Brazil’s loan market has navigated significant economic swings in recent years, marked by high interest rates followed by easing monetary policy. Banks remain well-capitalised and profitable, benefiting from wide interest spreads, while non-performing loan levels have been manageable and fintechs continue to expand credit access. Regulatory change has been central to this evolution.
Other regulatory changes are also influencing the loan market’s direction. The Open Finance programme (open banking/insurance) has progressed, requiring banks to share customer data (with consent) and enabling new entrants to offer tailored credit based on that data. Meanwhile, the Brazilian Data Protection Law (LGPD) and enhanced compliance requirements have led lenders to strengthen data governance and KYC procedures. The BCB’s agenda for 2025–26 prioritises innovation in areas such as Banking-as-a-Service (BaaS) and virtual asset service providers (VASPs). Although cryptocurrency lending is still nascent, the trend towards regulatory clarity may pave the way for crypto-backed loans or tokenised credit instruments in the future. Overall, Brazil’s regulatory environment is evolving to balance prudential oversight with market modernisation – a trend that bolsters long-term confidence in the lending framework.
Global geopolitical conflicts have had indirect but notable effects on Brazil’s loan market. The war in Ukraine, for example, contributed to worldwide inflation and supply chain disruptions that influenced Brazil’s economy.
Spiking global commodity prices in 2022 and 2023 had a dual impact. Brazilian commodity producers (especially in agriculture and mining) enjoyed windfall revenues, thereby improving their creditworthiness, whereas manufacturers and consumers faced higher costs.
Banks saw increased credit demand from commodity sectors looking to finance expansion, whereas other industries were more cautious amid uncertainty in global trade. Additionally, the conflict-driven volatility in international capital markets led to higher funding costs for emerging market borrowers. This made some Brazilian companies delay international bond issuances or rely more on local bank credit until spreads normalise.
A second effect has been a sharper focus on sanctions and AML in cross-border financings. Following the expansion of US/EU regimes and headline cases, lenders now require enhanced representations and covenants on sanctions compliance, beneficial ownership, and use of proceeds, and have tightened internal screening for clients with international exposure.
Brazil’s high-yield debt market – both international and domestic – has played a meaningful role in recent financing trends.
On the international front, Brazilian issuers have increasingly tapped into global high-yield bond markets as an alternative to bank loans. Notwithstanding higher base rates abroad, investor appetite for Brazilian credits resurged in 2023–24. This surge in high-yield fundraising reflects a clear upward trend in global bond financing for Brazilian companies, even those below investment grade.
The availability of high-yield financing has impacted loan terms and structures domestically – larger companies with wide capital markets access can negotiate more borrower-friendly loan conditions, knowing they have the option to refinance via bonds. Banks have responded by offering longer tenors and friendlier covenants on loans for strong borrowers in order to stay competitive.
Domestically, debentures – particularly incentivised infrastructure papers – continue to fund infrastructure projects and mid caps at higher coupons. Bond-style features (incurrence tests, covenant-lite mechanics, and grower baskets) are appearing in loan documentation.
Overall, robust high-yield activity has nudged Brazilian loan documentation toward more flexible, market-friendly structures.
Brazil’s loan market has witnessed significant growth in alternative credit providers in recent years, diversifying the sources of credit beyond the traditional commercial banks. Private credit funds and direct lenders (including global investment funds) have become increasingly active in Brazil.
Receivables funds (fundos de investimento em direitos creditórios, or FIDCs) have scaled up as an alternative channel. This allows companies to monetise working capital assets and enabling non-bank investors to fund the real economy via structured vehicles.
Public policy also played a countercyclical role. In 2023, the Brazilian Development Bank (Banco Nacional de Desenvolvimento Econômico e Social, or BNDES) increased long-term lending and subscribed infrastructure debentures to catalyse investment, while “Desenrola” supported retail debt restructuring led by public banks. These vectors widened the funding base and compelled banks to remain competitive on pricing and speed. These funds, often partnering with local asset managers, offer companies bespoke credit – for example, mezzanine loans, unitranche facilities, or pre-export financing – that may not fit within traditional banks’ lending criteria or timing. For instance, during periods when banks tightened credit (eg, after the high-profile corporate default of a major retailer in early 2023), private credit stepped in to fill the gap.
Sponsors of acquisitions and infrastructure projects have tapped debt funds for more flexible terms (albeit at higher yields) than those offered by banks.
The influence of these private lenders is seen in the greater variety of loan structures in the market, often tailored to the cash flow of the borrower (with payment-in-kind (PIK) interest, toggle features, or equity kickers).
Banking and finance techniques in Brazil are evolving as market participants adapt structures to investor preferences and borrower needs.
One notable development is the use of holding company (HoldCo) structures in financing arrangements. In complex acquisition financings, sponsors increasingly utilise HoldCo loans or bonds (debt issued at the level of the holding company that indirectly owns the operating company). This technique can avoid some regulatory and corporate pitfalls, such as financial assistance issues or restrictions on the operating company incurring debt. HoldCo debt is structurally subordinated (lenders only have a claim on the equity value of the operating subsidiary), but it offers flexibility ‒ for instance, it may carry interest that accrues until a refinancing event, and it can be serviced by dividends upstreamed from the operating company.
Brazilian borrowers and global investors have grown more comfortable with such structures, especially for cross-border deals where a foreign HoldCo raises debt to acquire a Brazilian target, or vice versa.
Likewise, preferred equity instruments are being used as quasi-debt in certain deals. Rather than traditional mezzanine loans, private equity sponsors have occasionally injected capital as preferred shares with preferential dividends and redemption rights to achieve financing needs without increasing formal debt on the balance sheet.
These preferred equity stakes can mimic debt economics – for example, they carry a fixed cumulative dividend and are redeemable at a premium – while keeping leverage ratios in check from a legal standpoint. Borrowers appreciate this because it can preserve covenants or regulatory ratios and investors accept it for the higher returns and potential equity upside.
ESG lending and sustainability-linked lending have gained significant traction in Brazil’s financing spectrum. In the past couple of years, there has been a notable uptick in sustainability-linked loans (SLLs) and green loans offered by both domestic banks and international banks to Brazilian companies.
Project finance has seen widespread use of green-labelled structures in wind, solar and transmission, alongside sanitation; agribusiness issuers tap “green” Certificate of Agribusiness Receivables (Certificados de Recebíveis do Agronegócio, or CRAs), and sustainability-linked bonds with step-up/step-down interest rate mechanics are more common. Supervisors have reinforced the trend: National Monetary Council (Conselho Monetário Nacional, or CMN) and Central Bank of Brazil (Banco Central do Brasil, or BCB) rules embed social, environmental and climate risk management into credit processes, the Securities and Exchange Commission of Brazil (Comissão de Valores Mobiliários, or CVM) has strengthened ESG disclosures, and a domestic taxonomy is under discussion. Together, market practice and regulation are making ESG factors part of standard underwriting and ongoing reporting.
In addition to widespread use in renewable energy, sanitation and agribusiness, sustainability-linked instruments are also gaining ground in logistics and infrastructure projects — for instance, railway issuers tapping ESG debentures tied to greenhouse-gas reduction targets. CRAs labelled as “green” have expanded significantly and social impact lending has reached areas such as female entrepreneurship and low-income housing. These developments reflect not only market practice but also regulatory requirements, embedding climate-risk management into credit processes.
