Fazenda announces set of 13 measures to stimulate credit and boost PPPs; see list

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Of the proposed actions, nine depend on the approval of the National Congress and four only on changes in decrees or ordinances. The Ministry of Finance announced this Thursday (20th) a set of 13 measures (see full list below) intended to stimulate the credit market and boost Public-Private Partnerships (PPPs) in states and municipalities. The package includes: three measures related to bills already being discussed in the National Congress, which now receive formal support from the government; six measures that will be made possible with new bills to be sent by the government to Congress; four measures that depend on amendments to decrees or ordinances, that is, they will not need the approval of parliamentarians. Among the measures is the one that will change the value of the existential minimum, that is, the minimum amount of monthly income that a person needs to pay their basic expenses. This amount cannot be committed to debt. According to the current decree, the amount is R$303. The government will issue a decree to establish that the existential minimum will rise to R$600. The government also wants to allow resources from open supplementary pension plans, personal insurance and capitalization bonds , for example, can be used as collateral for bank loans. A bill will be introduced for this. In the end, the economic team hopes that the set of measures, if implemented, will expand the credit market as a whole, reducing costs and interest rates, in addition to stimulating investments in infrastructure. Government will announce measures to increase credit, says sec. Check the 13 proposed actions below: 1. Union endorsement of PPPs in states and municipalities The government will allow credit operations that will make Public-Private Partnerships (PPPs) in states and municipalities possible with the guarantee of the Union. That is, the Union will cover eventual defaults by governors and mayors in PPP projects. Afterwards, the federal government recovers the money, deducting it from the participation fund transfers. The model is the same as for credit operations carried out by states and municipalities that have the Treasury as guarantor, but the measure had not yet been extended to PPPs. The action will be carried out directly by the National Treasury, without needing congressional approval. Public and private banks and multilateral financial institutions have already indicated their interest in making lines available in this format. The government considers that the absence of a firm guarantee was the main obstacle to launching PPPs in states and municipalities. Still within the scope of partnerships, a National Treasury ordinance will clarify which expenses are included in the maximum commitment limit of the net current revenue of states and municipalities with PPPs. In this way, subnational entities will be able to expand their capacity for partnerships with the private sector. 2. Incentivized debentures The economic team intends to amend a 2016 decree to expand the possibilities of issuing incentivized debentures, which are securities issued by companies and traded in the capital market that have reduced Income Tax taxation. The objective is to encourage private financing of infrastructure projects focused on the social and environmental areas. With the change, new sectors will be able to be financed through these debentures. They are: education, health, public security and prison system, urban parks and conservation units, cultural and sports facilities, social housing and urban requalification. According to the government, there is insufficient public resources in these areas and difficulty in financing Public-Private Partnership (PPP) projects. Differential Income Tax rates for these incentivized debentures are as follows: 0% for gains registered by individuals and 15% for legal entities. 3. New Guarantee Framework Signed by former President Jair Bolsonaro in 2021, the bill already presented to Congress changes guarantee rules in the credit market. The proposal provides, among other points, that the same property can be used as collateral in more than one operation. With the measure, if the asset is valued at BRL 200,000 and the debt amounts to BRL 50,000, it will be possible to use the remaining BRL 150,000 to pledge other loans at the same bank. After an amendment in the Chamber of Deputies, the text also expanded the possibilities of pledging family assets offered as collateral for loans. At the time, opposition parliamentarians expressed concern about the project and stated that it would allow Guarantee Management Institutions (IGGs) to confiscate the home of a family that eventually defaulted. The project still needs to go through the analysis of the senators. The Lula government considers that the project has the potential to expand access to credit and reduce interest rates. 4. Guarantee with social security resources The idea is to present a bill that allows the use of resources from open supplementary pension plans, personal insurance, Individual Programmed Retirement Fund (FAPI) and savings bonds as collateral for bank loans. The objective, according to the economic team, is to enable customers of financial institutions to have access to cheaper credit. In addition, the government seeks to prevent policyholders from redeeming these applications under unfavorable conditions. This is because, in part of these social security products, the Income Tax rate varies according to the redemption period. The shorter the term, the higher the rate. According to the Ministry of Finance, there are BRL 1.2 trillion in resources invested in open pension plans, and another BRL 20 billion in capitalization bonds. 