President Jair Bolsonaro's administration revealed Tuesday a "foreign exchange liberalization" bill, to be presented to the Brazilian Congress, which paves the way to the dollarization of the Brazilian economy.
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"Bank accounts, wages and prices could be dollarized, burying once and for all national sovereignty. All countries that gave up their currencies and adopted the U.S. dollar have lost their sovereignty," local media Brasil 247 said reporting on the news.
Under the legislation, dollar-denominated transactions can be carried out only by 187 banks which are authorized to operate at the foreign exchange market.
Bolsonaro's proposal opens space for the Central Bank to authorize a larger number of financial institutions to carry out these operations.
Besides giving local financial institutions more freedom to act in the exchange market, the bill allows foreigners to acquire Brazilian banks.
“Currently, some banks manage accounts in foreign currency,” the Central Bank's regulation director Otavio Damaso said. “The Bill does not allow individuals to have accounts in dollars. That possibility is not in our short-term plans. However, we are willing to make some improvements in the mid and long term."
Bolsonaro's bill allows foreign central banks and clearing houses to open accounts in both local currency and foreign currency.
"The bill also seeks to advance in the internationalization of the Brazilian currency (the Real), a goal which the Central Bank has called 'convertibility'," magazine Valor Economico reported, adding that other countries' central banks may also invest in government securities denominated in the Brazilian currency.
Bolsonaro's bill also allows local banks to grant loans to non-residents economic agents, which means that Brazilian banks will be able to finance foreign importers of Brazilian products.
If the bill is approved, the Brazilian government will allow Brazilian exporters greater freedom to manage their financial resources abroad.