In Brazil, providing financing on a regular basis is a regulated activity. Banks and other financial institutions must be licensed by the Central Bank of Brazil to operate.
The authorisation process for a new institution requires submission of detailed documentation, including business plans and governance structures. Capital thresholds must also be complied with.
For non-financial institution lenders, the requirements depend on the nature and scope of their financing activities. Brazilian law does not prohibit a one-off or occasional loan from a company that is not a financial institution – for example, a parent company can lend to its subsidiary or a commercial company can extend trade credit to a business partner (all without requiring a banking licence). However, if a non-bank entity were to regularly extend loans to the public (especially if raising funds from third parties to do so), it would likely be deemed a financial institution and thus require authorisation.
Foreign lenders may extend loans to Brazilian borrowers on a cross-border basis without holding a local banking licence, provided the transaction is duly registered with the Central Bank of Brazil under SCE-Crédito (Sistema de Prestação de Informações de Capital Estrangeiro de Crédito Externo). In practice, the Brazilian borrower is responsible for carrying out the registration, which is a prerequisite for enabling foreign exchange inflows and outflows and ensuring deductibility of interest for tax purposes. Loan disbursements and repayments must be processed through authorised foreign exchange dealers in Brazil, in compliance with local foreign exchange regulations.
As foreign lenders do not need a Brazilian banking licence to extend credit cross-border, many international banks, export credit agencies, development finance institutions and investment funds routinely lend to Brazilian companies from abroad.
Brazilian law allows foreign creditors or their security agents to take and hold security and guarantees granted by Brazilian obligors. Practical constraints exist for certain asset classes (eg, rural land or border-area properties), where enforcement may need to occur via sale to eligible buyers rather than direct title vesting in a foreign mortgagee.
Brazil maintains a regulated foreign exchange system, but recent reforms have modernised and liberalised many aspects of currency control. For cross-border loans, the main control is the registration requirement described in 3.1 Restrictions on Foreign Lenders Providing Loans. Once a loan is registered, the borrower can purchase foreign currency from a local bank to remit interest and principal abroad at maturity.
Brazilian law does not impose a general restriction on how a private borrower may use loan or debt securities proceeds, with a few notable exceptions. In most commercial loan agreements, the use of proceeds is a contractual matter – lenders may stipulate that the funds must be used for a certain purpose (eg, to finance an acquisition or a project or as general working capital) and thus misuse could be a breach of contract. However, as a matter of law, there is no blanket rule that prevents loan funds being used for stock buybacks or other particular activities. The exceptions are typically tied to specific credit programmes or incentivised financing.
Brazil’s legal system, rooted in civil law, does not recognise the concept of trusts in the same way common-law jurisdictions do. There is no direct equivalent of a trust whereby a trustee holds property for the benefit of beneficiaries. However, in commercial practice, agency and fiduciary arrangements are recognised and commonly used to achieve similar outcomes, particularly in banking and secured transactions.
Loans in Brazil can be transferred or assigned between lenders, but the mechanism depends on the form of the loan and the documentation of the security interests. The common methods for transferring loan exposure are assignment of credit (cessão de crédito) or negotiation of credit instruments, and the transfer of the security package requires certain formalities.
Ensuring the collateral is transferred with the loan means checking each type of security. Some may require a formal assignment document and possibly publicly registering that assignment, especially for assets where priority is at stake. To ensure that the security remains effective after a transfer, parties often mention in the initial documentation that the collateral is granted not only to the original lender but also to its successors and assignees. When well-managed, the result is that a new lender can benefit from the same secured position as the original lender without interruption.
In summary, debt buybacks are allowed; indeed, some well-advised companies use this tool opportunistically. The key is to have clear loan documentation provisions, typically requiring lender consent to any borrower repurchase (often all lenders consent via the agreement upfront, albeit with conditions).
In addition, in a restructuring or distressed situation, borrowers or sponsors might indeed want to buy back debt at a discount. Brazilian law allows it but, from a structuring perspective, parties ensure that it does not undermine the remaining lenders. By way of example, if a sponsor-related entity buys the debt, it may agree to subordinate its rights or waive rights in order to align interest with the borrower. Under out-of-court debt restructurings, controlling shareholders can purchase bank claims and then either convert them into equity or simply cancel them, as part of a deleveraging strategy.
In Brazilian public acquisition financing (public acquisition offer (oferta pública de aquisição, or OPA)), the concept of “certain funds” is not as codified as in jurisdictions such as the UK, but market practice and regulation achieve a similar effect. However, the CVM – CVM Resolution No 215/2024 – requires the intermediary institution to secure a payment guarantee for 100% of the consideration, typically by using escrow deposits, standby letters of credit, or bank guarantees.
This mechanism effectively functions as a “certain funds” requirement, ensuring public shareholders receive cash at closing. At the same time, commitment letters and financing structures allow bidders flexibility.
The use of such provisions in private M&A is common in complex transactions. Documentation tends to be long-form and detailed. In a public acquisition finance transaction, their existence and key terms are disclosed in mandatory public filings.
Recent legal and commercial developments in Brazil have prompted changes to financing documentation and deal structures. The following key changes stand out.
Brazil technically has an old usury law (Decree 22,626 of 1933) (the “Usury Law”), which caps interest at 12% per year. However, this ceiling is not applicable to lending provided by financial institutions and – since September 2024, when Law No 14,905 was enacted ‒ such ceiling is not applicable for any loans to companies (not individuals) and debt related to certain credit instruments named as títulos de crédito (credit bonds) under Brazilian Law and debt securities.
Private loan agreements are not generally filed publicly. There are no specific rules requiring disclosure of lending terms to employees, work councils or such, as might exist in some EU contexts. In Brazil, even if a company has a unionised workforce or a works council, they do not have the right to be informed of financing arrangements.
However, for certain financial arrangements – such as CRAs, real estate receivables certificates (certificados de recebíveis imobiliários, or CRIs), bonds or notes – that are offered to the public, disclosure is required. By way of example, a debenture issued by a Brazilian company in a public offering must have an indenture (escritura de emissão) that is filed with the CVM and is publicly available.
However, most loan agreements remain private. The publicity requirements are generally related to collateral registrations and any securities law triggered by the nature of the borrower or arrangement. Companies and banks value confidentiality of financing terms, so ‒ unless there is a compelling reason to do so – they are not published. Even when disclosed, it is usually high-level information. Brazil does not have an EDGAR (Electronic Data Gathering, Analysis, and Retrieval) system or Companies House where all loan contracts are filed. Thus, borrowers and lenders can generally assume that their contract terms will remain out of the public eye, with only the existence of the debt and security potentially discoverable by those who search registries or follow financial statements.
Payments of principal are not subject to withholding tax in Brazil. Interest, default interest and fines are generally subject to decreasing withholding tax of 22.5% to 15%.
The interest received by corporate lenders taxed under the lucro real (effective income) regime is not generally subject to withholding tax. However, such corporate lenders are subject to 34% total tax (25% income tax and 9% social contribution on net profit (contribuição social sobre o lucro líquido, or CSLL)).
