Filed Pursuant to Rule 424(b)(5)
Registration No. 333-261972

 

PROSPECTUS SUPPLEMENT

(To Prospectus dated March 30, 2022)

 

Federative Republic of Brazil

U.S.$2,250,000,000 6.000% Global Bonds due 2033

 

 

Brazil is offering U.S.$2,250,000,000 aggregate principal amount of its 6.000% global bonds due 2033 (the “global bonds”). Brazil will pay interest on the global bonds on April 20 and October 20 of each year, commencing on October 20, 2023. The global bonds will mature on October 20, 2033.

Brazil may, at its option, redeem the global bonds, in whole or in part, before maturity, on not less than 10 nor more than 60 days’ notice on the terms described under “Description of the Global Bonds—Optional Redemption” in this prospectus supplement. The holders of the global bonds will not be entitled to the benefit of any sinking fund.

The global bonds will be issued under an indenture, and constitute a separate series under the indenture. The global bonds will contain “collective action clauses.” Under these provisions, which differ from the terms of Brazil’s public external indebtedness issued prior to July 2, 2015, Brazil may amend the payment provisions of the global bonds and other reserve matters listed in the indenture with the consent of the holders of: (1) with respect to a single series of debt securities, more than 75% of the aggregate principal amount outstanding of such series; (2) with respect to two or more series of debt securities, if certain “uniformly applicable” requirements are met, more than 75% of the aggregate principal amount of the outstanding debt securities of all series affected by the proposed modification, taken in the aggregate; or (3) with respect to two or more series of debt securities, whether or not certain “uniformly applicable” requirements are met, more than 66 2/3% of the aggregate principal amount of the outstanding global bonds of all series affected by the proposed modification, taken in the aggregate, and more than 50% of the aggregate principal amount of the outstanding debt securities of each series affected by the proposed modification, taken individually.

Application will be made to list the global bonds on the Luxembourg Stock Exchange for trading on the Euro MTF Market.

Section 309B(1)(c) of the Securities and Futures Act (Chapter 289 of Singapore) Notification

The global bonds are prescribed capital markets products (as defined in the Securities and Futures (Capital Markets Products) Regulations 2018).

 

 

See “Risk Factors” beginning on page S-8 to read about certain risk factors you should consider before investing in the global bonds.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus supplement or the accompanying prospectus. Any representation to the contrary is a criminal offense.

 

 

 

		Per Global Bond				Total
Public offering price (1)			98.849	%		U.S.$	2,224,102,500
Underwriting discount			0.200	%		U.S.$	4,500,000
Proceeds, before expenses, to Brazil (1)			98.649	%		U.S.$	2,219,602,500

 

(1)	Plus accrued interest, if any, from April 13, 2023, the date Brazil expects to deliver the global bonds offered by this prospectus supplement.

The global bonds will be ready for delivery in book-entry form only through the facilities of The Depository Trust Company (“DTC”); Euroclear Bank S.A./N.V. (“Euroclear”); and Clearstream Banking, société anonyme (“Clearstream”) against payment on or about April 13, 2023.

 

 

Joint Lead Managers and Joint Bookrunners

 

BNP PARIBAS		BofA Securities		Morgan Stanley

The date of this prospectus supplement is April 5, 2023.

Brazil has provided only the information contained in or incorporated by reference in this prospectus supplement and the accompanying prospectus. Brazil has not authorized anyone to provide you with different information. Brazil is not making an offer of these securities in any state where the offer is not permitted.

This prospectus supplement can only be used for the purposes for which it has been published.

TABLE OF CONTENTS

Prospectus Supplement

 

		Page
Summary			S-2
Risk Factors			S-8
Table of References			S-11
About this Prospectus Supplement			S-12
Forward-Looking Statements			S-14
Use of Proceeds			S-15
Recent Developments			S-16
Description of the Global Bonds			S-29
Global Clearance and Settlement			S-38
Taxation			S-42
Underwriting			S-48
Validity of the Global Bonds			S-57
Official Statements and Documents			S-57
General Information			S-58

Prospectus

 

		Page
ABOUT THIS PROSPECTUS			1
FORWARD-LOOKING STATEMENTS			1
DATA DISSEMINATION			2
USE OF PROCEEDS			2
RISK FACTORS			2
DEBT SECURITIES			4
WARRANTS			13
GOVERNING LAW			14
ARBITRATION AND ENFORCEABILITY			14
TAXATION			15
PLAN OF DISTRIBUTION			23
OFFICIAL STATEMENTS			23
VALIDITY OF THE SECURITIES			24
AUTHORIZED REPRESENTATIVE			24
WHERE YOU CAN FIND MORE INFORMATION			24

 

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RISK FACTORS

This section describes certain risks associated with investing in the global bonds. You should consult your financial and legal advisors about the risk of investing in the global bonds. Brazil disclaims any responsibility for advising you on these matters.

The information in this section is directed to investors who are U.S. residents and does not address risks for investors who are not U.S. residents. We disclaim any responsibility to advise prospective purchasers who are residents of countries other than the United States with respect to any matters that may affect the purchase, holding or receipt of payments of the global bonds. If you are not a U.S. resident, you should consult your own financial and legal advisors.

Risk Factors Relating to Brazil

Brazil’s economy is vulnerable to external shocks and to more general “contagion” effects, each of which could have a material adverse effect on Brazil’s economic growth and its ability to raise funding in the external debt markets in the future.

Emerging market investment generally poses a degree of risk because the economies in the developing world are susceptible to destabilization resulting from domestic and international developments.

Brazil’s economy is vulnerable to external shocks, including adverse economic and financial developments in other countries and market developments. A significant increase in interest rates in the international financial markets may adversely affect the liquidity of, and trading markets for, the global bonds. In addition, a significant drop in the price of commodities produced in Brazil, such as iron ore, oil, soybeans, sugar and corn, could adversely affect the Brazilian economy. A significant decline in the economic growth or demand for imports of any of Brazil’s major trading partners, such as China, the European Union, or the United States, could have a material adverse impact on Brazil’s exports and balance of trade and adversely affect Brazil’s economic growth.

In addition, because international investors’ reactions to the events occurring in one emerging market country sometimes produce a “contagion” effect, in which an entire region or class of investment is disfavored by international investors, Brazil could be adversely affected by negative developments in other countries. Brazil has been adversely affected by such contagion effects on a number of occasions, including the 1997 Asian financial crisis, the 1998 Russian financial crisis, the 2001 Argentine financial crisis and the 2008 global economic crisis. Similar developments may affect the Brazilian economy in the future.

We cannot assure you that any developments like those described above will not negatively affect investor confidence in mature market economies, emerging markets or the economies of the principal countries in Latin America, including Brazil. In addition, we cannot assure you that these events will not adversely affect Brazil’s economy and its ability to raise funding in the external debt markets in the future. See “Forward-Looking Statements” in this prospectus supplement.

Brazil’s economy is vulnerable to a number of internal risks, each of which could have a material adverse effect on Brazil’s economic growth and on the liquidity of, and trading markets for, the bonds.

Brazil’s economy, and therefore its government finances, are subject to risks arising from internal developments in Brazil. These include general economic and business conditions in Brazil, the level of consumer demand, the level of confidence that domestic consumers and foreign investors have in the economic and political conditions in Brazil, present and future exchange rates of the Brazilian currency, the level of domestic debt, domestic inflation, the ability of Brazil to generate a primary budget surplus and advance fiscal and structural reforms, the level of foreign direct and portfolio investment, the level of domestic interest rates, the

 

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degree of political uncertainty at the federal and state level in Brazil, and ongoing investigations into allegations of corruption or other criminal actions by public officials and others and their impact on political and economic conditions in the country.

Any of these factors or similar events or developments may adversely affect the liquidity of, and trading markets for, the global bonds.

Adverse changes in Brazil’s credit rating could adversely affect the liquidity of and demand for Brazil’s debt securities and Brazil’s access to the international financial markets.

Moody’s Credit Ratings, Standard & Poor’s and Fitch have each rated Brazil’s long-term foreign and local-currency debt sub-investment grade. Brazil’s ratings or outlooks may be downgraded further or placed on watch by Moody’s, Standard & Poor’s and Fitch or any other rating agency in the future, potentially affecting the trading price for the bonds and the liquidity of and demand for Brazil’s debt securities in general. Downgrades could also adversely affect the cost of funding and terms on which Brazil is able to borrow in the international financial markets and may adversely affect Brazil’s access to the international financial markets.

The Brazilian economy has been in a gradual recovery, but its growth rate is uncertain for the future. Reductions of the Brazilian economic growth rate could have a material adverse effect on public finances and on the market price of the global bonds.

In the fourth quarter of 2022, GDP decreased by 0.20% compared to the third quarter of 2022. Compared to the fourth quarter of 2021, GDP increased by 2.90% in the fourth quarter of 2022, measured on a cumulative 12 month basis. See “Recent Developments—COVID-19.”

Brazil cannot assure investors that its economy will grow in the future. Brazil’s economic growth depends on a variety of factors, including, among others, international demand and prices for Brazilian exports, climatic factors affecting Brazil’s agricultural sector, fiscal and monetary policies, confidence among Brazilian consumers and foreign and domestic investors and their rates of investment in Brazil, the willingness and ability of businesses to engage in new capital spending, the exchange rate and the rate of inflation. Some of these factors are outside Brazil’s control. A sustained or deepened recession could result in a material decrease in Brazil’s fiscal revenues, or a significant depreciation of the real over an extended period of time could adversely affect Brazil’s debt/GDP ratio, which could in turn materially and adversely affect the market price of the global bonds and the ability of Brazil to service its public debt, particularly its debt obligations denominated in foreign currencies, including the global bonds.

An increase in inflation and government measures to curb inflation may adversely affect the Brazilian economy.

Brazil’s economy has experienced high levels of inflation in the past and may experience high levels in the future. Periods of rapid economic expansion and contraction in Brazil have resulted in volatile rates of inflation. In the future, significant inflation may cause Brazil to impose controls on credit or prices, or to take other action, which could inhibit Brazil’s economic growth. In addition, inflation can result in greater market volatility by causing economic uncertainties and reduced consumption, GDP growth and consumer confidence. Inflation, measures to combat inflation and public speculation about possible additional actions have also contributed to economic uncertainty in Brazil in the past and could produce uncertainty in the future. Any of these factors can have a material adverse effect on Brazil’s results of operations and financial condition.

 

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The ongoing investigations into allegations of corruption or other criminal actions by public officials and others and political developments may lead to political instability and a decline in confidence by consumers and foreign investors in the stability and transparency of the Brazilian government, and may have a material adverse effect on Brazil’s economy, demand for Brazil’s debt securities and Brazil’s access to international financial markets.

Investigations into allegations of corruption or other criminal actions by public officials and others may lead to further allegations and charges against Brazilian federal and state government officials and senior management of Brazilian industry. Numerous elected officials, public servants and executives and other personnel of major companies have been subject to investigation, arrest, criminal charges and other proceedings.

There can be no assurance that other federal or state officials or senior management of Brazilian industry will not be charged with corruption-related crimes or other crimes in investigations into allegations of corruption or other criminal actions. Additional allegations, trials and convictions may lead to political instability and a decline in confidence by consumers and foreign direct investors in the stability and transparency of the Brazilian government, and may have a material adverse effect on Brazil’s economic growth, on the demand for Brazil’s debt securities, including the global bonds, and on Brazil’s access to the international financial markets.

Risk Factors Relating to the Global Bonds

Brazil is a foreign state and accordingly it may be difficult to obtain or enforce judgments or arbitral awards against it.

