Emerging Markets Rates and Currencies Handbook

Brazil (BRL - Brazilian Real) Citi in Brazil Citi opened in Brazil in 1915. Citi operates as commercial bank in Brazil (banco múltiplo), offering a complete basket of products and services. Market Overview The Central Bank of Brazil, known as “Bacen”, regulates all currency flows in and out of the country. According to local regulation, the Brazilian Foreign Exchange regime does not permit free convertibility of the currency. Therefore, in Brazil, FX transactions must be executed with an institution authorized by Bacen to carry out such transactions, which shall be responsible for ensuring compliance with the local foreign exchange regulation. Also, FX transactions must be duly formalized and may require a register into Bacen’s system. Bacen manages the local currency under a free-float regime; however, it intervenes through the spot, swaps and/or futures markets when it deems necessary. The currency is the BRL (Brazilian Real or simply Real) and the quoting convention is BRL per US dollar (1 pip = 0.0001 BRL). The benchmark rate for the US Dollar, known in the market as the PTAX, is the arithmetic average of four intra-day quotes made by the Central Bank with dealer institutions every business day. Most of the FX volume is generated in the spot or futures market. 1m tenor for futures is most liquid. Options are traded both onshore and offshore, with liquidity concentrated under the 1y tenor. In terms of currency pairs, most volume is dominated by USD/BRL, which accounts for about 90% of the total flow. Foreign Exchange Policy Although most of the FX deals are settled in up to 2 business days (spot — câmbio pronto), full-deliverable forward FX transactions are also permitted, up to a maximum tenor of 360 days (full-deliverable-forward — câmbio futuro, also known as “trava cambial”). Convertibility 186