Beyond withholding tax, other levies also influence loan structures. Domestic credit transactions are subject to IOF-Crédito ‒ tax on financial operations (imposto sobre operações financeiras, or IOF) specifically applied to credit transactions in Brazil ‒ whereas cross-border inflows trigger IOF-Câmbio (a tax on financial transactions applied to foreign exchange operations), which decreases for long-term loans compared to short-term loans. Security interests must be registered in the relevant public registries, generating variable filing fees.
Brazil has no stamp duty. However, certain loan-related fees may – depending on their characterisation – be subject to service tax (imposto sobre serviços, or ISS) in domestic contexts or to a contribution for intervention in the economic domain (contribuição de intervenção no domínio econômico, or CIDE) when classified as technical services in cross-border payments.
Careful drafting is often used to align such fees with interest for tax purposes and avoid double taxation. Interest deductibility is subject to thin capitalisation limits and transfer pricing rules on related-party loans, requiring robust arm’s length documentation.
Foreign lenders face exposure to higher withholding if located in tax havens or jurisdictions with privileged tax regimes. They are also face exposure to thin capitalisation limits and transfer pricing restrictions on related-party loans.
In summary, the main tax concerns with foreign or non-traditional lenders are higher withholding tax rates for certain jurisdictions, limits on borrower’s deductions for related-party or haven lenders, and ensuring any treaty benefits are secure. Mitigation strategies include careful choice of lending entity domicile, using intermediate vehicles or funds, contract clauses for gross-up/indemnity, and compliance with thin cap ratios. By anticipating these issues in structuring the deal, parties can often lawfully minimise the tax leakage and avoid surprises that would erode the economics of the loan.
Almost any class of asset can be granted as collateral in Brazil, provided that the security interest is created in the proper legal form and perfected in the relevant public registry.
Typical collateral packages for a Brazilian corporate loan might include fiduciary transfer of properties (movable and immovable), fiduciary assignment of key receivables and contracts, fiduciary transfer of shares, and even a floating inventory lien (specific for debentures).
Under a fiduciary transfer, the title to the asset is conditionally transferred to the creditor and the possession remains with the debtor. Under mortgage and pledges, the debtor retains the title to the asset.
In general, creditors prefer fiduciary transfer of properties and fiduciary assignment of rights, as those collaterals have the advantage of out-of-court foreclosure (faster enforcement) and keep the asset outside the borrower’s insolvency estate. Mortgages and pledges are also granted in certain situations (eg, to foreign lenders, or where necessary to differentiate security rankings).
Formalities and perfection vary, but a universal step is registering the security agreement with the appropriate public registry. If perfection requirements are not completed, consequences are severe: the security might not be effective against third parties (including other creditors or an insolvency estate). Counsel must co-ordinate to ensure completeness, because missing a step can render the security unperfected. After perfection, the lender holds strong rights.
Setting up comprehensive security in Brazil can be quite time-consuming and costly, owing to multiple registrations. Each asset class might involve a different registry and different fees. However, none of the fees are exorbitant relative to loan sizes (they are often capped or scaled) and registration has evolved to adapt to online platforms.
Brazilian law does not provide for a true floating charge that covers all present and future assets of a company in a universal manner (as one might have under English law), except for debentures (which are seldom used in Brazil, owing to the lack of a wider legal framework and case law). Security interests in Brazil must generally attach to specific assets or categories of assets. There is no concept of a floating charge that hovers over changing pools of assets and then “crystallises” upon default. Instead, lenders must take security interest in defined assets and ‒ if they want coverage of future assets ‒ they need to specifically include those assets in the security agreement and must frequently update the collateral schedule as new assets come into being.
The absence of a floating charge means lenders cannot get a one-stop security that picks up everything automatically (except perhaps via an all-assets FIDC structure, which is not exactly a charge but a transfer to a fund). Therefore, the approach is to cover major assets piecemeal. Notably, assets such as real estate and vehicles have title-based registries; it is not possible to have a generic lien on “all real estate” without identifying each property at its registry.
In summary, Brazilian law permits security over classes of assets and future assets of that class, but does not have a single security instrument over the entire enterprise assets by default (except for debentures, as mentioned earlier). Lenders must use combinations of fiduciary transfers, pledges, and mortgages to compose the security package. There is no functional equivalent to the English floating charge that later becomes fixed – except the inventory pledge, which is probably the closest functional analogue, albeit used on a limited basis.
Brazilian companies may provide downstream, upstream and cross-stream guarantees, subject to proper authorisation and to compliance with officers’ responsibility principles. Corporate law requires that guarantees be consistent with the company’s purpose and interests; minority shareholders may challenge guarantees lacking clear benefit. Corporate approvals (board and shareholder resolutions) should document the rationale, particularly for upstream or cross-stream guarantees.
In practice, guarantees to affiliates are accepted when justified as part of a group financing strategy that may indirectly benefit the company providing the guarantee even if it does not directly benefit from the loan. Regulated entities may face additional sector-specific restrictions.
Unlike some jurisdictions, Brazil does not have an explicit, codified “financial assistance” prohibition. However, in practice, there are limitations on a target company providing financing, guarantees or security for the acquisition of its own shares. The concept is addressed under general corporate law principles and specific rules for publicly traded companies.
For public companies, the CVM and securities law impose duties: using a public company’s assets to assist in buying control could be seen as a breach of duty by officers and controlling shareholders, potentially triggering actions by the CVM or lawsuits by minority shareholders. The CVM has rules on conflicts of interest in transactions with controlling shareholders, and guarantees, security or financial assistance could be considered a related-party transaction requiring disclosure and fairness (if it is not obviously beneficial to the granting company).
In any event, Brazil does not have a bright-line rule prohibiting the target company from providing financing, guarantees or security for the acquisition of its own shares, so this becomes a matter of risk management and corporate governance. In straightforward LBOs where the target is wholly owned post-acquisition, and especially if it is not a regulated or public company, the risk of anyone challenging an upstream guarantee to support acquisition debt is lower (given that the only shareholders now are the acquirers, who obviously consent).
Guarantees and security interests in Brazil are subject to certain consents and limitations, as follows.
Upon repayment of the secured obligations, creditors issue release instruments for cancellation at the relevant registries (the Real Estate Registry, the Registry of Deeds and Documents (Registro de Títulos e Documentos, or RTD), the Commercial Registry, the National Institute of Industrial Property (Instituto Nacional da Propriedade Industrial, or INPI)), etc). For security over shares, releases are annotated in the company’s corporate books or with custodians. For security over quotas, releases are included in an amendment to the articles of association.
Partial releases follow the same process for specific assets. If a creditor fails to co-operate, the debtor may seek judicial relief to compel cancellation.
Priority in Brazil generally follows the first-to-register principle, meaning the earlier perfected lien prevails over later filings. Fiduciary transfers provide stronger protection, as the asset is segregated from the debtor’s estate in insolvency.
Contractual subordination was expressly recognised under the 2020 insolvency reform and is enforceable in bankruptcy. Structural subordination naturally applies where creditors of a holding company rank behind those of its operating subsidiaries.