Brazil has agreed to arbitrate in New York, New York any dispute, controversy or claim arising out of or relating to the indenture, the global bonds or any coupon appertaining thereto. As a result, an arbitration proceeding in New York, New York is the exclusive forum in which a holder may assert a claim against Brazil, unless the holder elects to bring a claim in a competent court in Brazil against Brazil only, as may be permitted by the terms of the global bonds. Brazil is a foreign state and has not waived any immunity or submitted to the jurisdiction of any court outside Brazil. In addition, it may not be possible for investors to effect service of process upon Brazil within their own jurisdiction, obtain jurisdiction over Brazil in their own jurisdiction or enforce against Brazil judgments or arbitral awards obtained in their own jurisdiction. See “Arbitration and Enforceability” in the accompanying prospectus.

The price at which the global bonds will trade in the secondary market is uncertain.

Brazil has been advised by the underwriters that they intend to make a market in the global bonds but are not obligated to do so and may discontinue market making at any time without notice. Application will be made to list the global bonds on the Luxembourg Stock Exchange for trading on the Euro MTF Market. We cannot assure you as to the liquidity of the trading market for the global bonds. The price at which the global bonds will trade in the secondary market is uncertain.

The global bonds will contain provisions that permit Brazil to amend the payment terms without the consent of all holders.

The global bonds will contain provisions regarding acceleration and voting on future amendments, modifications, changes and waivers, which are commonly referred to as “collective action clauses.” Under these provisions, certain key provisions of the global bonds may be amended without your consent, including the maturity date, interest rate and other payment terms. See “Description of the Global Bonds—Default; Acceleration of Maturity” and “—Meetings and Amendments” in this prospectus supplement.

 

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TABLE OF REFERENCES

The information incorporated by reference from Brazil’s annual report on Form 18-K, as amended from time to time, includes but is not limited to, the following items:

 

EC No. 809/2004 Item		Annual Report on Form 18-K for 2021
Issuer’s position within the governmental framework		“The Federative Republic of Brazil—Form of Government” on page D-18 of Exhibit D
Geographic location and legal form of the issuer		“The Federative Republic of Brazil—Geography and Population” and “—Form of Government” on pages D-17 to D-18 and D-18 of Exhibit D
Recent events relevant to the issuer’s solvency		“The Brazilian Economy—Historical Background” and “—Economy in 2021” on pages D-25 and D-25 to D-28 of Exhibit D
Structure of the issuer’s economy		“Principal Sectors of the Economy” on pages D-28 to D-30 of Exhibit D
Gross domestic product		“The Brazilian Economy—Economy in 2022—Gross Domestic Product” on page D-10 of Exhibit D and “The Brazilian Economy—Economy in 2021—Gross Domestic Product” on page D-26 of Exhibit D
Brazil’s political system and government		“The Federative Republic of Brazil—Form of Government” on page D-18 of Exhibit D
Tax and budgetary systems of the issuer		“Public Finance—Budget Process” and “—Taxation and Revenue Sharing Systems” on pages D-46 to D-47 and D-47 to D-48 of Exhibit D
Gross public debt of the issuer		“Public Debt” on pages D-50 to D-56 of Exhibit D
Foreign trade and balance of payments		“Balance of Payments—Current Account” on pages D-37 to D-44 of Exhibit D
Foreign exchange reserves		“Balance of Payments—Reserve Assets” on page D-44 of Exhibit D
Financial position and resources		“Balance of Payments—Financial Account” on pages D-43 to D-44 and “Public Finance—2022 Budget” on page D-47 of Exhibit D
Income and expenditure figures and 2022 Budget		“Public Finance—2022 Budget” on pages D-13 to D-14 and D-47 of Exhibit D

 

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ABOUT THIS PROSPECTUS SUPPLEMENT

Brazil, having taken all reasonable care to ensure that such is the case, confirms that the information contained in this prospectus (which includes this prospectus supplement together with the attached prospectus dated December 28, 2017) is, to the best of Brazil’s knowledge, in accordance with the facts in all material respects and contains no material omission likely to affect its import. Brazil accepts responsibility accordingly.

No person is authorized to make any representation or give any information not contained in this prospectus supplement, the accompanying prospectus or the documents incorporated by reference in this prospectus supplement and the accompanying prospectus. Brazil has provided only the information contained in or incorporated by reference in this prospectus supplement and the accompanying prospectus. Brazil has not authorized anyone to provide you with different information. Please see “General Information—Where You Can Find More Information” for information on the documents that are incorporated by reference in this prospectus supplement and the accompanying prospectus.

Brazil is not offering to sell or soliciting offers to buy any securities other than the global bonds offered under this prospectus supplement, nor is Brazil offering to sell or soliciting offers to buy the global bonds in places where such offers are not permitted by applicable law. You should not assume that the information in this prospectus supplement or the accompanying prospectus, or the information Brazil has previously filed with the Securities and Exchange Commission, or the “SEC,” and incorporated by reference in this prospectus supplement and the accompanying prospectus, is accurate as of any date other than their respective dates. Brazil’s economic, fiscal or political circumstances may have changed since such dates.

The global bonds described in this prospectus supplement are debt securities of Brazil being offered under registration statement no. 333-261972 filed with the SEC under the U.S. Securities Act of 1933 (the “Securities Act”) on January 3, 2022, as amended by pre-effective Amendment No.1 filed on March 30, 2022. The accompanying prospectus is part of registration statement no. 333-261972. The accompanying prospectus provides you with a general description of the securities that Brazil may offer, and this prospectus supplement contains specific information about the terms of this offering and the global bonds. This prospectus supplement also adds, updates or changes information provided or incorporated by reference in the accompanying prospectus. Consequently, before you invest, you should read this prospectus supplement together with the accompanying prospectus as well as the documents incorporated by reference in this prospectus supplement and the accompanying prospectus. Those documents (such as Brazil’s annual report on Form 18-K for 2021, which was filed with the SEC on July 7, 2022, as amended from time to time (the “2021 Annual Report”)) contain information regarding Brazil, the global bonds and other matters. The registration statement, any post-effective amendments thereto, the various exhibits thereto, and the documents incorporated therein and herein by reference, contain additional information about Brazil and the global bonds. All of those documents may be inspected at the office of the SEC. Our SEC filings are also available to the public from the SEC’s website at http://www.sec.gov. Certain terms used but not defined in this prospectus supplement are defined in the prospectus.

References to “U.S.$,”, “US$”, “$” or “dollars” in this prospectus supplement are to U.S. dollars and references to “R$,” “BRL,” “real” or “reais” are to Brazilian reais.

The distribution of this prospectus supplement and the accompanying prospectus and the offering of the global bonds in certain jurisdictions may be restricted by law. Persons who receive copies of this prospectus supplement and the accompanying prospectus should inform themselves about and observe those restrictions. See “Underwriting” in this prospectus supplement.

PROHIBITION OF SALES TO EEA RETAIL INVESTORS – The global bonds are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area (“EEA”). For these purposes, a retail investor means a person who

 

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is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, “MiFID II”); or (ii) a customer within the meaning of Directive 2016/97/EU (as amended, the “Insurance Distribution Directive”), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II. Consequently, no key information document required by Regulation (EU) No 1286/2014 (as amended, the “PRIIPs Regulation”) for offering or selling the global bonds or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling the global bonds or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.

PROHIBITION OF SALES TO UK RETAIL INVESTORS – The global bonds are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the United Kingdom (“UK”). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client, as defined in point (8) of Article 2 of Regulation (EU) No 2017/565 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018 (“EUWA”); or (ii) a customer within the meaning of the provisions of the United Kingdom Financial Services and Markets Act 2000 (the “FSMA”) and any rules or regulations made under the FSMA to implement Directive (EU) 2016/97, where that customer would not qualify as a professional client, as defined in point (8) of Article 2(1) of Regulation (EU) No 600/2014 as it forms part of domestic law by virtue of the EUWA. Consequently, no key information document required by Regulation (EU) No 1286/2014 as it forms part of domestic law by virtue of the EUWA (the “UK PRIIPs Regulation”) for offering or selling the global bonds or otherwise making them available to retail investors in the UK has been prepared and therefore offering or selling the global bonds or otherwise making them available to any retail investor in the UK may be unlawful under the UK PRIIPs Regulation.

 

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FORWARD-LOOKING STATEMENTS

Brazil has made forward-looking statements in this prospectus supplement and the accompanying prospectus. Statements that are not historical facts are forward-looking statements. These statements are based on Brazil’s current plans, estimates, assumptions and projections. Therefore, you should not place undue reliance on them. Our forward-looking statements are subject to certain risks and uncertainties, including the potential effects of current events, that are not reasonably foreseeable or known at this time and that may differ materially from those contemplated by the forward-looking statements. Actual events and effects may differ materially from the information included in this prospectus supplement. Forward-looking statements speak only as of the date they are made, and Brazil undertakes no obligation to update any of them in light of new information or future events.

Forward-looking statements involve inherent risks. Brazil cautions you that a number of factors could cause actual results to differ materially from those contained in any forward-looking statements. These factors include, but are not limited to:

 

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External factors, such as:

 

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the impact of the international economic environment on the Brazilian economy, including liquidity in the international financing markets and volatility in international equity, debt and foreign exchange markets;

 

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interest rates in financial markets outside Brazil;

 

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the impact of changes in the credit rating of Brazil;

 

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the impact of changes in the international prices of commodities;

 

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economic conditions in Brazil’s major export markets;

 

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the occurrence of natural disasters, regional or global pandemics, or similar events, and

 

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the decisions of international financial institutions regarding the terms of their financial arrangements with Brazil or mature market economies.

 

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Internal factors, such as:

 

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general economic and business conditions in Brazil;

 

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present and future exchange rates of the Brazilian currency;

 

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foreign currency reserves;

 

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the level of domestic debt;

 

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domestic inflation;

 

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impact on the Brazilian economy and the government finances of the measures taken to respond to the occurrence of natural disasters, regional or global pandemics, or similar events;

 

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the ability of Brazil to effect key economic reforms and to generate a primary budget surplus and advance fiscal and structural reforms;

 

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the level of foreign direct and portfolio investment;

 

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the level of Brazilian domestic interest rates;

 

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political instability in Brazil; and

 

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the government’s ability to implement and the results of governmental policies and economic reforms.

 

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Other factors discussed in the section “Risk Factors.”

 

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USE OF PROCEEDS

The net proceeds to Brazil from the sale of the global bonds will be approximately U.S.$2,219,602,500, after deduction of the underwriting discounts but before expenses. Brazil will use the net cash proceeds of the sale of the global bonds for repayment of outstanding indebtedness.

 

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RECENT DEVELOPMENTS

The information included in this section supplements the information about Brazil contained in Brazil’s 2021 Annual Report, as amended. To the extent the information in this section is inconsistent with the information contained in the 2021 Annual Report, the information in this section replaces such information. Capitalized terms not defined in this section have the meanings ascribed to them in the 2021 Annual Report.

COVID-19

As of April 4, 2023, Brazil had reported 37.3 million confirmed cases of COVID-19, since the beginning of the COVID-19 pandemic, of which 700,556 were fatal (resulting in a 1.9% COVID-19 mortality rate in the country). Brazil has adopted several measures in response to the COVID-19 outbreak aimed at preventing mass contagion and overcrowding of Brazilian health service facilities, including, among other things, granting decision making authority to local governmental entities (i.e., states and municipalities) with respect to measures to be taken in response to the outbreak. Brazilian states and municipalities have taken extensive measures to limit the spread of the outbreak, including severe restrictions on business and economic activity.

