With this law, we will ensure there is more investment and better terms for government and the private sector within the framework of legal certainty for international debt buyers, Chaves said when announcing the signing of this regulation at a press conference following the usual ECB Council on Wednesdays.
He specified that this new legislation seeks flexible investment mechanisms and hopes that with this new window of opportunity for foreign investors, their participation will increase in the medium term, so that interest rates on the local market will decrease and investment conditions will be extended.
According to the text, the law reforms three aspects, the first relating to tax treatment to avoid double taxation of 15 percent on interest on securities and 15 percent on remittances abroad.
Likewise, it introduces an amendment to Law 8131 to clarify the maturity of internal government debt and the addition of two articles to Title VII on Compensation, Liquidation and Custody of Securities of the Securities Markets Regulation Law.
The addition of one of them aims to provide more legal certainty and regulate the processes of cross-border settlement of sovereign debt transactions by defining clear rules for transactions using international means of payment by non-resident investors. The other added article “sets out the requirements for local custodians in legal matters to provide the sub-custodial service to foreign custodians or financial market infrastructures.”
For the Treasury chief, this new law will improve the debt profile by lengthening maturities and expanding the investor base, while hoping to optimize funding costs by strengthening the allocation process and achieving better pricing of financial instruments.
In summary, it is an initiative that will modernize and remove barriers to the participation of non-resident investors in the local sovereign debt market.
The advantages include legal certainty, expanding the investor base, extending the term of the debt, improving the cost of financing, new placement mechanisms, as well as deepening liquidity in both the primary and secondary markets.
Their goal is to establish clearer rules for investors and improve the placement of internal public debt issued by the Treasury and the Central Bank.
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