Intercreditor agreements are commonly used to govern relative rankings among lenders in unitranche or multi-tranche financings. Contractual variations of priority are enforceable among creditors but cannot override statutory preferences, such as labour claims, tax claims, and accident-related claims.
Brazilian law recognises limited categories of claims that may rank higher secured creditors in an insolvency scenario.
First, estate expenses (eg, court and insolvency administrator fees, expenses necessary to preserve and sell assets, certain post-petition labour and tax items) are paid before pre-petition claims. Second, within the waterfall for pre-petition claims, labour claims and occupational accident-related claims have statutory privileges. Tax claims rank after secured creditors on their collateral proceeds but may still compete on unencumbered assets.
By contrast, assets held under fiduciary structures (eg, fiduciary transfer of real estate, fiduciary transfer of movables, or fiduciary assignment of receivables) are generally excluded from the insolvency estate. The creditor may reclaim or enforce them directly and these assets fall outside the pari passu pool available to unsecured creditors. In certain cases, courts may restrict the enforcement of fiduciary transfers where the asset is essential to operations.
The 2020 insolvency reform allows court-approved DIP financing to obtain super-priority, subject to adequate protection of existing liens. Lenders address priming risk by favouring fiduciary security over pledges/mortgages where available, monitoring tax and labour exposures, and incorporating intercreditor provisions that anticipate potential DIP funding.
Secured lenders in Brazil can enforce their collateral upon borrower default (after any contractual grace or notice periods) per the methods allowed by law for that type of collateral, as follows.
In terms of restrictions, Brazil has an automatic stay of judicial reorganisation (for 180 days, possibly extended) that freezes enforcement actions against the debtor and the debtor’s assets (except fiduciary transfer and assignments). In bankruptcy (liquidation), individual enforcements are ceased and assets are handled by the bankruptcy administrator. Secured creditors will then get paid from sale of their collateral through the bankruptcy proceeding and, if the collateral is a public concession or something requiring regulatory clearance, enforcement might need regulatory approval.
The main concerns relating to the enforcement of loans, guarantees and typical security interests are timeline and bureaucracy. Judicial enforcement has historically been slow, owing to procedural manoeuvres by debtors (appeals, objections, requests to stay auction citing low price for auction, etc).
Brazilian law generally recognises the parties’ freedom to choose foreign law and jurisdiction in contracts with an international element, provided that the matter does not fall within areas of exclusive Brazilian jurisdiction ‒ for example, real estate rights located in Brazil, Brazilian insolvency proceedings, or corporate governance of Brazilian entities.
Submission to foreign jurisdiction and waiver of immunity are enforceable in respect of commercial acts, including for state-owned enterprises. Assets considered essential to public service remain immune from attachment, however.
Loan agreements governed by New York or English law are common in cross-border finance. Brazilian courts generally uphold the parties’ choice of foreign law in contracts with an international element, provided it does not contravene public policy or concern matters reserved to Brazilian law, such as security over local assets or insolvency proceedings. In practice, financings are often documented under New York or English law, whereas Brazilian law governs the security package. Foreign judgments must be recognised by the Superior Court of Justice (Superior Tribunal de Justiça, or STJ) prior to enforcement, whereas foreign arbitral awards benefit from expedited recognition under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the “New York Convention”).
A foreign court judgment or arbitral award is not self-executing in Brazil and must be recognised by the STJ. The STJ does not re-examine the facts or merits – it is largely a formality check. Therefore, without retrial on merits, a foreign judgment or arbitral award is enforceable but requires the recognition steps.
Foreign judgments will have no effect in Brazil if they breach national sovereignty, public order, or good morals. However, this is not an issue in most cases.
The commencement of insolvency proceedings in Brazil significantly affects a lender’s enforcement rights. In court reorganisations, once the petition is accepted, an automatic stay period is imposed for 180 days, suspending virtually all enforcement actions and lawsuits against the debtor.
Secured creditors cannot foreclose collateral during this stay period, except for creditors holding fiduciary title (such as fiduciary transfer of assets or receivables). Even fiduciary creditors, however, may face a temporary suspension if the asset is deemed essential to the debtor’s operations.
In bankruptcy, all individual enforcement is consolidated into the collective proceeding, and secured creditors must enforce within the court-supervised liquidation process.
Guarantees by third parties that benefit the insolvent debtor remain enforceable outside the court reorganisations. Recent reforms clarified that guarantors’ obligations are not automatically discharged.
In bankruptcy liquidation, distributions follow a statutory order of priority. First, claims/costs not subject to court reorganisation/bankruptcy( such as court costs, expenses of the administrator and obligations related to the bankruptcy proceedings) must be paid. Thereafter, proceeds are applied to:
The length of insolvency proceedings in Brazil can be considerable and recoveries vary but are often limited, especially for unsecured creditors. A court reorganisation may last two to three years on average until approval and substantial implementation of the recovery plan – although complex cases often extend further.
Bankruptcy liquidations may take longer, depending on the complexity of asset sales and litigation.
Recovery levels for unsecured creditors are generally low, whereas secured creditors with properly perfected collateral – particularly fiduciary transfers – often achieve significantly higher recoveries and more predictable enforcement.
DIP financing allows companies under judicial reorganisation to obtain new money with court approval while continuing to manage their assets. DIP loans are treated as priority claims and may be secured by liens on non-encumbered assets or, with adequate protection, even on previously encumbered assets. This mechanism has improved restructuring outcomes by providing critical liquidity and maintaining business continuity ‒ although overall creditor recovery still depends heavily on the quality of collateral and the debtor’s co-operation.
Beyond formal court reorganisation, Brazilian law provides for out-of-court reorganisation. This is a pre-packaged procedure in which the debtor negotiates a restructuring plan with most creditors in one or more classes and seeks court homologation.
This tool is faster and less disruptive than court reorganisation, as it does not trigger an automatic stay for all creditors. Creditors outside the consenting classes are not bound.
Out-of-court reorganisations remain common, particularly with bank lenders, where standstill agreements and consensual restructuring are used to avoid judicial proceedings.
In Brazilian insolvency, the key risks for lenders are:
Together, stay periods, claw-backs, priority rules, procedural delay and regulatory overlays form the core risk set for lenders when a borrower, guarantor or collateral provider becomes insolvent.
Project finance remains active in Brazil, especially in sectors linked to infrastructure expansion and natural resources. Power generation and transmission continue to dominate volumes, with wind and solar projects in the northeast region standing out. These projects are typically backed by long-term power purchase agreements (PPAs), which provide stable revenue streams, and by transmission concessions that offer predictable regulated tariffs. In the oil and gas sector, midstream assets such as floating production, storage and offloading units (FPSOs), pipelines and gas processing plants are sometimes financed through project structures – often combined with sponsor guarantees – whereas upstream exploration and production is still largely funded on corporate balance sheets.
Transportation infrastructure also plays a central role, with concessions and PPPs supporting long-tenor financings for toll roads, airports, port terminals, and railways. These projects usually combine financing from the BNDES and commercial banks, as well as public offerings of infrastructure debentures, which are are tax-incentivised to attract private investment. In the water and sanitation sector, new concessions have accelerated since the introduction of the 2020 regulatory framework, driving large capital expenditure (capex) programmes financed through long-term loans and debenture issuances.