As of March 22, 2023, 81.82% of the Brazilian population had completed the full COVID-19 vaccination cycle (two doses) and 88.08% of the population had received at least one dose of the COVID-19 vaccine. As of March 22, 2023, 58.70% of the population had also received a third dose of the COVID-19 vaccine.

The Republic expects to acquire up to 150 million vaccine doses by the end of 2023. By December of 2022, 81 million doses had already been delivered, and the remaining 69 million doses are expected to be delivered by the second quarter of 2023. The Republic began administering a bivalent COVID-19 vaccine on February 27, 2023. The bivalent booster doses will be first given to people at higher risk of developing severe forms of COVID-19, such as senior citizens over 60 years and people with disabilities.

As of February 27, 2023, the bivalent vaccine against COVID-19 began to be applied across the country. The vaccine improves immunity against the original strain virus and also against the Omicron variant and has a safety and efficacy profile similar to that of monovalent vaccines.

The Republic has adopted several stimulus measures in reaction to the COVID-19 crisis. In 2022, the expenditures related to such measures amounted to R$20.8 billion. These measures, as currently approved or proposed, include, among other things, (i) measures to provide financial assistance to individuals and companies, (ii) the allocation of resources for medical treatment for Brazilian citizens and investing in appropriate protective equipment, and (iii) the implementation of a plan for the purchase and administration of COVID-19 vaccines.

THE FEDERATIVE REPUBLIC OF BRAZIL

Population

According to estimated figures, Brazil’s population declined from 213.3 million in 2021 to 207.8 million in 2022. The decline in population is explained in part because the population figures are based on the 2010 census performed by the Brazilian Institute of Geography and Statistics, which predicted an average annual growth rate of 0.7% and does not reflect the effects of the COVID-19 pandemic, resulting in an inflated population figure for 2021.

Political Developments

Investigations into Antidemocratic Acts

On January 8, 2023, demonstrators who support former president Jair Bolsonaro and who did not accept the election results invaded the Planalto presidential palace, the National Congress and the Federal Supreme Court (STF, for its acronym in Portuguese). About three hours after the invasion had begun, the police were able to gain control of the riot.

 

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On January 8, 2023, the President of the Republic, Luiz Inácio Lula da Silva, signed a decree ordering a federal intervention for public security reasons by the Federal Government of the Federal District, which includes Brazil’s capital, Brasilia. According to the decree, the intervention period expired on January 31, 2023.

On January 9, 2023, Ibaneis Rocha, the governor of the Federal District, was suspended from his office for 90 days amid allegations that local forces had failed to stop the invasion of key government buildings.

On January 10, 2023, Minister Alexandre de Moraes, of the Federal Supreme Court, ordered the arrest of Brasilia’s top public security official, the then Security Secretary Anderson Torres. Torres was arrested on January 14, 2023 by the Federal Police.

The public security intervention by the Federal Government in the Federal District, instituted on January 8, 2023, ended on January 31, 2023.

On February 14, 2023, the Federal Police began the sixth phase of investigation “Lesa Pátria” (or “crimes against the State”). This investigation seeks to identify who participated, financed or in some way encouraged the acts of vandalism that culminated in the plundering of the National Congress, Planalto presidential palace and Federal Supreme Court buildings on January 8, 2023. The accused could be charged with crimes such as coup d’etat, qualified damage to property (dano qualificado), criminal association and criminal incitement.

On March 20, 2023, the Attorney General’s Office (PGR, for its acronym in Portuguese) identified to the Federal Supreme Court over 150 people accused of participating in the anti-democratic acts of January 8, 2023. The new complaint accuses 16 of executing a crime and 134 of instigating a crime. So far, 1,187 people have been criminally charged for the acts.

Investigations

On February 10, 2023, Minister Cármen Lúcia, of the Federal Supreme Court, initiated five lawsuits against former president Jair Bolsonaro in the Federal Regional Court of the 1st Region in the Federal District. The lawsuits, presented by members of congress and civil society organizations, called for the investigation of the former president for statements threatening the Judiciary and promoting an institutional rupture in the country during independence day celebrations on September 7, 2021.

Cabinet Changes

On January 1, 2023, the new president, Luís Inácio Lula da Silva, swore in the 34 cabinet officials listed below, each of whom holds minister status:

 

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Sônia Guajajara – Ministry of Indigenous Peoples

 

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Rui Costa – Office of the President’s Chief of Staff

 

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Flávio Dino – Ministry of Justice and Public Security

 

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Fernando Haddad – Ministry of Finance

 

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Simone Tebet – Ministry of Planning and Budget

 

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Aniele Franco – Ministry of Racial Equality

 

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Cida Gonçalves – Ministry of Women

 

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José Múcio Monteiro – Ministry of Defense

 

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Mauro Vieira – Ministry of Foreign Relations

 

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Renan Filho – Ministry of Transportation

 

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Nísia Trindade – Ministry of Health

 

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Margareth Menezes – Ministry of Culture

 

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Ana Moser – Ministry of Sports

 

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Carlos Fávaro – Ministry of Agriculture

 

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Camilo Santana – Ministry of Education

 

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Alexandre Silveira – Ministry of Mines and Energy

 

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André de Paula – Ministry of Fishing and Aquaculture

 

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Luciana Santos – Ministry of Science, Technology, and Innovation

 

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Marina Silva – Ministry of Environment and Climate Change

 

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Esther Dweck – Ministry of Management and Innovation in Public Services

 

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Carlos Lupi – Ministry of Social Security

 

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Waldez Góes – Ministry of Integration and Regional Development

 

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Alexandre Padilha – Secretariat of Institutional Relations

 

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Daniela Carneiro – Ministry of Tourism

 

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Silvio Almeida – Ministry of Human Rights

 

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Márcio França – Ministry of Ports and Airports

 

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Paulo Teixeira – Ministry of Agricultural Development and Family Agriculture

 

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Juscelino Filho – Ministry of Communications

 

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Luiz Marinho – Ministry of Labor and Employment

 

•

Márcio Macedo – Office of the President’s Secretariat-General

 

•

Vinícius Marques Carvalho – Office of the Controller-General (CGU)

 

•

Jorge Messias – Office of the Attorney General (AGU)

 

•

Gonçalves Dias – Institutional Security Cabinet (GSI)

 

•

Geraldo Alckmin – Ministry of Development, Industry, Trade, and Services

2022 Federal and State Elections

On October 30, 2022, in a second round of voting, candidate Luiz Inacio Lula da Silva was elected for a third term as president of the Republic of Brazil, an office he last held in 2010.

Legislative Reforms

On December 21, 2022, the National Congress enacted the Transition PEC (proposal to amend the Constitution). Following Constitutional Amendment 126/2022, the new government will add R$145 billion to the spending ceiling, R$70 billion of which will be used to fund the Auxílio Brasil (renamed Bolsa Família in 2023), a monthly allowance of R$600 per family with an additional R$150 per child six years of age and under. The other R$75 billion can be allocated to expenses such as health policies (R$16.6 billion), including the Popular Pharmacy program and the real increase in the minimum wage (R$6.8 billion). The PEC also opens fiscal space for another R$23 billion in investments for a period of one year.

On January 1, 2023, President Luís Inácio Lula da Silva signed a series of decrees and provisional measures that change gun control policy, change policies on deforestation, maintain the federal tax exemption on fuels, restructure the Presidency of the Republic and its ministries, and keep the allowance under the Bolsa Família income transfer program at a monthly amount of R$600 per person, plus R$150 per child up to six years of age.

On January 12, 2023, the Minister of Finance, Fernando Haddad, presented a set of economic measures aiming at fiscal recovery. The announced measures have among their objectives the reduction of tax litigation and avoidance of tax distortions.

 

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On March 31, 2023, the Minister of Finance, Fernando Haddad, announced the proposal for a new fiscal framework which aims to bring the fiscal deficit to zero by 2024. The proposal would limit the spending growth in each year to 70% of primary revenue over the past 12 months. Moreover, the increase in real public expenditures would be limited between 0.6% and 2.5% per year.

Employment and Labor

Employment Levels

From January 1, 2023, to February 28, 2023, formal employment increased by 0.77%, with the creation of 326,356 jobs, compared to an increase of 1.18% from January 1, 2022, to February 28, 2022, with the creation of 478,862 jobs in the period.

In the fourth quarter of 2022, the unemployment rate in Brazil was 7.90%, a decrease of 0.80% percentage points compared to the third quarter of 2022, and a decrease of 3.20% compared to the fourth quarter of 2021.

Wages

As of January 1, 2023, the minimum monthly wage for 2023 was set at R$1,302.00, representing an increase of 7.42% compared to the 2022 minimum monthly wage of R$1,212.00.

The budgetary law for 2023 (“2023 Budgetary Guidelines”) estimated a minimum monthly wage of R$1,294.00, considering the National Consumer Price Index (Índice Nacional de Preços ao Consumidor or “INPC”) at 3.30%. However, in light of an effective INPC of 5.81% in 2022, on December 12, 2022, the Federal Government enacted a provisional measure to increase the minimum monthly wage to R$1,302.00, pursuant to the Constitution of the Republic, with the aim of avoiding loss in purchase power, plus a real gain of around 1.50%.

The minimum monthly wage for 2024 is currently forecasted at R$1,337.00, representing an increase of 2.69% compared to the 2023 minimum monthly wage of R$1,302.00.

On February 16, 2023, President Luiz Inácio Lula da Silva confirmed that the government will raise the minimum wage to R$1,320.00 in May 1, 2023.

Social Security

On February 28, 2023, (i) the monthly benefits accumulated in the preceding 12-month period paid by the Brazilian Social Security System increased by 3.52% compared to the immediately prior 12-month period; and (ii) the Brazilian Social Security System payments increased by 4.43%, when compared to February 28, 2022 (in real terms).

Environment

On November 3, 2022, the Federal Supreme Court determined that the Federal Government should reactivate the Amazon Fund, originally created to raise funds and finance measures to protect the environment in the region. By decision of the Court, the Federal Government will have a period of 60 days to comply with the measure. The fund was created in 2008 and receives donations from international institutions and governments to finance actions to prevent and combat deforestation in the Amazon. In 2019, Germany and Norway suspended transfers to new projects after the Brazilian government presented suggestions for changing the application of resources and extinguishing collegiate fund management.

On January 31, 2023, the Federal Government published a decree that determines actions to face the emergency in public health and to combat illegal mining in the indigenous Yanomami territory. The decree authorizes the Ministries of Defense, Health, Development and Social Assistance, Family and Fight against Hunger and Indigenous Peoples to take measures and mobilize resources to address the situation.

 

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On February 10, 2023, the Federal Police began to implement actions to interrupt the logistics of and eradicate illegal mining in indigenous Yanomami lands. The actions take place within the scope of Operation Liberation, which will be ongoing until legitimacy is restored in Yanomami land.

On March 6, 2023, the National Treasury released a note on Sustainable Public Securities (Environmental + Social). The National Treasury has been making efforts to build a framework of sustainable sovereign securities, which will serve as a reference for an active and constant presence in the thematic issuances market for the coming years. There is still no estimated date for the release of the framework. However, the expectation is that this process will be completed in time for a sustainable bond (environmental + social) to be issued in 2023.

