate to 19% and the government lowered the reserve ratio on both demand and time deposits to spur lending.


(Provisions specific to commercial banks and other credit institutions) Banks' short foreign exchange positions became unlimited.a3


The stock market rallied due to a congressional bill allowing foreign individuals to invest in local equities as well as a proposal to abolish the 10% capital gains tax for individual foreign investors.


The minimum share of Brazilian Brady bonds in FIEX funds was increased from 60% to 80%.a3


Two of Brazil's largest drink producers merged to create AmBev, one of the largest breweries in the world. Foreign investment restrictions were eased. But President Fernando Henrique Cardoso's approval ratings weakened and political power struggles increased.


(Provisions specific to commercial banks and other credit institutions) Banks were allowed to borrow funds abroad to be applied freely in the domestic market.a3


The central bank lowered the benchmark Selic rate by 50 basis points. Turbulence in the U.S. markets weakened the real and forced the central bank to inject liquidity to maintain low interest rates.


(Controls on capital and money market instruments) Foreign investors were given access to derivative markets for the first time.a3


Nonresidents were allowed to purchase shares and other securities listed in the Brazilian stock market.a3


The central bank cut Selic rate again. The Congress passed the Fiscal Responsibility Law, imposing strict spending limits at local events, to address Brazil's longstanding problem of fiscal imbalances. Minimal increases in public-sector salaries were approved


The central bank lowered Selic rate again by 100 basis points. But increased utility charges and the rising prices of oil triggered inflation, putting interest rate reductions on hold. Brazil floated 16.4% of Petrobras on the NYSE, its largest-ever privatization offering. The energy sector made strong gains.


The Left make significant gains in the municipal elections. The real depreciated after the crisis in Argentina, Brazil's Mercosur partner.


IMF package for Argentina relieved the market. The central bank reduced the Selic again to 15.8%. Brazil's largest state bank, Banespa, was sold to Banco Santander at a premium above market expectations, and Banestado was sold to the local Banco Itau group.


GDP growth of more than 4%, a trade surplus, an interest rate cut, and a S&P's ratings upgrade boosted the markets.


The central bank raised the key Selic rate to 15.75% from 15.25%, the first monetary tightening in two years.


The commercial dollar rate had appreciated by 17.8% since the year's beginning. GDP growth slowed down.


In the third quarter, the government responded to the dramatic economic slowdown by raising the compulsory deposit on term transactions to 10% from zero and allowing companies to account for the real devaluation by spreading it over four years. Brazil negotiated a new $15.6 billion credit line from the IMF.


In the fourth quarter, the markets were lifted by decoupling of Brazil from Argentina, easing of electricity rationing, proposals to widen the tax base, and a slight recovery in political ground by the reformist president.


Central Bank announces steady “linear” intervention in the foreign exchange market.


IMF Managing Director recommends approval of a new US$15 billion Stand-By Arrangement for Brazil through December 2002. The authorities indicate that they intend to treat the arrangement as precautionary.


The Central Bank Monetary Policy Committee (COPOM, Comitê de Política Monetária) decided to lower the benchmark overnight rate (SELIC) from 19.0% to 18.75%, the first cut since January last year. 


The World Bank has approved three loans totaling US$1bn to support energy, education, and financial reforms in Brazil.


The CPMF tax, a 0.38% tax on all financial transactions, including cheques, which provided R$18bn per year in revenues for the government, expired. b1


Currency hits all-time low and financial markets panic over the prospect of left-winger Luiz Inacio Lula da Silva winning October's presidential elections. b21


Agreement announced on a new 15-month Stand-By Arrangement with financing of an additional US$30 billion.


Brazil's National Bank of Economic and Social Development (BNDES) started to release US$8bn to lend to exporters of all types with interest rate of 1% to 2.5%. b1


Luiz Inacio Lula da Silva, popularly known as Lula, wins presidential elections. The former shoeshine boy heads Brazil's first left-wing government for more than 40 years. At his inauguration in January 2003 he promises political and economic reforms and pledges to eradicate hunger. b21


Luis Inácio da Silva (‘Lula’), the candidate for the left-wing Brazilian Workers’ Party, won easily over the governing party’s candidate José Serra,


president, Fernando Henrique Cardoso approved a bill to allow foreign investors to hold up to a 30% stake in local media companies. b1


The PT government secured approval in the Chamber of Deputies for a bill aimed at amending the regulations for the financial system and paving the way for legislation allowing greater Central Bank autonomy.


President Luiz Inacio Lula da Silva won the support of Brazil's 27 state governors for the social security reforms, which should be sent to Congress by the end of the month. b25


The Chamber of Deputies approved the PT's social security bill in the first- and second-round votes in August 2003 and that of the Senate's in November and December 2003.


Brazil President Luiz Inacio Lula da Silva failed to persuade the country's 27 governors to drop demands to keep tax breaks that they use to attract investment in their states, as he tries to keep his tax bill on track. b23


The Central Bank monetary policy committee (COPOM) lowered the benchmark SELIC interest rate by 100 basis points to 19.0% and again by 150 basis points to 17.5% on 19 November, b25


The key SELIC rate was reduced by a total of 1,000 basis points between June and December 2003 to 16.5%.


The Executive Board of the IMF approved a new loan agreement concluded with Brazil in November. The US$14bn, 15-month agreement comprises US$6.6bn in new credit and US$8.2bn that corresponds to the previous US$30bn agreement, due to expire at end-2003.


The government formally unveiled a R$15.05bn (US$5.2bn) program to stimulate industrial sectors regarded as strategic - semiconductors and software, pharmaceutical products, biotechnology, capital goods.


Gun Control Law Takes Effect in Brazil.


Brazil's central bank said on Tuesday it would buy back about $988 million in domestic government debt tied to the dollar that comes due on July 15. The move is part of the bank's strategy to pay off debt linked to the greenback, which can be more expensive to service when the country's currency depreciates. b24


Brazilian senate approves bankruptcy law.


Regulations on Foreign Investors


Restrictions: 1. The Central Bank of Brazil issues certificates of registration for funds entering Brazil in order to control foreign capital, future remittances abroad of dividends, capital gains and repatriation of invested capital. 2. Five investment vehicles (Foreign Capital Investment Company and Fund, Foreign Capital Securities Portfolio, Foreign Institutional Investors, ADRs and IDRs) for foreigners to deal in the Brazilian stock market all require approval of the Securities Commission for their information.

Taxation: 25% individual dividend tax and 15% institution dividend tax (an 8% deduction applies corresponding to the 8% tax applied to corporate profits when dividends are declared). Lower tax rates for reciprocal tax agreement. 25% individual capital gain tax and no tax on institutional capital gains.a5(first entry)


No change through 2001.a5


Restrictions: 1. Allow foreign investment of up to 30 percent in Brazilian media. 2. Limited investments in certain sectors, including nuclear energy, health services, rural property, fishing, mail and telegraph, aviation, and aerospace, remain in effect. b1

Taxation: No change.


Restrictions: 1. All sectors of the economy are open to foreign investment. The government has progressively lifted impediments to investment in recent years . However, foreign investment in the banking sector is evaluated on the basis of national interest. 2. Foreign investors may freely convert the Brazilian currency in the foreign exchange markets.

Taxation: The corporate tax rate is 30%. Profit and dividend remittances are subject to a 15% income withholding tax. Repatriations are exempt from income tax. b1