Digital infrastructure is another growing area, with fibre optic networks and telecommunications towers increasingly financed through structured debentures. In addition, certain industrial and agribusiness ventures have adopted project finance techniques, particularly where long-term offtake contracts – ie, agreements in which a buyer commits to purchase output at pre-agreed terms – provide the predictability needed to support bankability.
Brazil relies on two main models for private participation in infrastructure. In traditional concessions, governed by the general concession law and sector-specific statutes, the private sector provides the service and is subject to risk of demand. The consumers/users pay for the services. As regards PPP transactions, there are two frameworks. Under one framework, the consumers/users and the government pay for the services. Under another framework, the government alone pays for the service and it is often used for hospitals or prisons.
Common challenges in these structures include a demanding procurement process, a three-stage environmental licensing procedure, tax constraints at state and municipal levels, and the need to allocate demand risk and foreign exchange risk with precision. Regulatory approvals are also required for granting security interests, for changes of control of the concessionaire, and for step-in rights (ie, rights granted to lenders to replace the project operator if the project operator defaults financially). Careful drafting of concession contracts is essential to ensure clarity on risk matrix, performance standards, payment mechanisms, changes in law, and termination compensation ‒ all of which are critical to achieving bankability.
Concession and PPP contracts are governed by Brazilian law and many now allow for ADR in the form of arbitration, typically seated in Brazil and applying Brazilian law.
Engineering, procurement and construction (EPC) contracts and supply agreements for projects that are entirely domestic are usually governed by Brazilian law. However, when foreign contractors or suppliers are involved, the parties may negotiate the application of foreign law combined with international arbitration, provided that the arrangement remains enforceable in Brazil. Financing agreements for international lenders are frequently governed by New York or English law, reflecting global market practice. By contrast, all security interests over Brazilian assets must be documented under Brazilian law and enforced under local procedures, given that property rights are subject to domestic rules.
Intercreditor agreements (which set the rights of and priorities among multiple lenders) and common terms agreements (which standardise provisions across different financing tranches) often follow precedents from the Loan Market Association (LMA) or New York law templates. These are then adapted to Brazilian requirements on perfection (which refers to the registration steps that make security interests effective against third parties) and foreclosure (which is the legal process for the enforcement of collateral).
Foreign investors can own Brazilian project companies and assets, subject to a few restrictions depending on asset type, as follows.
Projects in Brazil are typically housed in a special purpose entity (SPE), which is a company created solely to implement and operate the project. This ring-fenced structure isolates project assets and cash flows from those of the sponsors, ensuring segregation and facilitating lender oversight. In concessions and PPPs, the law or bidding terms usually require that the SPE be incorporated as a corporation (sociedade anônima, or SA), which provides greater governance transparency and is allowed to publicly offer securities.
The capital structure usually combines equity with subordinated shareholder loans. Lenders, especially the BNDES and commercial banks, often impose minimum equity contribution levels and specific debt-to-equity ratios to maintain financial discipline. Foreign equity contributions must be registered with the Central Bank’s RDE-IED (Registro Declaratório Eletrônico – Investimento Estrangeiro Direto), whereas cross-border loans must be registered with the RDE-ROF (Registro Declaratório Eletrônico – Registro de Operações Financeiras). These registrations are essential to enable repayment of dividends and debt service abroad and, in some cases, they allow access to tax incentives (eg, reduced withholding tax on qualifying infrastructure debentures).
Brazil’s foreign exchange rules permit borrowing in hard currency such as euros or US dollars – although when revenues are denominated in Brazilian reais, lenders generally expect the borrower to hedge the currency risk. Hedging is often costly and may hinder the funding of projects with foreign currency. Short-term inflows are subject to IOF-Câmbio (see 4.2 Other Taxes, Duties, Charges or Tax Considerations).
The bankability of projects depends on several regulatory milestones, including the granting of the concession, the three-stage environmental licensing process, and sector-specific approvals for creating liens or transferring control of the SPE.
The typical security package includes a lien of the SPE’s shares, fiduciary transfer of receivables and bank accounts, liens over key project contracts and tangible assets, and a waterfall account structure to prioritise payments. Dispute resolution often relies on arbitration, with lenders negotiating step-in rights, which allow them to operate the project in case of default.
Brazil is not a member of the International Centre for Settlement of Investment Disputes (ICSID) and has only a limited network of ratified bilateral investment treaties. As a result, foreign investors cannot rely on treaty-based investor–state arbitration.
Funding structures in Brazil are adapted to each sector and project stage. The BNDES provides long-term financing, usually combined with shorter construction or mini-perm loans from commercial banks, which are refinanced once the project becomes operational/complete. Export credit agencies (ECAs) and multilateral institutions such as the International Finance Corporation (IFC), IDB Invest, and CAF – Development Bank of Latin America and the Caribbean (formerly Corporación Andina de Fomento, or CAF) play an important role in projects involving imported equipment or policy priorities, offering long maturities and applying ESG standards.
Private banks in Brazil usually provide a bank guarantee to the BNDES until the project is operational.
The capital markets are increasingly relevant by means of infrastructure debentures, which benefit from tax incentives when applied to qualifying projects.
Private credit funds and institutional investors provide unitranche loans, mezzanine financing or tailor-made facilities, generally co-ordinated under intercreditor agreements to align priorities.
Alternative financing techniques include:
A common trajectory involves bank-led construction financing followed by refinancing with long-tenor debentures or a BNDES take-out loan once the project is completed and operation.
Exports are generally permitted, with royalties such as CFEM (compensação financeira pela exploração mineral) (mining royalty) in mining and profit oil in oil and gas forming part of project economics.
Domestic supply obligations are rare and local content rules in oil and gas – though relaxed – still feature in bidding. Licensing is rigorous, requiring community consultation under ILO (International Labor Organization) Convention 169 as well as compliance with strict safety standards. Logistics infrastructure (rail and port terminals) is often critical to bankability.
Mining rights must be held by Brazilian-incorporated entities, which may be foreign-owned, whereas nuclear resources remain state-controlled. Lenders emphasise ESG performance, export and logistics stability, and policy risks affecting cash flows.
Environmental, health and safety compliance in Brazil follows the National Environmental Policy and the National Environmental Council (Conselho Nacional do Meio Ambiente, or CONAMA) rules. Projects usually require a three-phase licensing process often supported by environmental impact assessments (EIAs) and public hearings. State agencies issue most licences, whereas the federal environmental authority ‒ the Brazilian Institute of Environment and Renewable Natural Resources (Instituto Brasileiro do Meio Ambiente e dos Recursos Naturais Renováveis, or IBAMA) ‒ oversees projects of federal impact. The National Mining Agency (Agência Nacional de Mineração, or ANM), water-basin authorities, and municipalities may impose additional requirements. Key statutes include the Forest Code, the Water Law, the Solid Waste Policy, and labour safety norms (Normas Regulamentadoras, or NRs). Projects affecting indigenous communities require involvement from the National Indigenous People Foundation (Fundação Nacional dos Povos Indígenas, or FUNAI) and consultation under ILO Convention 169, and those in or near protected areas face stricter conditions and compensatory obligations.