THE BRAZILIAN ECONOMY

Economy in 2023

In 2023, the challenging global economic scenario due to inflation and elevated interest rates, which could lead to a slowdown or even a recession in the United States and Europe, is likely to exert pressure on the Brazilian economy, However, the reopening of China in the first half of 2023 is expected to be positive for Brazil, due to the number of Brazilian companies that export commodities to the Asian country. At the domestic level, the Federal Government has stated that it sees 2023 is an opportune year to advance the reform agenda, such as tax reform, preserving the microeconomic advances of recent years, and reinforcing the commitment to fiscal sustainability. In this context, the Federal Government has stated that domestic economic growth is expected to be slower than in 2022, in a context marked by high interest rates and inflation above the target. In the more optimistic scenario, progress in structural reforms and stronger fiscal responsibility could favor economic growth and lead to a decrease in structural interest rates.

Gross Domestic Product

In the fourth quarter of 2022, GDP decreased by 0.20% compared to the third quarter of 2022. Compared to the fourth quarter of 2021, GDP increased by 2.90% in the fourth quarter of 2022, measured on a cumulative 12-month basis. The GDP results from the fourth quarter of 2022 were mainly influenced by the industrial sector, which decreased by 0.30%, and the service sector, which increased by 0.20%, in each case compared to the third quarter of 2022.

Principal Sectors of the Economy

Public Utilities

Electricity prices are regulated by the Brazilian Electricity Regulatory Agency (Agência Nacional de Energia Elétrica or “ANEEL”) following a tariff flag system for electricity generation. The green, yellow, red flags (levels 1 and 2) indicate whether the energy will cost more or less depending on the generation conditions. The green flag corresponds to regular tariff price charged under regular hydrological conditions, and the yellow and red flags result in additional charges on top of regular tariffs, in case of moderate or severe water scarcity conditions.

Following favorable hydrological conditions in recent months, on April 15, 2022, ANEEL replaced the red flag tariff with the green flag tariff, and from May 2022 through January 2023, additional charges were no longer imposed on electricity bills. The green tariff flag was maintained for the ninth month in a row as of January 2023.

Privatizations

From 2019-2022, the Investment Partnership Program (Programa de Parcerias de Investimentos or “PPI”) included 168 active projects, totaling R$908.5 billion in investments, including 49 airports, 35 ports, 7 roads and 7 railways concessions. In addition, the Federal Government will assist states and municipalities in carrying out several other projects involving water supply and waste disposal concessions.

 

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On May 18, 2022, the Federal Audit Court (Tribunal de Contas da União, or “TCU”) approved by 7 votes to 1, the privatization model of Eletrobras, a state-owned company considered the largest energy company in Latin America. This was the last pending step for the government to be able to carry out the privatization process of the company.

On June 14, 2022, the privatization of Eletrobras was officially completed with a ceremony at the B3 stock exchange.

FINANCIAL SYSTEM

Monetary Policy and Money Supply

Selic

The Selic interest rate is the main monetary policy instrument available to the Central Bank. The monetary policy transmission mechanisms are the channels through which changes in the Selic affect the behavior of other economic variables, mainly prices and output. Monetary policy affects prices in the economy by influencing (i) the decision between consumption and investment by families and companies, (ii) the exchange rate, (iii) the price of assets, and (iv) credit availability, among others.

When the Selic rate rises, real interest rates also tend to rise. The increase in the real interest rate, in turn, can lead to a decrease in investments by companies and a decrease in consumption by families - which, in turn, tends to reduce the demand for goods and services in the economy, contributing to for the reduction of inflation.

On March 22, 2023, the Central Bank Monetary Policy Committee (Comitê de Política Monetária or “COPOM”) maintained the Selic interest rate at the level of 13.75% per annum.

Inflation

From January 1, 2023, to February 28, 2023, the IPCA increased by 0.84%. With respect to the 12-month period ended on February 28, 2023, the index increased 5.60%, 0.17% below the rate of 5.77% registered in the 12 immediately previous months.

COPOM publishes a number of inflation projections based on different hypothetical scenarios. In its baseline scenario, assuming an interest rate path extracted from the Focus survey (a survey of market expectations for economic indicators carried out by the Banco Central do Brasil or “BCB”) and exchange rate starting at R$5.25 to US$1.00 and evolving according to the purchase power parity (PPP), inflation projections stand at 5.8% for 2023 and 3.6% for 2024. In this scenario, inflation projections for administered prices are 10.2% for 2023 and 5.3% for 2024.

Foreign Exchange Rates

Foreign Exchange Rates

The Brazilian Real-U.S. Dollar exchange rate, as published by the Central Bank, was R$5.0762 to US$1.00 (sell side) on April 4, 2023.

Financial Institutions

BNDES

In April 2023, the CMN decreased the long-term interest rate used for loans granted by the Brazilian National Development Bank (Banco Nacional do Desenvolvimento Econômico e Social or “BNDES”) (Taxa de Juros de Longo Prazo or “TJLP”) from 7.37% to 7.28% per annum for the second quarter of 2023. As of April 2023, the long-term rate (Taxa de Longo Prazo or “TLP”) applicable for new BNDES loans was IPCA, plus 6.05% per annum.

 

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Banking Supervision

Loan Loss Reserves

As of February 2023, the level of credit operations in arrears for over 90 days was at 3.30%, a 0.11% increase compared to January 2023 (3.19%). As of February 2023, the level of credit operations in arrears with respect to credits granted to families was 4.09%, a 0.04% increase compared to January 2023 (4.05%). Arrears of credits provided to legal entities increased in February 2023, when compared to January 2023 (from 1.86% to 2.08%).

BALANCE OF PAYMENTS

As of February 28, 2023, the current account registered a deficit of US$54.41 billion (2.78% of GDP) for the preceding 12-month period. For the same period, (i) the capital account registered a surplus of approximately US$275.00 million, (ii) the financial account registered a deficit of US$56.10 billion and (iii) foreign direct investment amounted to US$88.00 billion (4.49% of GDP).

Brazil’s total official reserves declined from US$363.7 billion in 2021 to US$337.7 billion in 2022, mainly due to a lower return on investment from international reserves as a result of market factors such as higher interest rates and the appreciation of the US dollar against other currencies that make up the international reserves (approximately 8%).As of March 30, 2023, the volume of international reserves amounted to US$340.81 billion (17.57% of GDP).

 

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PUBLIC FINANCE

The following table sets forth revenues and expenditures of the Federal Government from 2019 through 2022 and the budgeted amounts for 2023.

Table No. 1

Primary Balance of the Central Government ⁽¹⁾

(In Billions of Reais)

 

		2019				2020				2021				2022				2023 Budget(5)
1 – Total Revenues			2,029.1				1,763.2				2,144.2				2,352.3				2,357.6
1.1 – RFB Revenues (2)			1,175.5				1,080.7				1,328.4				1,414.7				1,474.3
1.2 – Fiscal Incentives			(0.1	)			(0.2	)			(0.2	)			(0.1	)			(0.0	)
1.3 – Social Security Net Revenues			512.7				485.4				511.8				544.1				595.1
1.4 – Non-RFB Revenues			340.9				197.2				304.2				393.6				303.9
2 – Transfers by Sharing Revenue			357.7				317.0				392.3				464.8				460,0
3 – Total Net Revenue			1,671.3				1,446.2				1,751.9				1,887.5				1,915.7
4 – Total Expenditures			1,788.5				2,344.6				1,792.0				1,830.4				2,023.2
4.1 – Social Security Benefits			777.4				799.6				789.2				809.5				858.8
4.2 – Personnel and Social Charges			388.6				386.3				365.6				343.4				365.0
4.3 – Other Mandatory Expenditures			242.9				868.5				340.5				300.9				282.7
4.4 – Discretionary expenditures – All Branches			379.6				290.2				296.7				376.6				516.8
5 – Brazilian Sovereign Wealth Fund (FSB)			0.0				0.0				0.0				0.0				0.0
6 – Primary Balance (3)			(117.2	)			(898.4	)			(40.2	)			57.1				(107.6	)
7 – Methodological Adjustment			8.5				2.4				(0.4	)			0.6				—
8 – Statistical Discrepancy			(0.7	)			(4.7	)			(0.5	)			0.3				—
9 – Central Government Primary Balance (4)			(109.4	)			(900.8	)			(41.1	)			58.0				—
10 – Nominal Interest			(385.1	)			(321.2	)			(449.1	)			(509.3	)			—
11 – Central Government Nominal Balance (4)			(494.5	)			(1,222.0	)			(490.2	)			(451.3	)			—

 

Note: Numbers may not total due to rounding.

(1)	Consolidated accounts of (i) the National Treasury; (ii) Social Security System; and (iii) the Central Bank.

(2)	Brazilian Federal Tax Authority (RFB).

(3)	Calculated using the “above the line” method, with respect to the difference between the revenues and expenditures of the public sector.

(4)	Calculated using the “below the line” financial method, with respect to changes in public sector’s total net debt (domestic or external). Surpluses are represented by positive numbers and deficits are represented by negative numbers.

(5)	Estimates in 2023 Budget Law and reviewed by the Primary Revenue and Expenditure Report (March 2023).

Source: National Treasury

The following table sets forth the expenditures of the Federal Government by function for 2019 through 2022 and the budgeted amounts for 2023. The figures in the table below are not directly comparable to those set forth in Table No. 2 above, entitled “Primary Balance of the Central Government”, given that the expenditures set forth in Table No. 2 were calculated in accordance with the International Monetary Fund (“IMF”) methodology, which does not include, among other things, debt service expenditures and certain financial investments (which, in turn, are accounted for in the numbers set forth in Table No. 3 below).

 

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Table No. 2

Expenditures of the National Treasury by Function

(In Millions of Reais)

 

		2019				2020				2021				2022				2023 Budget (1)
Legislative			6,573.1				6,305.4				6,428.5				6,633.8				10,079.3
Judiciary			32,621.9				31,448.0				31,549.4				34,872.3				45,222.9
Essential to Justice			6,426.9				6,635.8				6,663.2				7,091.9				9,438.1
Administration and Planning			22,978.8				22,229.0				22,503.6				23,632.6				28,384.6
National Defense			78,465.7				76,588.4				78,191.7				81,277.2				89,501.8
Public Security			8,449.2				9,872.1				9,613.5				10,981.9				14,923.9
Foreign Affairs			3,093.7				3,647.0				3,652.3				3,725.9				4,380.7
Social Assistance			94,914.7				412,348.8				161,127.0				196,869.6				272,505.7
Social Security			725,885.6				764,238.7				804,532.0				894,750.2				961,421.8
Health			113,907.8				151,122.6				161,392.8				136,174.1				172,672.7
Labor			72,480.8				75,874.9				65,833.2				92,364.2				96,156.8
Education			88,224.8				82,166.2				90,093.9				104,466.7				142,741.7
Culture			715.7				581.2				584.9				591.4				5,876.1
Citizenship Rights			828.9				885.8				597.6				662.3				1,514.4
Urban Planning			1,383.2				1,270.6				1,123.5				1,407.0				8,727.3
Housing			11.7				2.0				2.1				2.6				266.7
Sanitation			454.2				825.7				445.5				316.9				1,143.7
Environmental Management			3,158.2				3,433.2				2,894.1				2,851.6				6,262.8
Science and Technology			6,278.8				6,011.3				4,728.7				8,111.6				14,573.6
Agriculture			14,355.2				12,438.8				16,036.7				21,496.4				36,905.2
Agricultural Organization			1,345.9				1,287.8				983.3				1,403.2				1,725.2
Industry			1,610.1				1,458.4				1,471.1				1,560.2				2,111.7
Commerce and Services			1,782.6				6,908.7				1,683.3				1,574.5				4,698.7
Communications			1,122.6				1,491.0				1,961.2				3,023.8				3,523.1
Energy			2,261.5				1,223.9				1,568.1				1,241.1				1,415.8
Transportation			8,530.8				7,756.9				6,432.2				7,625.9				26,261.4
Sports and Leisure			159.3				101.7				213.9				293.0				919.9
Special Charges (2)			957,429.6				1,151,227.9				1,009,336.7				1,030,754.8				3,168,916.2
Contingency Reserve (3)			—				—				—				—				69,630.5
Subtotal			2,255,451.5				2,839,381.7				2,491,644.2				2,675,756.7				5,201,902.1
Refinancing Charges			476,775.2				723,323.4				1,399,617.9				1,425,069.6				—
Total			2,732,226.7				3,562,705.1				3,891,262.1				4,100,826.2				5,201,902.1

 

(1)	Estimates.

