Negotiate in Dollar But Pay in Real

Brazil has a history of implementing rules to stimulate the use of its national currency. According to the Civil Code, parties to a contract aren’t allowed to reach an agreement for payments in gold or foreign currency - only Brazilian currency.

According to Brazilian law, only certain types of contracts can fix debts in other currencies. Three examples are contracts to import or export goods, exchange agreements, and loans or other arrangements where the creditor or debtor resides outside Brazil. The latter, however, doesn’t apply to lease agreements for properties in Brazil.

Despite the Civil Code prohibition, Brazilian courts, including the Superior Tribunal de Justiça, have been issuing orders that minimize the impact. Instead of ruling that contracts in foreign currencies are null and void, they have authorized parties to negotiate in US dollars, for example. The courts have interpreted the Civil Code to require only that payment be made in Brazilian currency.

Still, there remains some uncertainty. If a contract stipulates a price in foreign currency yet payment is made in real, what date should the parties use for currency conversion purposes? Is it the date of the agreement or the date of payment?

In 2013, the Superior Tribunal de Justiça decided that the date of the contract must always be used. Yet still today, you’ll find lower court decisions that ignore the higher court’s precedent and side with the argument that it’s the date of payment.

So remember: when doing business in Brazil, keep it real.