Most private banks in Brazil require compliance with the Equator Principles, a baseline and risk management framework for financial institutions to identify, assess and manage environmental and social risks in projects.
Alameda Lorena 638
4th Floor
São Paulo
SP 01424-002
Brazil
Market Overview: Brazil as a Laboratory for Digital Finance
Brazil entered 2025 as one of the world’s most dynamic and innovative financial markets. Macroeconomic fundamentals have stabilised: inflation is back under control after the sharp hikes of 2021 and 2022, and GDP growth ‒ albeit modest ‒ is steady, driven by agribusiness exports (the 2025 crop season is an all-time record), consumer demand, and infrastructure investment. This relative stability provides the backdrop for a financial sector that is not only resilient but also remarkably innovative.
Central bank’s agenda
The Central Bank of Brazil (Banco Central do Brasil, or BCB) has positioned itself as a global benchmark in digital financial regulation. Throughout the past decade, its agenda has combined strict prudential supervision with a willingness to pioneer regulatory innovations. The creation of special licences for fintech credit companies such as direct credit companies (sociedades de crédito direto, or SCDs) and peer-to-peer loan companies (sociedades de empréstimo entre pessoa, or SEPs), the mandatory implementation of open finance, and the modernisation of deposit insurance and collateral law have all redefined the competitive landscape. Unlike many emerging markets, Brazil’s regulator has not been defensive toward innovation; rather, it has deliberately used regulation to increase competition, reduce costs, and expand inclusion.
Pix: Brazil’s instant payments system
One of the most transformative innovations is Pix, the instant payments platform launched by the Central Bank of Brazil in 2020. Pix allows individuals and companies to transfer money 24/7, in real time, using only simple identifiers such as a phone number, email address or QR code. Transfers settle in seconds, at no cost for individuals, and fees for businesses are minimal.
Adoption has been massive; Pix is now the default payment method for retail transactions, bill payments, peer-to-peer transfers, and even government services. In 2023 alone, Pix processed more than 42 billion transactions, outpacing credit and debit cards. Its success reflects both high smartphone penetration and the regulator’s commitment to inclusion.
Today, Pix serves as the foundation for further innovation, including contactless Pix by proximity, recurring Pix payments, and deeper integration with open finance. For international observers, Pix demonstrates Brazil’s ability to implement large-scale digital infrastructure with rapid adoption.
A competitive market
Traditional banks, well-capitalised and profitable, now face real competition from fintechs, digital banks and non-bank lenders. For clients, this means greater access to credit and more diverse financial products. For international investors, Brazil offers a large domestic market, sophisticated regulatory frameworks and high digital adoption. Smartphone penetration and consumer comfort with digital payments mean that new products can scale very quickly.
Key structural trends
The key structural trends in Brazilian banking and finance are as follows.
Challenges and guardrails
At the same time, regulators are reinforcing the system’s guardrails. The 2023‒24 incident, whereby a mid-sized bank relied excessively on deposit insurance to fund risky assets, triggered reforms to the Deposit Insurance Fund (Fundo Garantidor de Créditos, or FGC) to deter moral hazard. The New Legal Framework for Secured Transactions modernised collateral law to reduce credit costs and improve recovery rates. And a pipeline of new rules on credit, financing and investment companies (sociedades de crédito, financiamento e investimento, or SCFIs) (collectively, “finance companies”), BaaS, and virtual asset service providers (VASPs) will bring more players inside the prudential perimeter while preserving room for innovation.
Payments security, AML and supervisory tightening
A mid-2025 cyber-enabled heist exposed fragilities at the intersection of payments and third-party connectivity. In early July 2025, attackers exploited a third-party connectivity provider (provedor de serviços de tecnologia da informação, or PSTI) used by multiple participants. A BaaS provider reported approximately BRL400 million drained from its reserve account amid a broader incident initially estimated at BRL800 million across eight institutions, prompting emergency containment and sector-wide reviews of PSTI interfaces.
In parallel, Brazilian authorities launched sweeping AML actions in late August 2025. Operação Carbono Oculto (Operation Hidden Carbon) alleged that an organised network used payment institutions as a “parallel bank” and layered proceeds through at least 40 investment funds. The episode intensified scrutiny of fund governance and administrators’ AML controls.
Immediate risk-mitigation measures
The Central Bank of Brazil introduced a temporary BRL15,000 ceiling per Pix/TED (Transferência Eletrônica Disponível) electronic fund transfer for non-authorised payment institutions and for participants connecting via PSTIs, with a time-limited waiver (up to 90 days) for firms evidencing robust information-security controls. The package also raised the bar for PSTI governance and minimum capital (BRL15 million), signalling that third-party connectivity is now treated as critical infrastructure.
Authorisation becomes a hard gate
BCB Resolution 494 (5 September 2025) closes legacy “start-first, authorise-later” pathways to payment institutions; all new payment institutions must obtain prior authorisation before commencing activities. For incumbents that started operations under historical thresholds, the regularisation window is fixed between 1–31 May 2026. Failure to file within that window triggers cessation of activity and prompt return of client funds. Resolution 495 tightens the authorisation filing requirements, enabling the Central Bank of Brazil to demand independent technical certifications and reinforcing premises and governance requirements.
New regime for PSTIs
BCB Resolution 498 (5 September 2025) institutes a formal credentialling regime for PSTIs that intermediate access to the National Financial System Network (Rede do Sistema Financeiro Nacional, or RSFN). The rule elevates minimum standards for capital, governance, cybersecurity, fraud monitoring and continuity; non-compliance may lead to cautions, tighter operating limits, suspension from the RSFN or de-credentialling. Transition timelines apply to PSTIs already in operation.
Market impact
Collectively, the measures strengthen AML oversight and reduce fraud vectors across Pix and interbank rails, while increasing compliance costs and bringing previously lightly regulated actors firmly within the perimeter. For managers, administrators and trustees, the enforcement wave around Operação Carbono Oculto raises the expectation of enhanced investor due diligence files, beneficial ownership transparency, and transaction monitoring around flows between payment institutions and funds. In short, regulators are moving to a more mature, risk-based regime that safeguards innovation while tightening operational and financial-crime controls.
Global relevance
For foreign clients, Brazil is not only a large market but also a regulatory laboratory. Lessons from Pix, open finance, and soon Drex (the Brazilian central bank digital currency (CBDC)) are being observed worldwide. Multinationals, funds and fintechs should see both opportunity and discipline ‒ ie, in unmatched digital adoption combined with robust governance, compliance and consumer protection.
In short, Brazil’s banking and finance market in 2025 is characterised by a mix of stability and dynamism. The next chapters ‒ including new SCFI licences, regulated BaaS, integrated VASPs and deepening private credit ‒ will define opportunities for clients and investors.
BaaS: From Contract Patchwork to Regulated Infrastructure
During the past five years, Brazil has become one of the most globally fertile grounds for BaaS. At its core, BaaS allows licensed financial institutions to provide their accounts infrastructure, cards, payment means and credit products to third-party entities, which then distribute these services under their own brand. This model has enabled supermarkets, mobility platforms, retailers and marketplaces to offer financial products without holding a banking licence. For fintechs, it provided a way to scale quickly by partnering with a licensed bank for the back end while focusing on customer acquisition and user experience.
