SML - Local Currency Payment System

 

Brazil - Argentina


Frequently Asked Questions - FAQ



Questions:
  1. What is SML?
  2. How is the operational functioning of SML?
  3. For which transactions the SML can be used?
  4. Can bank fees be paid through the SML?
  5. Who can use?
  6. What are the advantages of using the SML vis-a-vis the current procedure?
  7. How can it be used by the importer?
  8. What is procedure to use SML by the importer side?
  9. Are the FIs required to perform the operations according to the rate announced by the BCB?
  10. Can the financial institution charge fees for registering transactions in SML?
  11. How can it be used by the exporter?
  12. What is the procedure for the exporter to use the SML?
  13. Can the exporter start the payment process in the SML?
  14. The amount received by the exporter may be changed by the variation of the rate SML?
  15. Can the SML be used only for transactions with Argentina?
  16. Can a financial institution that does not operate with exchange operate in SML?
  17. Is it mandatory to use the SML in transactions of foreign trade with Argentina?
  18. Are there changes in the foreign trade documentation?
  19. Can the SML be used to transactions recorded in USD / other currencies?
  20. In how many days the payment will be made to the exporter?
  21. How is the SML rate disclosed?
  22. Is the SML a tool for hedging foreign exchange risk?
  23. Do Central Banks act as guarantors of the operations?
  24. Was there any difference regarding the entry of foreign currency in Brazil, due to SML?
  25. May advanced payments be made by the SML?
  26. Is there a need to proceed exchange rate forms for operations in SML?
  27. Are there any minimum or maximum values for the operations?
  28. How is calculated the SML rate?
  29. Where can be found the SML rate value for the previous day?
  30. Which Financial Institutions are authorized to operate the SML?
  31. If using the SML, in reais, is it possible to use the credit lines ACC (Adiantamento sobre Contrato de Câmbio) and ACE (Adiantamento sobre Cambiais Entregues)?
  32. Must the documentation of a Brazilian exporter to an importer be issued in reais?
  33. What are the financial benefits to the Brazilian importer in addition to reduce costs of the exchange contract?
  34. What goods can be traded through the SML?

1. What is SML?

The SML is a payment system focused on business deals, which allows importers and exporters in Brazil and in Argentina to make and receive payments in their local currencies.

2. How is the operational functioning of SML?

In operational terms, the financial transactions among central banks and financial institutions participating in the SML, and concerning the exporters and importers are made in their local currencies, or for payment of exports, or for the recovery of imports. The cycle is initiated by SML importer in order to register their operation and proceed the payment in its own currency in an authorized financial institution.

3. For which transactions the SML can be used?

The SML applies, initially, to the transactions - up to 360 days - on trade of goods, including services and related expenses, provided in the agreed conditions of sale, such as freight and insurance.

4. Can bank fees be paid through the SML?

Yes, if it has been agreed on the conditions of sale.

5. Who can use?

SML may be used by the Brazilian importers and exporters in their trade with Argentina.

6. QWhat are the advantages of using the SML vis-a-vis the current procedure?

The SML enables the implementation of foreign trade in local currencies. Thus, there is no need to conduct operations in real-dollar exchange and dollar-Argentine peso on the imports trades, and Argentine peso-dollar and dollar-in real on the export trades. The SML rate will be, theoretically, more attractive to agents because it is formed by the interchange fee real / dollar (PTAX) and peso / dollar rate (reference). The SML also can simplify procedures for importers and exporters on the need for operation with the U.S. dollar. Thus, it is expected to reduce the cost of transactions, both financial and administrative.

7. How can it be used by the importer?

The SML can be used to pay imports of goods from Argentina, since they have been previously negotiated in Argentine pesos.

8. What is procedure to use SML by the importer side?

9. Are the FIs required to perform the operations according to the rate announced by the BCB?

No. The FIs can define the real / peso rate for each transaction directly with clients or perform operations according to the rate announced by the BCB SML.

10. Can the financial institution charge fees for registering transactions in SML?

Yes. Fees may be charged, at the discretion of each IF.
For individuals, this service is characterized as a special service under Art. 4 of resolution 3.919, 2010, and the charge is admitted.

11. How can it be used by the exporter?

The exporter can use SML to receive payment of its operations to Argentina, provided that the operation has been previously negotiated in reais.

12. What is the procedure for the exporter to use the SML?

13. Can the exporter start the payment process in the SML?

No. The payment will always be initiated in an FI by the importer. The exporter just inform his banking data to the importer.