(2)	Special Charges includes expenses that cannot be associated with goods or services generated in the functioning of the Federal Government, including with respect to debt service, debt refinancing, reimbursements, indemnifications, and other similar expenses.

(3)	The Contingency Reserve is outlined in the Annual Budget (Lei Orçamentária Anual) and may be used for additional lines of credit related to contingent liabilities, unexpected fiscal events, and other unexpected events or risks.

Source: Ministry of Finance/National Treasury and Federal Budget Secretariat.

 

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2022 Budget

The 2022 Budgetary Guidelines set a nominal primary deficit of R$177.49 billion (2.00% of estimated GDP) for the consolidated public sector in 2022. The macroeconomic parameters contemplated by the bill anticipate inflation at 3.50% and a projected GDP growth of 2.50% for 2022. The 2022 Budgetary Guidelines were sent to Congress for approval on April 15, 2021 and were enacted on August 20, 2021. On December 21, 2022, the 2022 budget law was approved by Congress and was enacted on January 21, 2022 (the “2022 Budget Law”).

The following table sets forth the assumptions that were included in the 2022 Budget Law.

Table No. 3

Principal 2022 Budget Assumptions

 

		As of December 31, 2022
Gross Domestic Product
Nominal GDP (billions of Reais)			9,934.40
Real GDP Growth			3.10	%
Inflation
Domestic Inflation (IPCA)			5.75	%

 

Source:

Federal Budget Secretariat (SOF) and Economic Policy Secretariat (SPE).

2023 Budget

The 2023 Budgetary Guidelines set a nominal primary deficit of R$69.01 billion (0.66% of estimated GDP) for the consolidated public sector in 2023. The macroeconomic parameters contemplated by the bill anticipate inflation at 3.30% and a projected GDP growth of 2.50% for 2023. There is no assurance that such assumptions will prevail, and it is likely that such outcomes will vary.

The 2023 Budgetary Guidelines were sent to Congress for approval on July 12, 2022 and were enacted on August 9, 2022.

Table No. 4

Principal 2023 Budget Assumptions

 

		As of February 28, 2023
Gross Domestic Product
Nominal GDP (billions of Reais)			10,711,6
Real GDP Growth			1.61	%
Inflation
Domestic Inflation (IPCA)			5.31

 

Source:

Federal Budget Secretariat (SOF) and Economic Policy Secretariat (SPE).

 

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Fiscal Balance

In February 2023, the consolidated public sector registered a primary deficit of R$ 26.45 billion. For the 12-month period ended February 28, 2023, the accumulated balance registered a surplus of R$ 93.25 billion (0.93% of GDP).

In February 2023, the Brazilian Social Security System registered a deficit of R$ 21.05 billion, 4.70% higher (in real terms) than the deficit registered in February 2022. For the 12-month period ended February 28, 2023, the deficit of the Brazilian Social Security System totaled R$ 269.93 billion (in real terms). At current market prices, the deficit accumulated in the preceding 12-month period ended February 28, 2023, reached R$ 264.10 billion.

PUBLIC DEBT

Public Debt Indicators

Public Sector Net Debt

As of February 28, 2023, Public Sector Net Debt was R$5,706.73 billion (56.64% of GDP) compared to R$5,047.57 billion (56.14% of GDP) as of February 28, 2022.

General Government Gross Debt

As of February 28, 2023, General Government Gross Debt was R$7,351.86 billion (72.96% of GDP) compared to R$7,001.66 billion (77.87% of GDP) as of February 28, 2022.

Federal Public Debt

The following table presents Brazil’s Federal Public Debt profile as of February 28, 2023.

Table No. 5

Federal Public Debt Profile

 

		Feb/2023				Feb/2023				Jan/2023				Jan/2023				Feb/2022				Feb/2022
						%								%								%
Federal Public Debt (R$ bn)		R$	5,856.0				100.0	%		R$	5,768.7				100.0	%		R$	5,730.3				100.0	%
Domestic		R$	5,616.9				95.9	%		R$	5,534.7				95.9	%		R$	5,490.3				95.8	%
Fixed-rate		R$	1,390.0				23.7	%		R$	1,354.1				23.5	%		R$	1,540.9				26.9	%
Inflation-linked		R$	1,832.3				31.3	%		R$	1,830.8				31.7	%		R$	1,693.7				29.6	%
Selic rate		R$	2,379.9				40.6	%		R$	2,335.6				40.5	%		R$	2,241.0				39.1	%
FX		R$	253.9				4.3	%		R$	248.3				4.3	%		R$	254.7				4.4	%
Others			0.0				0.0	%			0.0				0.0	%			0.0				0.0	%
External (R$ bn)		R$	239.1				4.1	%		R$	234.0				4.1	%		R$	240.0				4.2	%
Maturity Profile
Average Maturity (years)			4.0								4.0								3.9
Maturing in 12 months (R$ bn)		R$	1,316.3							R$	1,305.2							R$	1,338.6
Maturing in 12 months (%)			22.5	%							22.6	%							23.4	%

 

Source:

National Treasury.

 

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On January 23, 2023, the National Treasury released an Annual Borrowing Plan for 2023.

Table No. 6

Annual Borrowing Plan 2023⁽¹⁾

 

		Limits for 2023
		Minimum				Maximum
Stock of Federal Public Debt (R$ Billion)
Federal Public Debt			6,400.0				6,800.0
Composition—%
Fixed Rate			23.0				27.0
Inflation Linked			29.0				33.0
Floating Rate			38.0				42.0
Exchange Rate			3.0				7.0
Maturity Profile
% Maturing in 12 months			19.0				23.0
Average Maturity (years)			3.8				4.2

 

(1)	As published on January 23, 2023.

Source:

National Treasury.

Public Debt Management

Golden Rule

Based on the 2023 Budgetary Guidelines, budget execution is expect to be in compliance with the Golden Rule (as defined below). However, given the expected fiscal scenario, the Federal Government expects that it will be required to constantly monitor budget execution, with the possibility that it will need to resort to credit operations in an amount greater than capital expenditures, since the margins projected are only slightly positive of R$17.35 billion.

As of March 31, 2023, the budget execution is within the Golden Rule margin, in the amount of R$ 49.7 billion. For additional information on the Golden Rule, please refer to “Golden Rule” in the “Public Debt” section.

Internal Public Debt

Internal Public Debt Levels

In accordance with the fiscal consolidation program promoted by the Federal Government, new BNDES Early Repayments were settled in 2022, totaling R$72.31 billion, which resulted in total payments, including regular payments, of R$83.25 billion and a total of R$1.15 billion of total repayment (including only regular payments) in 2023 as of March 15, 2023. The proceeds of BNDES Early Repayments will be used by the National Treasury exclusively for public debt relief and compliance with the Golden Rule.

Regional Public Debt (State and Municipal)

Federal Government Guarantees

As of February 28, 2023, the Federal Government had paid a total of R$53.94 billion in liabilities incurred by states and municipalities. The largest payments were attributed to (i) the State of Rio de Janeiro (R$30.99 billion), pursuant to the Special Recovery Regime (as defined below), (ii) the State of Minas Gerais (R$ 13.18 billion),

 

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(iii) the State of Goiás (R$4.10 billion), (iv) the State of Maranhão (R$1.20 billion), (v) the State of Rio Grande do Sul (R$1.00 billion), and (vi) the State of Pernambuco (R$866.27 million). The Federal Government is currently prevented by the Federal Supreme Court (Supremo Tribunal Federal or the “STF”) from recovering for any guarantees granted pursuant to the Special Recovery Regime. For more information on Federal Government guarantees, please refer to “Special Recovery Regime” in the “Public Debt” section.

Rating Agencies

In December 2022, Fitch confirmed Brazil’s long term foreign currency sovereign credit rating at BB-, and revised the outlook to stable from negative.

 

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DESCRIPTION OF THE GLOBAL BONDS

Brazil will issue the global bonds under the indenture, dated as of July 2, 2015, between Brazil and The Bank of New York Mellon, as trustee.

The following is a description of the material provisions of the global bonds and the indenture. The description may not contain all of the information that is important to you as a potential investor in the global bonds. Therefore, Brazil urges you to read the indenture and the form of global bond in making your decision on whether to invest in the global bonds. Brazil has filed a copy of these documents with the SEC and will also deposit copies of these documents at the office of the trustee in New York City.

The following description of the particular terms of the global bonds offered hereby supplements and replaces any inconsistent information set forth in the description of the general terms and provisions of the debt securities set forth in the prospectus.

General Terms of the Global Bonds

The global bonds will:

 

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be issued in an aggregate principal amount of U.S.$2,250,000,000.

 

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mature at par on October 20, 2033.

 

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bear interest at 6.000%, calculated on the basis of a 360-day year consisting of twelve 30-day months, from April 13, 2023.

 

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pay interest semi-annually in arrears on April 20 and October 20 of each year, starting on October 20, 2023, to be paid to the person in whose name the global bond is registered at the close of business on the preceding April 17 or October 17.

 

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contain provisions which are described in the sections entitled “—Default; Acceleration of Maturity,” “—Certain Amendments Not Requiring Holder Consent” and “—Amendments and Waivers” in this prospectus supplement. Under these provisions, Brazil may, among other things, amend the payment provisions of the global bonds and certain other terms without your consent.

 

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contain provisions described in “Arbitration and Enforceability” in the accompanying prospectus.

 

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be direct, general, unconditional, unsecured (except as described under the heading “Debt Securities— Negative Pledge” in the accompanying prospectus) and unsubordinated External Indebtedness of Brazil. Brazil has pledged its full faith and credit for the due and punctual payment of principal of, premium, if any, on, and interest on the global bonds. The global bonds will rank without any preference among themselves and equally with all other unsecured and unsubordinated External Indebtedness of Brazil. It is understood that this provision shall not be construed so as to require Brazil to make payments under the global bonds ratably with payments being made under any other External Indebtedness of Brazil.

 

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be recorded on, and transferred through, the records maintained by DTC and its direct and indirect participants, including Euroclear and Clearstream.

 

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be issued in fully registered form, without coupons, in minimum denominations of U.S.$200,000 and integral multiples of U.S.$1,000 in excess thereof.

 

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be available in certificated form only under certain limited circumstances.

 

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be redeemable at the option of Brazil before maturity. See “—Optional Redemption” in this prospectus supplement.

 

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not be entitled to the benefit of any sinking fund.