Until recently, these partnerships operated in a regulatory grey zone, with a lack of supervisory/regulatory oversight clarity. With the explosion of embedded finance in retail and digital channels, addressing this issue became urgent.
Public consultation on regulation of BaaS
In late 2024, the Central Bank of Brazil launched Public Consultation (Consulta Pública, or CP) 108/2024 (“CP 108/2024”) ‒ extended in early 2025 ‒ to regulate BaaS. The draft joint resolution sets out the following.
The consultation closed in February 2025. The final resolution is expected in the second half of 2025.
Why it matters
By setting a common rulebook, the Central Bank of Brazil is effectively legitimising BaaS as a permanent feature of Brazil’s financial ecosystem. This will encourage larger brands, including bigtechs, to enter embedded finance without fear of sudden regulatory backlash.
Commercial implications
For licensed institutions, BaaS becomes a scalable business line (with application programming interfaces (APIs), compliance toolkits, white-label catalogues). For brands and fintechs, compliance costs rise but regulatory certainty enables scaled integration.
Risk and governance considerations
BaaS is not a compliance shortcut. Licensed institutions should implement:
The winners will be those who treat compliance not as a barrier but as a competitive differentiator ‒ using robust governance to win large-scale brand partnerships. In practice, supermarkets, digital retailers and mobility platforms are expected to formalise white-label banking propositions with SCFIs and mid-sized banks, while larger institutions focus on multi-partner BaaS ecosystems.
For foreign clients, Brazil offers a unique BaaS market, thanks to high digital adoption, a regulatory authority that actively embraces embedded finance, and a population receptive to banking through non-traditional channels. But the message is clear: design for regulation from day one.
Finance Companies 2.0: New Framework for SCFIs
In July 2025, the National Monetary Council (Conselho Monetário Nacional, or CMN) approved Resolution 5,237, modernising the regulation of SCFIs. The rule consolidates scattered norms into a single rulebook and recasts the SCFI licence so finance companies can operate as digital-ready, multi-product institutions spanning lending, payments, purchasing, funding and related services.
Structural requirements
All SCFIs must be incorporated as corporations, adopt robust governance, compliance and risk frameworks, and meet fit-and-proper criteria for officers. Minimum capital is BRL7 million, with a 30% reduction for institutions headquartered outside São Paulo and Rio de Janeiro ‒ signalling a policy push for regional development. Reporting and controls are similar to mid-sized bank standards.
Expanded scope of activities
The reform of the SCFI licence expands the scope of finance companies’ activities, as follows.
The result is a single corporate vehicle that can originate credit, run payments, process purchases and diversify funding.
Why it matters
This is more than housekeeping; the reform creates a scalable, modular licence that bridges fintech lenders and full-service banks. Players that outgrew narrower licences (SCDs/SEPs or pure payment institutions) can consolidate within one prudential perimeter, reducing duplication, clarifying oversight, and presenting cleaner structures for investor due diligence.
Comparisons with other licences
With broad functional scope and prudential oversight at lower capital thresholds than banks, SCFI licences now serve as a mid-point between:
Implications for foreign entrants
SCFIs offer a credible, cost-effective entry route ‒ ie, operating consumer credit, payments and purchasing without a full bank burden. The recognised prudential perimeter simplifies capital raising (private credit/equity) and supports joint ventures, acquisitions, or greenfield projects.
Challenges ahead
Migration demands investment in risk systems, independent governance and internal controls. Competition should intensify as larger banks deploy SCFIs as focused vehicles for consumer and embedded-lending niches, pressuring smaller fintechs to differentiate.
The reform reshapes the traditional SCFI as SCFI 2.0, multi-product and investor friendly. It is a pivotal step in Brazil’s regulatory trajectory, coupling fintech agility with supervised finance to create one of the market’s most versatile, growth-ready platforms.
VASPs and the Tokenised Future
Law 14,478/2022 created Brazil’s first comprehensive statute for virtual assets and the category of VASPs, which must be licensed and supervised by the Central Bank of Brazil when engaging in intermediation, custody or exchange. The purpose is clear: bring cryptocurrency activities inside the prudential perimeter, while preserving room for innovation.
Consultation process and prudential core
In late 2024, the Central Bank of Brazil issued CP 109/2024 to regulate VASPs. The draft divides VASPs into intermediaries, custodians and brokers (combined) and sets differentiated minimum capital depending on the licensing and whether leverage, margin trading or margin staking is offered. Core prudential and operational rules include segregation of client assets, mandatory payment accounts to separate client funds, a proof-of-reserves process, and independent audits.
User protection and market integrity
VASPs must provide human customer-support channels, perform suitability tests for complex products, and avoid gamified features that induce excessive risk-taking. Sanctions screening and the monitoring of blacklisted wallet addresses are required, and obligations extend to outsourced service providers and technology vendors. Together, these measures bring cryptocurrency activity within a supervised perimeter while maintaining room for responsible innovation.
Integration with the traditional system
Once VASPs are licensed, financial and payment institutions will be able to partner with exchanges, custodians and tokenisation platforms under a unified supervisory framework. Tokenised receivables or other assets held with a licensed custodian can more confidently be used as collateral in secured lending, and digital wallets may integrate cryptocurrency features with clearer segregation and governance, thereby facilitating institutional participation in tokenised credit and settlements.
Strategic takeaway
Institutions that invest early in custody, governance and compliance will be better positioned to capture opportunities as the VASP regime enters into force and tokenisation use moves from experimentation to supervised infrastructure.
Deposit‑Insurance Reform: Aligning Incentives and Restoring Discipline
Brazil’s deposit insurance scheme, the FGC, insures deposits against the risk of default in the event of insolvency of the financial institution. Deposits of up to BRL250,000 per depositor per institution ‒ with an aggregate cap of BRL1 million over a rolling four-year period ‒ are insured. The framework has preserved retail confidence and supported funding for smaller banks; in practice, more than 99% of depositors are fully covered under current deposit insurance limits.
The problem: moral hazard
Over time, generous coverage encouraged some institutions to advertise above-market deposit rates while leaning on the FGC coverage, thereby dulling credit discipline. Episodes involving mid-sized players showed how guaranteed inflows could be channelled into higher-risk strategies, creating a classic moral-hazard dynamic and potential strain on the insurer if the practice is replicated system-wide.
2025 reform
In August 2025, the CMN approved Resolution 5,238 (effective 1 June 2026, with phased implementation up to 2028) to recalibrate incentives, as follows.
Together, these measures raise the marginal cost of over-reliance on insured deposit funding and curb riskier allocation of guaranteed liabilities.
Why it matters
The reform aims to protect the scheme’s solvency while strengthening market discipline. Retail confidence remains intact, but extreme deposit offers should moderate as institutions rebalance funding. Banks and finance companies must demonstrate prudent asset liability management and adopt more stringent risk-reporting practices to align with global standards.
