Banking & Finance 2025 Comparisons

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.

• Modernisation of secured transactions – Brazil has implemented reforms to improve the secured lending environment. One change is the legal infrastructure for collateral registries and electronic liens. Also, Law 14,195/2021 made some tweaks such as allowing creditors to more easily enforce guarantees out of court. Loan contracts increasingly incorporate explicit consent of the borrower to out-of-court enforcement and appointment of the creditor (or an agent) as an attorney-in-fact for such enforcement steps, to utilize these streamlined procedures.
• Insolvency law reforms – Brazil’s Bankruptcy Law was significantly amended by Law 14,112/2020. Some changes better protect creditors, such as giving DIP financing priority in certain cases and clarifying that unsecured creditors (such as those with fiduciary collateral) can enforce even during reorganisation (after a waiting period). Loan documentation has evolved to take advantage of these changes or protect against new risks.
• ESG and sustainability terms – with the rise of sustainability-linked finance, loan agreements may include Key Performance Indicator pricing adjustments or covenants to maintain certain ESG ratings.
• Digital contracts and electronic signatures – the COVID-19 pandemic accelerated acceptance of electronic signatures and digital contracts. Financing documents now routinely allow electronic execution and even provide that counterparties agree not to contest validity solely based on electronic form. Also, notices and communications clauses now often permit email notice as a means of official communication (with appropriate conditions), reflecting an evolution from the traditional registered mail approach.

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.

• Spousal consent – under Brazilian civil law, if an individual (or an entity controlled by a married individual in certain marital arrangement) grants a guarantee or security interest, the spouse may need to consent.
• Corporate benefit and interest (see 5.3 Downstream, Upstream and Cross-Stream Guarantees) – even aside from acquisitions, any guarantee by a company for another party’s debt could be questioned if not in the guarantor’s interest/direct/indirect benefit.
• Regulatory consents – companies in regulated industries might need public authority consent to encumber assets or grant guarantees.
• Insolvency claw-back period – if a company grants collateral for an existing debt before insolvency, Brazilian bankruptcy law may void it (as an act in debtor’s suspect period that gives preference to a creditor). The law states that granting security to an unsecured creditor within the 90 days (and up to two years in some cases) prior to a bankruptcy filing can be clawed back.
• Rural land – restrictions also apply to foreign ownership of rural land and can limit enforcement of security in favour of non-resident lenders, as foreclosure may require transfer to an eligible Brazilian acquirer.

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.

• Extrajudicial (out-of-court) enforcement – certain security interests allow the creditor to enforce without a full court process. By way of example, in a fiduciary transfer, upon default, the creditor (fiduciary owner) can typically sell the asset privately or via fast-track procedures. For fiduciary transfer of real estate, the law provides a specific extrajudicial foreclosure process: the creditor registers the default with the Real Estate Registry, notifies the debtor to cure within 15 days and, if not cured, proceeds to sell the property at auction (two rounds of public auction).
• Judicial enforcement – if the collateral is not under a fiduciary transfer or assignment agreement, enforcement typically requires filing a lawsuit in court. This is because the creditor does not hold title as in a fiduciary transfer, only a lien.

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:

• labour claims up to 150 minimum wages per creditor and occupational accident claims;
• secured creditors, up to the value of their collateral;
• tax claims;
• creditors holding special or general privileges as defined by law;
• unsecured creditors;
• fines and penalties; and
• subordinated claims, such as shareholder loans or contractually subordinated debt.

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:

• the automatic stay in judicial reorganisation, which freezes most enforcement for at least 180 days and slows collateral foreclosure;
• temporary limits on enforcing even fiduciary security if the court deems the asset essential to operations;
• claw-back exposure on acts within the suspect period (typically 90 days before insolvency, but up to two years for related parties’ transactions), as these can unwind last-minute collateral or repayments;
• statutory priorities that dilute unsecured recoveries (labour claims, certain accident-related claims, secured creditors, and tax claims rank ahead);
• timeline risk, as court reorganisation and bankruptcy cases can run for years, eroding value; and
• sectoral/regulatory constraints for concessionaires and regulated entities, where licences or concessions may be restricted or terminated, depressing collateral value.

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.

• Rural land and border-area property face statutory restrictions that are typically addressed with approvals, leasing or other structures, whereas urban property presents fewer limits.
• Subsurface resources remain state-owned, but can be exploited by foreign and Brazilian companies. Mining and oil rights are granted to Brazilian-incorporated entities, which may be wholly foreign-owned.
• Water use for energy (hydroelectric) or irrigation requires grants from agencies ‒ foreign companies can participate but foreign ownership of certain strategic water bodies might be restricted for national security purposes.

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:

• offtake prepayments, where future production is prepaid by a buyer;
• streaming or royalty arrangements in mining, where investors finance development in exchange for a portion of future output or revenues; and
• equipment leasing.

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.