 

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General Terms of the Global Bonds

The global bonds will contain provisions regarding acceleration and voting on amendments, modifications, changes and waivers, described in this prospectus supplement, that differ from those applicable to Brazil’s outstanding public external indebtedness issued prior to July 2, 2015. These provisions are commonly referred to as “collective action clauses.” Under these provisions, Brazil may amend the payment provisions of the global bonds and other reserve matters listed in the indenture with the consent of the holders of: (1) with respect to a single series of debt securities, more than 75% of the aggregate principal amount outstanding of such series; (2) with respect to two or more series of debt securities, if certain “uniformly applicable” requirements are met, more than 75% of the aggregate principal amount of the outstanding debt securities of all series affected by the proposed modification, taken in the aggregate; or (3) with respect to two or more series of debt securities, whether or not certain “uniformly applicable” requirements are met, more than 66 2/3% of the aggregate principal amount of the outstanding debt securities of all series affected by the proposed modification, taken in the aggregate, and more than 50% of the aggregate principal amount of the outstanding debt securities of each series affected by the proposed modification, taken individually. Those provisions are described in the sections entitled “—Default; Acceleration of Maturity” and “—Amendments and Waivers” in this prospectus supplement.

“External Indebtedness” means Indebtedness for money borrowed which is payable by its terms or at the option of its holder in any currency other than Brazilian currency (other than any such Indebtedness that is originally issued within Brazil).

“Indebtedness” means all unsecured and unsubordinated obligations of Brazil in respect of money borrowed and guarantees given by Brazil in respect of money borrowed by others.

“Public External Indebtedness” means any Public Indebtedness of Brazil which is payable by its terms or at the option of its holder in any currency other than Brazilian currency (other than such Public Indebtedness that is originally issued within Brazil); settlement of original issuance by delivery of Public Indebtedness (or the instruments evidencing such Public Indebtedness including by means of a book entry system) within Brazil shall be deemed to be original issuance within Brazil.

“Public Indebtedness” means any payment obligation, including any contingent liability, of any person arising from bonds, debentures, notes or other securities which (i) are, or were intended at the time of issuance to be quoted, listed or traded on any securities exchange or other securities market (including, without limiting the generality of the foregoing, securities eligible for resale pursuant to Rule 144A under the Securities Act, as amended (or any successor law or regulation of similar effect)) and (ii) have an original maturity of more than one year or are combined with a commitment so that the original maturity of one year or less may be extended at the option of Brazil to a period in excess of one year.

Optional Redemption

Brazil may redeem the global bonds at its option, in whole or in part, at any time and from time to time, at a redemption price (expressed as a percentage of principal amount and rounded to three decimal places) equal to the greater of:

(1) (a) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 45 basis points less (b) interest accrued to the date of redemption, and

(2) 100% of the principal amount of the global bonds to be redeemed,

plus, in either case, accrued and unpaid interest thereon to the redemption date.

 

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“Treasury Rate” means, with respect to any redemption date, the yield determined by Brazil in accordance with the following two paragraphs.

The Treasury Rate shall be determined by Brazil after 4:15 p.m., New York City time (or after such time as yields on U.S. government securities are posted daily by the Board of Governors of the Federal Reserve System), on the third business day preceding the redemption date based upon the yield or yields for the most recent day that appear after such time on such day in the most recent statistical release published by the Board of Governors of the Federal Reserve System designated as “Selected Interest Rates (Daily)—H.15” (or any successor designation or publication) (“H.15”) under the caption “U.S. government securities–Treasury constant maturities–Nominal” (or any successor caption or heading) (“H.15 TCM”). In determining the Treasury Rate, Brazil shall select, as applicable: (1) the yield for the Treasury constant maturity on H.15 exactly equal to the period from the redemption date to the maturity date (the “Remaining Life”); or (2) if there is no such Treasury constant maturity on H.15 exactly equal to the Remaining Life, the two yields – one yield corresponding to the Treasury constant maturity on H.15 immediately shorter than and one yield corresponding to the Treasury constant maturity on H.15 immediately longer than the Remaining Life – and shall interpolate to the maturity date on a straight-line basis (using the actual number of days) using such yields and rounding the result to three decimal places; or (3) if there is no such Treasury constant maturity on H.15 shorter than or longer than the Remaining Life, the yield for the single Treasury constant maturity on H.15 closest to the Remaining Life. For purposes of this paragraph, the applicable Treasury constant maturity or maturities on H.15 shall be deemed to have a maturity date equal to the relevant number of months or years, as applicable, of such Treasury constant maturity from the redemption date.

If on the third business day preceding the redemption date H.15 TCM is no longer published, Brazil shall calculate the Treasury Rate based on the rate per annum equal to the semi-annual equivalent yield to maturity at 11:00 a.m., New York City time, on the second business day preceding such redemption date, of the United States Treasury security maturing on, or with a maturity that is closest to, the maturity date, as applicable. If there is no United States Treasury security maturing on the maturity date but there are two or more United States Treasury securities with a maturity date equally distant from the maturity date, one with a maturity date preceding the maturity date and one with a maturity date following the maturity date, Brazil shall select the United States Treasury security with a maturity date preceding the maturity date. If there are two or more United States Treasury securities maturing on the maturity date or two or more United States Treasury securities meeting the criteria of the preceding sentence, Brazil shall select from among these two or more United States Treasury securities the United States Treasury security that is trading closest to par based upon the average of the bid and asked prices for such United States Treasury securities at 11:00 a.m., New York City time. In determining the Treasury Rate in accordance with the terms of this paragraph, the semi-annual yield to maturity of the applicable United States Treasury security shall be based upon the average of the bid and asked prices (expressed as a percentage of principal amount) at 11:00 a.m., New York City time, of such United States Treasury security, and rounded to three decimal places.

Brazil’s actions and determinations in determining the redemption price shall be conclusive and binding for all purposes, absent manifest error.

Notice of any redemption will be mailed or electronically delivered (or otherwise transmitted in accordance with the depositary’s procedures) at least 10 days but not more than 60 days before the redemption date to each holder of global bonds to be redeemed.

In the case of a partial redemption, selection of the global bonds for redemption will be made pro rata, by lot or by such other method as the trustee in its sole discretion deems fair and appropriate. No global bonds of a principal amount of U.S.$200,000 or less will be redeemed in part. If any global bond is to be redeemed in part only, the notice of redemption that relates to the global bond will state the portion of the principal amount of the global bond to be redeemed. A new global bond in a principal amount equal to the unredeemed portion of the global bond will be issued in the name of the holder of the global bond upon surrender for cancellation of the

 

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original global bond. For so long as the global bonds are held by DTC (or another depositary), the redemption of the global bonds shall be done in accordance with the policies and procedures of the depositary. Unless Brazil defaults in the payment of the redemption price, on and after the redemption date interest will cease to accrue on the global bonds or portions thereof called for redemption.

Payment of Principal and Interest

As long as the global bonds are in the form of fully registered book-entry securities, registered in the name of DTC or a nominee of DTC, Brazil will make payments of principal and interest on the global bonds in U.S. dollars to DTC, which will receive the funds for distribution to the beneficial holders of the global bonds. Brazil expects that holders of the global bonds will be paid in accordance with the procedures of DTC and its direct and indirect participants. Neither Brazil nor the paying agent will have any responsibility or liability for any aspect of the records of, or payments made by, DTC or its direct and indirect participants or any failure on the part of DTC or its direct and indirect participants in making payments to holders of the global bonds from the funds DTC receives.

If the global bonds are issued in certificated form and your name is listed as the registered holder of a global bond in the security register maintained by the trustee, Brazil will make its interest and principal payments to you by wire transfer if:

 

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you own at least U.S.$1,000,000 aggregate principal amount of the global bonds;

 

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not less than 15 days before the payment date, you notify the trustee in writing of your election to receive payment by wire transfer and provide it with your bank account information and wire transfer instructions; and

 

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with respect to principal payments, you surrender the global bonds at the corporate trust office of the trustee or at the office outside the United States of the other paying agents that Brazil appoints pursuant to the indenture.

If Brazil does not pay interest by wire transfer as described above for any reason, it will, subject to applicable laws and regulations, mail a check to you on or before the due date for the payment at your address as it appears on the security register maintained by the trustee on the applicable record date.

If any date for an interest or principal payment is a day on which the law at the place of payment permits or requires banking institutions to close, Brazil will make the payment on the next banking day at such place. Brazil will treat such payments as if they were made on the due date, and no interest on the global bonds will accrue as a result of this delay in payment.

Subject to any relevant unclaimed property laws or regulations, if any money that Brazil pays to the trustee for the payment of principal of or interest on the global bonds is not claimed at the end of two years after the principal or interest was due and payable, the trustee will repay the money to Brazil. After any such repayment, the trustee will not be liable with respect to the payments. However, Brazil’s obligations to pay the principal of and interest on the global bonds as they become due will not be affected by such repayment. The global bonds will become void unless presented for payment within five years after the maturity date (or a shorter period if provided by applicable law).

Default; Acceleration of Maturity

Any of the following events will be an event of default with respect to any series of the global bonds:

(a) a default by Brazil in any payment of principal of or interest on the global bonds of such series which continues for 30 days after such payment was due;

 

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(b) a default which is materially prejudicial to the interests of the holders of the global bonds of such series in the performance of any other obligation under the global bonds of that series, which continues for 60 days after the written notice requiring such default to be remedied is given by the trustee or the holders of not less than 25% in aggregate principal amount of global bonds of such series then outstanding;

(c) an acceleration of in excess of U.S.$25,000,000 (or its equivalent in any other currency) in aggregate principal amount of Public External Indebtedness of Brazil by reason of an event of default (however described) arising from Brazil’s failure to make any payment of principal, premium, if any, or interest under that Public External Indebtedness when due;

(d) a failure of Brazil to make any payment in respect of Public External Indebtedness of Brazil in an aggregate principal amount in excess of U.S.$25,000,000 (or its equivalent in any other currency) when due (as such date may be extended by virtue of any applicable grace period or waiver), which continues for 30 days after written notice requiring such default to be remedied is given by the trustee or the holders of not less than 25% in aggregate principal amount of global bonds of such series then outstanding;

(e) a declaration by Brazil of a moratorium with respect to the payment of principal of, or premium, if any, on or interest on Public External Indebtedness of Brazil which does not expressly exclude the global bonds and which is materially prejudicial to the interests of the holders of the global bonds; or

(f) a denial by Brazil of its obligations under the global bonds of such series.

If any of the events of default described above occurs and is continuing with respect to a series of global bonds, the trustee or the holders of at least 25% of the aggregate principal amount of the global bonds of that series then outstanding may declare all the global bonds of such series to be due and payable immediately by giving written notice to Brazil, with a copy to the trustee, and the same shall become and shall be due and payable upon the date that such written notice is received by or on behalf of Brazil, unless prior to such date all events of default in respect of all the global bonds of that series shall have been cured.

Holders holding global bonds of a series representing in the aggregate more than 50% of the principal amount of the then-outstanding global bonds of that series, by written notice to Brazil and to the trustee, may waive any existing defaults and their consequences on behalf of the holders of all of the global bonds of such series if:

 

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following the declaration that the principal of the global bonds of such series has become due and payable immediately, Brazil deposits with the trustee a sum sufficient to pay all outstanding amounts then due on those global bonds (other than principal due by virtue of the acceleration upon the event of default) together with interest on such amounts through the date of the deposit as well as the reasonable fees and compensation of the holders that declared those global bonds due and payable, the trustee and their respective agents, attorneys and counsel; and

 

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all events of default (other than non-payment of principal that became due by virtue of the acceleration upon the event of default) have been remedied.

Paying Agents and Transfer Agents

Until the global bonds of each series are paid, Brazil will maintain a paying agent in New York City. Brazil has initially appointed The Bank of New York Mellon to serve as its paying agent and transfer agent in New York City.

