Brazil's foreign exchange law may have mixed effects

Significance

There are several arguments in favour of the new law, among them the simplification of foreign exchange rules and the facilitation of international transactions. However, the law also involves some macroeconomic risks.

Impacts

• There will be potential competitiveness gains from simpler exchange rate rules and easier international transactions.
• Uncertainty about the risks involved in the new law may undermine potential gains, at least in the short term.
• The success or failure of the new law may depend on the pace of liberalisation.