Looking to stockpile dollars in Brazil? Not so fast

Getting involved in the modernizing reformist agenda established in previous years, Brazil’s Central Bank presented a bill to the House of Representatives aiming to replace century-old norms regarding the market of trading foreign currency in Brazil. 

If Congress agrees with the plan of bank chairman Roberto Campos Neto, Brazil will unify over 40 regulations about foreign currency exchange into one law, simplifying processes and allowing the Brazilian Real to become a convertible currency in the future. But, after all, what impacts would this measure have on the Brazilian economy? 

The changes were drafted to increase competition in Brazil’s concentrated financial system, as well as modernizing forex trading and giving investors more legal security. According to the bill, Brazil’s Central Bank would be able to authorize new institutions to operate on the forex trading market. Currently, only 187 banks in Brazil are allowed to transfer money abroad, and other companies interested in carrying out this service must associate with them, increasing bureaucracy and costs. According to newspaper Valor Econômico, banks charge an average spread as high as 0.9 percent for buying and selling foreign currencies.   

This rule change would allow fintechs to enter the market, fostering competition and making it easier to send funds to Brazil. Another measure that may give a boost to this market is...