14. The amount received by the exporter may be changed by the variation of the rate SML?

No. The value of the transaction is flat for the exporter, in its currency, when it is registered by the importer. For the Brazilian exporter, since the transaction is registered in reais, the amount is flat. The SML rate is reference only to determine the amount payable by the importer in Argentine pesos and the Brazilian importer in reais.

15. Can the SML be used only for transactions with Argentina?

Initially, the SML will be used only for payment and receipt transactions for import and export of Brazilian goods to Argentina.

16. Can a financial institution that does not operate with exchange operate in SML?

Yes.

17. Is it mandatory to use the SML in transactions of foreign trade with Argentina?

No. The SML is an alternative to payments and receipts available to Brazilian exporters and importers.

18. Are there changes in the foreign trade documentation?

There are no changes in the documentation of foreign trade, except in regards to the record of exports, which will be in real.

19. Can the SML be used to transactions recorded in USD / other currencies?

No, the transactions should be recorded in local currencies. The Brazilian exports should have been engaged in reais, and the imports in pesos.

20. In how many days the payment will be made to the exporter?

The forsight to the payment to the exporter’s financial institution is 3 business days, simultaneously in Brazil and in Argentina.

21. How is the SML rate disclosed?

The SML rate is published daily on the main page of the website of BCB after the closure of the Brazilian and Argentinean markets. On this web site you can also find the historic rate of SML.

22. Is the SML a tool for hedging foreign exchange risk?

No. The SML is not a tool for hedging foreign exchange risk.

23. Do Central Banks act as guarantors of the operations?

No. Central banks acts only as intermediaries of the operation. They do not take whether mutual credit risk or credit risk from the financial institutions authorized in their countries.

24. Was there any difference regarding the entry of foreign currency in Brazil, due to SML?

No. There was no change in the regulation for the entry of foreign currency in the country. For the operations coursed through SML, since there is no exchange of money between the exporter or importer and their financial institution or between financial institutions and BCB, there is no transaction exchange (all occurring in real transfers). Since there is no exchange transaction between the participants, do not apply specific instructions, such as the need to fulfill exchange rate forms.

25. May advanced payments be made by the SML?

Yes, SML allows prepayments.

26. Is there a need to proceed exchange rate forms for operations in SML?

No. As there is no exchange transaction (see response 24) there is not such needs.

27. Are there any minimum or maximum values for the operations?

No. There are no value limits to transactions.

28. How is calculated the SML rate?

The SML rate is calculated in accordance with the Operational Regulation of Payments System in Local Currency, signed between the Central Bank of Brazil and the Argentine Central Bank.
Its value is the ratio between the average rate of closure of PTAX (listing of the real against the dollar) to buy and for sale, and the reference rate (rate of the Argentine peso against the U.S. dollar, announced by the BCRA).
The SML rate will have five (5) decimal places. When the value of the fifth decimal place is greater than 5 (five) will take it to the figure 0 (zero) and the value of the fourth decimal place shall be increased by one. When its original value is equal to or lesser than five (5) the fifth decimal place will be rounded for the digit 5 (five).

29. Where can be found the SML rate value for the previous day?

The rate SML is informed, after calculation, on the main page of BCB on the Internet, in a board of rates and remains available, to the disclosure of the fee value for the following working day. The historical series of the SML rate is available in the SML page and on the Time Series Management System (SGS) of the Central Bank.

30. Which Financial Institutions are authorized to operate the SML?

The list of FIs authorized to operate the SML is available on the web site of the Central Bank of Brazil.

31. If using the SML, in reais, is it possible to use the credit lines ACC (Adiantamento sobre Contrato de Câmbio) and ACE (Adiantamento sobre Cambiais Entregues)?

No. The ACC and ACE are financial instruments addressed toward operations of foreign trade involving exchange, There are already in the market ways to finance receivables in advance. Besides, new products may be developed by financial institutions.

32. Must the documentation of a Brazilian exporter to an importer be issued in reais?

Yes.

33. What are the financial benefits to the Brazilian importer in addition to reduce costs of the exchange contract?

The financial benefits should be evaluated case by case by exporters and importers when negotiating operations in foreign trade. In general, exporters can make contracts to receive in reais, eliminating the risk of the floatation on the exchange rate against the U.S. dollar. For importers, the risk of exchange rate of U.S. dollars will be transferred to the Argentinean peso, which is advantageous in several situations.

34. What goods can be traded through the SML?

There are no restrictions for any good included in the NCM (Nomenclatura Comum do Mercosul).