BRASILIA (Reuters) – Brazil’s National Monetary Council, the country’s highest economic body, announced on Thursday tightened regulations for the issuance of private debt securities linked to financing in the real estate and agribusiness sectors.
These financial instruments, including the so-called CRAs, CRIs, LCAs, LCIs, and LIGs, provide income tax exemptions for investors and have experienced significant growth in Brazil over the past few years.
Real estate-linked securities LCI and LIG represent a market of 460 billion reais ($93.57 billion), said Felipe Derzi, deputy head of regulation of the financial system at the central bank in a press conference.
The government’s assessment indicated that only 15-20% of these securities were initiating new credit operations in line with the original goal intended for the instruments he said, adding that “a reduction in the issuance volume is expected.”
LCAs, which are linked to agribusiness, also account for 460 billion reais, said Claudio Filgueiras, head of rural credit regulation, supervision and control at the bank.
The changes encompass stricter rules for eligible underlying assets in issuances and will apply exclusively to new operations, said the finance ministry and the central bank in a joint statement, adding that the adjustments “aim to enhance the efficiency of public policy in supporting” the sectors.
They added that the alterations seek to ensure that the “aforementioned instruments are backed by operations consistent with the purposes that justified their creation and contributing to a more robust credit market.”
($1 = 4.9163 reais)
(Reporting by Marcela Ayres; Editing by David Gregorio and Sam Holmes)
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