These changes also open the door for more capital market funding. As insured deposits become costlier at the margin, smaller banks and SCFIs may turn more to securitisations (FIDCs), commercial notes, or private credit lines to diversify funding. This will likely deepen Brazil’s private debt market while ensuring that deposit insurance continues to serve its true purpose ‒ ie, protecting small savers, not subsidising speculative strategies. In short, the 2025 FGC reform shows how regulators are tuning incentives by balancing inclusion and protection with discipline. For clients, the message is that Brazil’s financial stability framework is not static; it evolves quickly to address risks, ensuring that innovation in credit and payments is matched with prudent oversight.
Private Credit: FIDCs and Commercial Notes Fuel Market Depth
Brazil’s private credit market has accelerated rapidly in 2024 and 2025, emerging as a genuine alternative to traditional bank lending. Driven by high interest rates, investor demand for yield, and securitisation reforms, companies of all sizes are tapping private markets for working capital, receivables finance and expansion funding. The result is a diversified ecosystem in which fintechs, funds and companies interact through structured vehicles.
FIDCs as the core vehicle
The FIDC remains the cornerstone of Brazilian private credit. These funds purchase receivables trade invoices, consumer loans, payroll-deductible credit, and credit card portfolios, as well as issuing quotas to investors ‒ thereby providing bankruptcy remoteness, credit enhancement, and liquidity. Warehouse FIDCs season portfolios before placement into larger FIDCs for institutional investors. Regulatory improvements from the CVM and the Brazilian National Association of Financial and Capital Market Institutions (Associação Nacional das Entidades dos Mercados Financeiro e de Capitais, or ANBIMA), CVM Resolution 175, and guidance on accounting and segregation have increased transparency and confidence, expanding participation by pension funds and retail investors in senior FIDC tranches.
Commercial notes boom
Another star is the nota comercial (commercial note), introduced in 2021 as a flexible, non-convertible debt instrument. Commercial notes allow companies to raise short- to medium-term funds with “simpler requirements” than debentures, while still benefiting from CVM registration. By mid-2025, issuance volumes of commercial notes were nearly 40% higher than the previous year. For companies, commercial notes offer speed and simplicity; for investors, they offer exposure to corporate credit with tradable securities.
Integration with fintech origination
Fintechs originate loans under SCD, SEP or SCFI licences, then package receivables into digital promissory notes, FIDCs or commercial notes, creating a funding pipeline: origination upfront, structured finance at the back end. Investors gain access to diversified credit pools with professional servicing and governance; borrowers gain faster access to credit at potentially better rates. Foreign private equity and hedge funds are increasingly investing in mezzanine FIDC tranches or buying commercial notes, enticed by yields above developed-market benchmarks.
The expansion of private credit signals the maturation of Brazil’s capital markets. As deposit funding becomes more expensive under new FGC rules, mid-sized banks and SCFIs will lean further on FIDCs and notes to diversify liabilities. Regulators aim to preserve transparency and investor protection so growth does not come at the cost of hidden risks. For clients, private credit is no longer a niche: it is a mainstream funding channel and strategic asset class. With strong structures, improved regulation and robust demand, private credit will remain a defining feature of Brazil’s financial landscape in 2025 and beyond.
Compliance, Enforcement, and the New Discipline of Brazilian Finance
If the previous decade in Brazil was about opening the financial system to competition and technology, the current phase is about reinforcing discipline and governance. The Central Bank of Brazil and the CVM have consistently signalled that innovation must walk hand-in-hand with compliance. For foreign clients, opportunities are abundant but only for those who treat compliance as an enabler rather than an afterthought.
Collateral and enforcement reform
The New Legal Framework for Secured Transactions redefined how collateral can be created and enforced in Brazil. It introduced the security agent, enabling syndicated loans and bond issuances to share security packages under one fiduciary representative. It expanded extrajudicial enforcement, allowing creditors to repossess assets such as vehicles and receivables more quickly, reducing reliance on slow court processes. For lenders, this lowers credit risk. For borrowers, it means cheaper capital with strong collateral.
Restructuring and insolvency
Brazil’s insolvency framework was modernised by Law 14,112/2020, which strengthened DIP financing, clarified treatment of fiduciary collateral, and limited the extension of judicial reorganisation stays to third-party guarantors. Loan documentation increasingly incorporates these reforms: covenants anticipate restructuring scenarios, intercreditor agreements set clear rules for DIP financing, and security structures are preserved even under judicial reorganisation. For investors, this increases predictability in distressed scenarios.
Sanctions, AML, and cross-border compliance
Global geopolitics have impacted Brazilian finance more directly. Sanctions regimes ‒ particularly the USA’s Global Magnitsky Act ‒ have begun to target Brazilian individuals, reminding lenders that cross-border compliance is not optional.
Governance as a differentiator
In today’s Brazil, compliance is a competitive advantage. Those who embrace these requirements find it easier to attract foreign capital; pension funds, private equity and development banks are more comfortable funding institutions that look and feel like regulated financial players in OECD markets. Those who ignore them risk fines, reputational damage, and exclusion from serious funding conversations.
Enforcement in Brazil is becoming faster and more reliable, thanks to collateral reform and modern insolvency law. Compliance is becoming deeper and broader, integrating sanctions, AML and ESG. Brazil is no longer a market where informality can succeed at scale; robust governance unlocks growth in BaaS partnerships, SCFI operations, VASP infrastructure, and private credit distribution. There is a clear opportunity to incorporate compliance into products and structures from the start. Enforcement and governance are not obstacles; they are keys to a market that is digital, dynamic and disciplined.
Outlook: Digital, Dynamic and Disciplined
Brazil’s banking and finance market in 2025 stands out among emerging economies for its unusual combination of scale, innovation, and regulatory maturity. During the past decade, the Central Bank of Brazil has deliberately transformed the system into a laboratory for global digital finance by launching Pix and open finance, creating new fintech licences, and modernising legacy institutions. The result is a market where innovation is not peripheral but mainstream.
Key regulatory milestones illustrate this trajectory. The new SCFI framework transforms finance companies into digital-ready institutions, creating a scalable licence for fintechs and mid-sized lenders. The forthcoming BaaS regulation will legitimise embedded finance as a business model, providing clarity and consumer protection. The VASP rules will bring cryptocurrency platforms into the prudential perimeter and the Central Bank of Brazil is piloting Drex (Brazilian CBDC), which is designed to enable tokenised deposits and programmable payments on distributed ledger technology, thereby pushing tokenisation from theory to practice. At the same time, reforms to the FGC and collateral and insolvency laws show regulators are equally focused on discipline, ensuring that growth does not come at the expense of stability.
In parallel, private credit markets are thriving, FIDCs, commercial notes and securitisation structures are channelling capital to companies outside the traditional banking system. For companies, this means more funding options; for investors, exposure to high-yield structured assets in a clearer regulatory environment.
The strategic message for clients is simple: Brazil is no longer just a large market, it is a structured opportunity. Those who treat compliance as fundamental, partner with licensed entities, and leverage private credit and embedded finance will find a jurisdiction that is not only dynamic but increasingly predictable. In 2025 and beyond, Brazil is digital, dynamic and disciplined ‒ a market where regulation and innovation reinforce each other to create long-term value.
Alameda Lorena 638
4th Floor
São Paulo
SP 01424-002
Brazil