HSBC J.P. Morgan Standard Chartered Bank - bicbanco

FOREIGN EXCHANGE RATES AND EXCHANGE CONTROLS
Until March 14, 2005, there were two legal foreign exchange markets in Brazil, the commercial rate
exchange market and the floating rate exchange market. The commercial rate exchange market was reserved
primarily for foreign trade transactions and transactions that generally required prior approval from Brazilian
monetary authorities, such as the purchase and sale of registered investments by foreign persons and related
remittances of funds abroad (including the payment of principal of and interest on loans, notes, bonds and other debt
instruments denominated in foreign currencies and duly registered with the Central Bank). Purchases of foreign
exchange in the commercial market could be carried out only through a financial institution in Brazil authorized to
buy and sell currency in that market. The commercial market rate was the commercial selling rate for converting
Brazilian currency into U.S. dollars, as reported by the Central Bank. The floating market rate generally applied to
specific transactions for which Central Bank approval was not required.
In March 2005, the CMN enacted new rules with respect to the foreign exchange market in Brazil. The
new regulations unified the two previously existing foreign exchange markets into a single foreign exchange market,
or the Foreign Exchange Market. The new regulations also eliminated previous restrictions and allowed more
flexibility for the purchase and sale of foreign currency. The Foreign Exchange Market is intended to simplify both
inbound and outbound foreign exchange transactions by permitting exchange contracts to be executed by those local
institutions that are authorized to deal in foreign exchange.
Brazilian foreign exchange rules have been made more flexible recently. For example, current regulations
provide that all proceeds from the export of goods or services be kept in bank accounts outside of Brazil and
eventually used abroad, without any need to repatriate such amounts.
Based on Resolution No. 3,719/09, local exporters are allowed to keep up to 100% of their export proceeds
abroad and freely dispose of such amounts (including transferring them to foreign third parties), with due regard for
the rules issued by the CMN and by the Federal Revenue Office in Brazil. Such proceeds held abroad, however,
cannot be lent by Brazilian exporters.
The Central Bank may, however, in limited circumstances intervene in the foreign exchange market to curb
excessive volatility. The foreign exchange rate is reported by the Central Bank on a daily basis.
The following tables set forth the selling rates of the Foreign Exchange Market selling rates published by
the Central Bank at the close of business day, expressed in reais per U.S. dollar for the periods and dates indicated.
Closing Selling Rates of Reais per U.S.$1.00
Year Ended December 31, Low High Average (1) Period End
2007 ............................................................................................... 1.73 2.16 1.95 1.77
2008 ............................................................................................... 1.56 2.50 1.84 2.34
2009 ............................................................................................... 1.70 2.42 1.99 1.74
Closing Selling Rates of Reais per U.S.$1.00
Month Low High Average (1) Period End
January 2010 ................................................................................. 1.72 1.87 1.78 1.87
February 2010 ............................................................................... 1.80 1.88 1.84 1.81
March 2010.................................................................................... 1.76 1.82 1.79 1.78
April 2010 (through April 19, 2010) (2) ......................................... 1.73 1.79 1.76 1.75
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Note:
(1) Represents the average of the rates on each business day in the period.
(2) On April 19, 2010, the exchange rate published by the Central Bank was R$1.75 per U.S.$1.00.
Brazilian law provides that in the event of a serious imbalance in Brazil’s balance of payments, or a
foreseeable likelihood of such an imbalance, temporary restrictions may be imposed on remittances of foreign
capital abroad. There can be no assurance that such measures will not be taken by the Brazilian government in the
future. See “Risk Factors—Risks Relating to the Bank and the Brazilian Banking Industry.”
AMR-248898-v2
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