5. Simplification and less bureaucracy of credit The government is going to send to Congress a bill to simplify the issuance of debentures – credit securities issued by companies and traded in the capital market – in general. Among the measures is the easing of the quorum for meetings of debenture holders, who are the investors who hold these securities. The text will also propose the reduction of bureaucratic requirements for granting credit, such as the presentation of certain certificates. The economic team assesses that the requirement for excessive documents makes it difficult and more expensive to access credit in the country. 6. Access to tax data The Federal Revenue will issue an ordinance to simplify the sharing of tax data, by people and companies, with financial institutions. The objective is to make credit cheaper, mainly for small and medium-sized entrepreneurs. The owner of a small business, for example, will be able to authorize the sharing of his financial data with creditors in a simplified way and, in this way, obtain a lower interest rate. Users will be able to authorize without leaving the financial institution’s environment, as the bank will be connected to a tax authorities system. 7. Authorization of banks and digital currency The government will send a complementary bill to Congress that should make the authorization process more flexible for the operation of new financial institutions in the country. This permission is given by the Central Bank. In the government’s assessment, the current rules make it difficult for smaller competitors to enter, in addition to the long waiting period for an institution to obtain BC authorization. The project will also take the opportunity to “clarify” the competence of the Central Bank to launch the digital real, the country’s official digital currency. The president of the monetary authority, Roberto Campos Neto, had said this year that a new regulation for the creation of the currency would not be necessary. 8. Banking Resolution Regime The government will support the supplementary bill currently being discussed in the Chamber that simplifies and improves the so-called “banking resolution regime”. The project is PLP 281/2019. The economic team considers that the current legislation dealing with liquidations (closing) and interventions in institutions of the banking system is outdated. Therefore, it will propose improvements to the current rules and new rules to allow the Central Bank to have a more effective action to intervene in institutions in crisis. According to the government, if the project is approved, there will be a reduction in the risks of using public resources in the case of intervention in banks or other financial institutions. 9. Over-indebtedness The government will change the current decree 1.150/2022, which deals with the “existential minimum”, regulating the Over-indebtedness Law. The existential minimum is the minimum amount of income a person needs to pay their basic expenses. This amount cannot be committed to debts. By the 2022 decree, the amount was set at 25% of the minimum wage in force at the time, approximately R$ 303 per month. The government will edit a decree to establish that the existential minimum rises to R$ 600. The economic team assesses that there has been an increase in defaults and indebtedness of the population in the last year, especially in low-income families, with the reduction of the existential minimum. Therefore, the government intends to increase the amount to protect consumers and, consequently, the credit market. 10. Protection of investors in the capital market The government is going to present a bill to improve the protection mechanisms for minority investors and also to improve the rules against possible losses caused by controlling shareholders (who hold control of a company). For example, a minority investor in a company will have more tools to sue controllers who have caused damage to the business. Among them is the possibility of filing a collective civil action of responsibility against the controller. The government considers that current rules do not adequately protect minority shareholders, which leads to less funding from the capital market. 11. Financial market infrastructure The government will propose a bill to improve the legislation on the so-called “financial market infrastructure” (FMI), that is, on the processes of settlement, clearing, guarantees, registration and deposits of financial assets and securities. The project will delimit the role of the Central Bank, the Securities and Exchange Commission and the Superintendence of Private Insurance (Susep). In the government’s view, the current legal framework on the subject is outdated, as it has not kept pace with market developments. The government hopes that the measure will increase process security and reduce operating costs in the financial system. 12. Expansion of insurance cooperatives The government is going to propose a complementary bill to enable insurance cooperatives to expand their scope of action. Currently, these groups work only with rural, health and work accident insurance. In the government’s evaluation, there is a lack of insurance offer in several segments, which could be filled with cooperatives, which already tend to act focusing on certain niches. For example, they will be able to offer insurance for cars, bicycles, cell phones, tablets, notebooks, among others. With the measure, the government expects an expansion of the insurance market in the country and, consequently, of credit. 13. Legal framework for private insurance The government will support the House bill pending in the Senate (PLC 29/2017) that improves the rules of the private insurance market in the country. In general terms, the project regulates the sector by consolidating it and brings a series of new rules for the different actors in the market, such as consumers, brokers, insurers and regulatory bodies, in addition to the rights and obligations of the parties involved. The government says that with the approval of the project, there will be greater protection for the insurance contractor. In the government’s assessment, the current rules – dispersed in the Civil Code – are outdated and lack protection for the insured.

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