Over the last few years, Brazil has re-established its attractiveness to foreign investors. According to the World Investment Report 2023, FDI inflows into Brazil increased to US$86bn in 2022 compared to US$50.6bn one year earlier (+69.9%) which was the second-highest value ever recorded and the fifth worldwide.

Yet, for companies doing business in Brazil there are several challenges when it comes to financing local operations. Jeremy Hamon, Head of Group Finance, CFO, Primetals Technologies Treasury explains, “Brazil is peculiar because of its cross-border currency regulation preventing cash concentration partially with stamp duty for offshore deposits and a high withholding tax on interest income when doing intercompany financing.”

Moreover, adds Hamon, the Brazilian real is a non-transferrable currency which makes hedging for long-term maintenance contracts an “expensive challenge”. Primetals Technologies designs and builds plants for the metals industry and its Brazilian affiliate is a specialist in steel castors maintenance – which means it has long-term contracts with its customers.

In the light of all these challenges, how has Primetals still managed to set up an automated intercompany cross-border loan for its Brazilian affiliate? This comes close to a cash pooling structure with an FX component and therefore fulfills the requirements from the central treasury organisation. Tune into the new flow InCorporate Treasury podcast and learn more.