Brazil may at any time appoint new paying agents and transfer agents. Brazil will promptly provide notice (as described under “—Notices”) of the termination or appointment of, or of any change in the office of, any paying agent or transfer agent.

 

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Certificated Securities

Brazil will issue global bonds in certificated form in exchange for the book-entry securities only if:

 

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DTC notifies Brazil that it is unwilling, unable or no longer qualified to continue to act as depositary or ceases to be a clearing agency registered under the U.S. Securities Exchange Act of 1934 at a time when it is required to be and Brazil does not appoint a successor depositary within 90 days of receiving notice from the depositary or becoming aware of such ineligibility;

 

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the trustee institutes or is directed to institute any judicial proceeding in a court or arbitral proceeding to enforce the rights of the holders with respect to the global bonds represented by the global security and the trustee has been advised by counsel that in connection with such proceeding it is necessary or appropriate for the trustee to obtain possession of the global bonds, the trustee may in its sole discretion determine that the global bonds represented by a global security will no longer be represented by a global security; or

 

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at any time Brazil decides it no longer wishes to have all or part of the global bonds represented by a book-entry security.

If Brazil issues certificated securities, the certificated securities will have the same terms and authorized denominations as the book-entry security. You may present certificated securities for transfer, exchange or payment at the corporate trust office of the trustee in New York City, according to the procedures in the indenture, and, in the case of certificated securities presented for payment, principal and interest thereon will be payable at the offices of the trustee in New York City, provided that interest thereon may be paid by check mailed to the registered holders of certificated securities. In the case of a transfer of part of a certificated security, the registrar or transfer agent will issue a new certificated security to the transferee and a second certificated security in respect of the balance of the certificated security to the transferor. Certificated securities presented for transfer must be accompanied by an executed instrument of assignment and transfer, copies of which are available at the office of the trustee in New York City. You will not be charged a fee for the registration of transfers or exchanges of certificated securities. You may, however, be charged for any stamp, tax or other governmental charge that must be paid in connection with the transfer, exchange or registration. Brazil, the trustee and any other agent of Brazil may treat the person in whose name any certificated security is registered as the owner of such security for all purposes.

If any security becomes mutilated, destroyed, stolen or lost, you can have it replaced by delivering the security or the evidence of its loss, theft or destruction to the trustee. Brazil and the trustee may require you to sign an indemnity under which you agree to pay Brazil, the trustee or any other agent of Brazil for any losses that they may suffer relating to such replacement. Brazil and the trustee may also require you to present other documents or proof. After you deliver these documents, Brazil in its discretion may execute, and, upon request of Brazil, the trustee will authenticate and deliver to you, a substitute security with the same terms as the security you are exchanging. If so requested by Brazil, you will be required to pay all expenses and reasonable charges associated with the replacement of the mutilated, destroyed, stolen or lost security.

Notices

So long as the global bonds are listed on the Luxembourg Stock Exchange and the rules of that exchange so require, Brazil will publish notices to the holders of the global bonds in a leading newspaper having general circulation in Luxembourg or arrange to make such notices available on the website of the Luxembourg Stock Exchange (at http://www.luxse.com). If Brazil elects to publish notices in Luxembourg, Brazil expects that it will initially make such publication in the Luxemburger Wort. If publication in a leading newspaper in Luxembourg is not practicable, Brazil will publish such notices in one other leading English language daily newspaper with general circulation in Europe. Brazil will consider a notice to be given on the date of its first publication.

In the case of the book-entry securities, notices also will be sent to DTC or its nominee, as the holder thereof, and DTC will communicate such notices to DTC participants in accordance with its standard procedures.

 

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Further Issues of the Global Bonds

From time to time, without the consent of holders of the global bonds, and subject to the required approvals under Brazilian law, Brazil may create and issue additional debt securities with the same terms and conditions as those of the global bonds (or the same except for the amount of the first interest payment, the issue date and the issue price), provided that any additional debt securities subsequently issued will be fungible with the previously outstanding debt securities for U.S. federal income tax purposes. Additional global bonds issued in this manner will be consolidated with, and will form a single series with, any other outstanding notes of such series.

Amendments and Waivers

The holders of the global bonds of any series may generally approve any proposal by Brazil to modify the indenture or the terms of the global bonds of such series with the affirmative vote (if approved at a meeting of the holders) or consent (if approved by written action) of holders of more than 50% of the outstanding principal amount of the global bonds of that series.

However, holders of the global bonds of any series may approve, by vote or consent through one of three modification methods, any proposed modification by Brazil that would do any of the following (such subjects referred to as “reserve matters”):

 

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change the date on which any amount is payable on the global bonds of such series;

 

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reduce the principal amount (other than in accordance with the express terms of the global bonds and the indenture) of the global bonds of such series;

 

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reduce the interest rate on the global bonds of such series;

 

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change the method used to calculate any amount payable on the global bonds of such series (other than in accordance with the express terms of the global bonds and the indenture);

 

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change the currency or place of payment of any amount payable on the global bonds of such series;

 

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modify Brazil’s obligation to make any payments on the global bonds of such series (including any redemption price therefor);

 

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change the identity of the obligor under the global bonds of such series;

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change the definition of “outstanding” or the percentage of affirmative votes or written consents, as the case may be, required to make a “reserve matter modification”;

 

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change the definition of “uniformly applicable” or “reserve matter modification”;

 

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authorize the trustee, on behalf of all holders of the global bonds of such series, to exchange or substitute all the global bonds of that series for, or convert all the global bonds of such series into, other obligations or securities of Brazil or any other person; or

 

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change the legal ranking, governing law, agreement to arbitrate, submission to jurisdiction in Brazil or waiver of immunities provisions of the terms of the global bonds of such series.

A change to a reserve matter, including the payment terms of the global bonds of any series, can be made without your consent, as long as the change is approved, pursuant to one of the three following modification methods, by vote or consent by:

 

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the holders of more than 75% of the aggregate principal amount of the outstanding global bonds of such series in so far as the changes affect the global bonds of that series;

 

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where such proposed modification would affect the outstanding debt securities of two or more series (a “cross-series modification”), including the global bonds, the holders of more than 75% of the aggregate principal amount of the outstanding debt securities of all of the series affected by the proposed modification, taken in the aggregate, if certain “uniformly applicable” requirements are met (a “cross-series modification with single aggregated voting”); or

 

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•

where such proposed modification would affect the outstanding debt securities of two or more series, including the global bonds, whether or not certain “uniformly applicable” requirements are met, the holders of more than 66 2/3% of the aggregate principal amount of the outstanding debt securities of all of the series affected by the proposed modification, taken in the aggregate, and the holders of more than 50% of the aggregate principal amount of the outstanding debt securities of each series affected by the modification, taken individually (a “cross-series modification with two-tier voting”).

The term “uniformly applicable,” as referred to above, in the context of a proposed cross-series modification, means a modification by which holders of debt securities of all series affected by that modification are invited to exchange, convert or substitute their debt securities on the same terms for (x) the same new instruments or other consideration or (y) new instruments or other consideration from an identical menu of instruments or other consideration.

A modification will not be considered to be uniformly applicable if each exchanging, converting or substituting holder of debt securities of any series affected by that modification is not offered the same amount of consideration per amount of principal, the same amount of consideration per amount of interest accrued but unpaid and the same amount of consideration per amount of past due interest, respectively, as that offered to each other exchanging, converting or substituting holder of debt securities of any series affected by that modification (or, where a menu of instruments or other consideration is offered, each exchanging, converting or substituting holder of debt securities of any series affected by that modification is not offered the same amount of consideration per amount of principal, the same amount of consideration per amount of interest accrued but unpaid and the same amount of consideration per amount of past due interest, respectively, as that offered to each other exchanging, converting or substituting holder of debt securities of any series affected by that modification electing the same option under such menu of instruments).

Brazil may select, in its discretion, any modification method for a reserve matter modification in accordance with the indenture and designate which series of debt securities will be included for approval in the aggregate of modifications affecting two or more series of debt securities. Any selection of a modification method or designation of series to be included will be final for the purpose of that vote or consent solicitation.

A cross-series modification constituting or including a reserve matter modification to the terms and conditions of the affected debt securities, including the global bonds, that is not uniformly applicable must be effected pursuant to a cross-series modification with two-tier voting; such a cross-series modification that is uniformly applicable may be effected pursuant to a cross-series modification with single aggregated voting or a cross-series modification with two-tier voting, at Brazil’s option.

Before soliciting any consent or vote of any holder of debt securities for any change to a reserve matter, Brazil will provide the following information to the trustee for distribution to the holders of debt securities of any series that would be affected by the proposed modification:

 

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a description of Brazil’s economic and financial circumstances which are, in Brazil’s opinion, relevant to the request for the proposed modification, a description of Brazil’s existing debts and description of any broad policy reform program and provisional macroeconomic outlook;

 

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if Brazil shall at the time have entered into an arrangement for financial assistance with multilateral and/or other major creditors or creditor groups and/or an agreement with any such creditors regarding debt relief, (x) a description of any such arrangement or agreement and (y) where permitted under the information disclosure policies of the multilateral or other creditors, as applicable, a copy of the arrangement or agreement;

 

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a description of Brazil’s proposed treatment of external debt instruments that are not affected by the proposed modification and its intentions with respect to any other major creditor groups; and

 

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if Brazil is then seeking any reserve matter modification affecting any other series of debt securities, a description of that proposed modification.

 

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For purposes of determining whether the required percentage of holders of the global bonds of any series or any other series of debt securities has approved any amendment, modification or change to, or waiver of, the global bonds of any series or the indenture, or whether the required percentage of holders has delivered a notice of acceleration of the global bonds of such series, debt securities (including the global bonds) will be disregarded and deemed not to be outstanding and may not be counted in a vote or consent solicitation for or against a proposed modification if on the record date for the proposed modification or other action or instruction hereunder, the debt security is held by Brazil or by a public sector instrumentality, except that (x) debt securities held by Brazil or any public sector instrumentality which have been pledged in good faith may be regarded as outstanding if the pledgee establishes to the satisfaction of the trustee the pledgee’s right so to act with respect to such debt securities and that the pledgee is not Brazil or a public sector instrumentality, and in case of a dispute concerning such right, the advice of counsel shall be full protection in respect of any decision made by the trustee in accordance with such advice and any certificate, statement or opinion of counsel may be based, insofar as it relates to factual matters or information that is in the possession of the trustee, upon the certificate, statement or opinion of or representations by the trustee; and (y) in determining whether the trustee will be protected in relying upon any such action or instructions under the indenture, or any notice from holders, only debt securities that a responsible officer of the trustee knows to be so owned or controlled will be so disregarded.

As used in the preceding paragraph, “public sector instrumentality” means any department, ministry or agency of Brazil, and a corporation, trust or other legal entity controlled by Brazil or by a public sector instrumentality and “control” means the power, directly or indirectly, through the ownership of voting securities or other ownership interests, by contract or otherwise, to direct the management of or elect or appoint a majority of the board of directors or other persons performing similar functions in lieu of, or in addition to, the board of directors of that legal entity.

Please refer to the section entitled “Debt Securities—Meetings and Amendments” in the accompanying prospectus for information on the procedures for convening and conducting meetings of the holders of global bonds.

Certain Amendments Not Requiring Holder Consent

Brazil and the trustee may, without the vote or consent of any holder of global bonds of any series, amend the indenture or the global bonds of that series for the purpose of:

 

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adding to Brazil’s covenants for the benefit of the holders;

 

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surrendering any of Brazil’s rights or powers with respect to the global bonds of that series;

 

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securing the global bonds of that series;

 

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curing any ambiguity or curing, correcting or supplementing any defective provision in the global bonds of that series or the indenture;

 

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amending the global bonds of that series or the indenture in any manner that Brazil and the trustee may determine and that does not materially adversely affect the interests of any holders of the global bonds of that series; or

 

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correcting a manifest error of a formal, minor or technical nature.

 

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GLOBAL CLEARANCE AND SETTLEMENT

Brazil has obtained the information in this section from sources it believes to be reliable, including from DTC, Euroclear and Clearstream, and Brazil takes responsibility for the accurate reproduction of this information. Brazil takes no responsibility, however, for the accuracy of this information. DTC, Euroclear and Clearstream are under no obligation to perform or continue to perform the procedures described below, and they may modify or discontinue them at any time. Neither Brazil nor the trustee will be responsible for DTC’s, Euroclear’s or Clearstream’s performance of their obligations under their rules and procedures. Nor will Brazil or the trustee be responsible for the performance by direct or indirect participants of their obligations under their rules and procedures.

Introduction

The Depository Trust Company

DTC is:

 

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a limited-purpose trust company organized under the New York Banking Law;

 

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a “banking organization” within the meaning of the New York Banking Law;

 

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a member of the Federal Reserve System;

 

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a “clearing corporation” within the meaning of the New York Uniform Commercial Code; and

 

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a “clearing agency” registered under Section 17A of the U.S. Securities Exchange Act of 1934.

DTC was created to hold securities for its participants and facilitate the clearance and settlement of securities transactions between its participants. It does this through electronic book-entry changes in the accounts of its direct participants, eliminating the need for physical movement of securities certificates. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries.

The laws of some states require certain purchasers of securities to take physical delivery of the securities in definitive form. These laws may impair your ability to transfer beneficial interests in the global bonds to such purchasers. DTC can act only on behalf of its direct participants, who in turn act on behalf of indirect participants and certain banks. Thus, your ability to pledge beneficial interests in the global bonds to persons that do not participate in the DTC system, and to take other actions, may be limited because you will not possess a physical certificate that represents your interest.

Euroclear and Clearstream

Like DTC, Euroclear and Clearstream hold securities for their participants and facilitate the clearance and settlement of securities transactions between their participants through electronic book-entry changes in their accounts. Euroclear and Clearstream provide various services to their participants, including the safekeeping, administration, clearance and settlement, and lending and borrowing of internationally traded securities. Euroclear and Clearstream participants are financial institutions such as underwriters, securities brokers and dealers, banks, trust companies and other organizations. Other banks, brokers, dealers and trust companies have indirect access to Euroclear or Clearstream by clearing through or maintaining a custodial relationship with Euroclear or Clearstream participants.

Ownership of the Global Bonds through DTC, Euroclear and Clearstream

Brazil will issue the global bonds in the form of one or more fully registered book-entry securities, registered in the name of Cede & Co., a nominee of DTC. Financial institutions, acting as direct and indirect

 

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participants in DTC, will represent your beneficial interests in the book-entry securities. These financial institutions will record the ownership and transfer of your beneficial interests through book-entry accounts. You may hold your beneficial interests in the book-entry securities through Euroclear or Clearstream, if you are a participant in such systems, or indirectly through organizations that are participants in such systems. Euroclear and Clearstream will hold their participants’ beneficial interests in the book-entry securities in their customers’ securities accounts with their depositaries. These depositaries of Euroclear and Clearstream in turn will hold such interests in their customers’ securities accounts with DTC.

Brazil and the trustee generally will treat the registered holder of the global bonds, initially Cede & Co., as the absolute owner of the global bonds for all purposes. Once Brazil and the trustee make payments to the registered holders, Brazil and the trustee will no longer be liable on the global bonds for the amounts so paid. Accordingly, if you own a beneficial interest in the book-entry securities, you must rely on the procedures of the institutions through which you hold your interests in the book-entry securities (including DTC, Euroclear, Clearstream, and their participants) to exercise any of the rights granted to the holder of the book-entry securities. Under existing industry practice, if you desire to take any action that Cede & Co., as the holder of such book-entry securities, is entitled to take, then Cede & Co. would authorize the DTC participant through which you own your beneficial interest to take such action, and that DTC participant would then either authorize you to take the action or act for you on your instructions.

DTC may grant proxies or authorize its participants (or persons holding beneficial interests in the global bonds through such participants) to exercise any rights of a holder or take any other actions that a holder is entitled to take under the indenture or the global bonds. Euroclear’s or Clearstream’s ability to take actions as a holder under the global bonds or the indenture will be limited by the ability of their respective depositaries to carry out such actions for them through DTC. Euroclear and Clearstream will take such actions only in accordance with their respective rules and procedures.

You may incur fees for the maintenance and operation of the book-entry accounts with the clearing systems in which your beneficial interests are held.

Transfers Within and Between DTC, Euroclear and Clearstream

Since the purchaser determines the place of delivery, it is important for you to establish at the time of the trade where both the purchaser’s and seller’s accounts are located to ensure that settlement can be on the desired value date. Although DTC, Euroclear and Clearstream have agreed to the following procedures in order to facilitate transfers of interests in the book-entry security among participants of DTC, Euroclear and Clearstream, they are under no obligation to perform or continue to perform these procedures, and these procedures may be discontinued at any time. Neither Brazil nor the trustee will have any responsibility for the performance by DTC, Euroclear or Clearstream or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations.

Trading Between DTC Purchasers and Sellers

DTC participants will transfer interests in the global bonds among themselves in the ordinary way according to DTC rules governing global securities issues.

Trading Between Euroclear and/or Clearstream Participants

Participants in Euroclear and Clearstream will transfer interests in the global bonds among themselves in the ordinary way according to the rules and operating procedures of Euroclear and Clearstream governing conventional Eurobonds.

Trading Between a DTC Seller and a Euroclear or Clearstream Purchaser

 

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When the global bonds are to be transferred from the account of a DTC participant to the account of a Euroclear or Clearstream participant, the purchaser must first send instructions to Euroclear or Clearstream through a participant at least one business day prior to the settlement date. Euroclear or Clearstream will then instruct its depositary to receive the global bonds and make payment for them. On the settlement date, the depositary will make payment to the DTC participant’s account and the global bonds will be credited to the depositary’s account. After settlement has been completed, DTC will credit the global bonds to Euroclear or Clearstream, Euroclear or Clearstream will credit the global bonds, in accordance with its usual procedures, to the participant’s account, and the participant will then credit the purchaser’s account. These securities credits will appear the next day (European time) after the settlement date. The cash debit from the account of Euroclear or Clearstream will be back-valued to the value date (which will be the preceding day if settlement occurs in New York). If settlement is not completed on the intended value date (i.e., the trade fails), the cash debit will instead be valued at the actual settlement date.

Participants in Euroclear and Clearstream will need to make funds available to Euroclear or Clearstream in order to pay for the global bonds by wire transfer on the value date. The most direct way of doing this is to pre-position funds (i.e., have funds in place at Euroclear or Clearstream before the value date), either from cash on hand or existing lines of credit. Under this approach, however, participants may take on credit exposure to Euroclear and Clearstream until the global bonds are credited to their accounts one day later.

As an alternative, if Euroclear or Clearstream has extended a line of credit to a participant, the participant may decide not to pre-position funds, but to allow Euroclear or Clearstream to draw on the line of credit to finance settlement for the global bonds. Under this procedure, Euroclear or Clearstream would charge the participant overdraft charges for one day, assuming that the overdraft would be cleared when the global bonds were credited to the participant’s account. However, interest on the global bonds would accrue from the value date. Therefore, in many cases the interest income on global bonds which the participant earns during that one-day period will substantially reduce or offset the amount of the participant’s overdraft charges. Of course, this result will depend on the cost of funds (i.e., the interest rate that Euroclear or Clearstream charges) to each participant.

Since the settlement will occur during New York business hours, a DTC participant selling an interest in the global bonds can use its usual procedures for transferring global bonds to the depositaries of Euroclear or Clearstream for the benefit of Euroclear or Clearstream participants. The DTC seller will receive the sale proceeds on the settlement date. Thus, to the DTC seller, a cross-market sale will settle no differently than a trade between two DTC participants.

Trading Between a Euroclear or Clearstream Seller and DTC Purchaser

Due to time zone differences in their favor, Euroclear and Clearstream participants can use their usual procedures to transfer global bonds through their depositaries to a DTC participant. The seller must first send instructions to Euroclear or Clearstream through a participant at least one business day prior to the settlement date. Euroclear or Clearstream will then instruct its depositary to credit the global bonds to the DTC participant’s account and receive payment. The payment will be credited in the account of the Euroclear or Clearstream participant on the following day, but the receipt of the cash proceeds will be back-valued to the value date (which will be the preceding day if settlement occurs in New York). If settlement is not completed on the intended value date (i.e., the trade fails), the receipt of the cash proceeds will instead be valued at the actual settlement date.

If the Euroclear or Clearstream participant selling the global bonds has a line of credit with Euroclear or Clearstream and elects to be in debit for the global bonds until it receives the sale proceeds in its account, then the back-valuation may substantially reduce or offset any overdraft charges that the participant incurs over that one-day period.

Finally, a day trader that uses Euroclear or Clearstream and that purchases global bonds from a DTC participant for credit to a Euroclear or Clearstream accountholder should note that these trades would

 

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automatically fail on the sale side unless affirmative action were taken. At least three techniques should be readily available to eliminate this potential problem:

 

•

borrowing through Euroclear or Clearstream for one day (until the purchase side of the day trade is reflected in its Euroclear or Clearstream account) in accordance with the clearing system’s customary procedures;

 

•

borrowing the global bonds in the United States from a DTC participant no later than one day prior to settlement which would give the global bonds sufficient time to be reflected in the borrower’s Euroclear or Clearstream account in order to settle the sale side of the trade; or

 

•

staggering the value dates for the buy and sell sides of the trade so that the value date for the purchase from the DTC participant is at least one day prior to the value date for the sale to the Euroclear or Clearstream accountholder.

 

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TAXATION

Brazilian Taxation

The following is a summary of certain Brazilian federal income taxation considerations that may be relevant to a prospective non-Brazilian investor in the global bonds. The summary is based on Brazilian laws, rules and regulations in effect on the date of this prospectus supplement, all of which are subject to change, possibly with retroactive effect. This summary is not intended to constitute a complete analysis of the Brazilian income tax consequences to non-residents of Brazil of the purchase, receipt, ownership or disposition of the global bonds. This summary does not describe any of the tax consequences that may be applicable to residents of Brazil.

Prospective purchasers of the global bonds should consult their own tax advisors to determine the tax consequences arising from the purchase, ownership and disposition of the global bonds.

Unless a non-Brazilian holder of a global bond has some connection with Brazil other than the mere holding of a global bond or the receipt of principal or interest in respect of a global bond, payments of interest and principal on a global bond to that non-Brazilian holder will be made free and clear of, and without deduction for or on account of, Brazilian taxes.

Capital gains resulting from any trades of global bonds effected between or in respect of accounts maintained by or on behalf of non-residents of Brazil will not be subject to Brazilian income tax or other Brazilian taxes if these non-residents have no connection with Brazil other than as holders of an interest in the global bonds.

Payments of interest and principal on the global bonds to, and any gain realized upon the disposition of global bonds by, non-Brazilian holders of global bonds will not be subject to Brazilian estate tax.

United States Federal Income Taxation

The following discussion supplements the disclosure provided under the heading “Taxation—United States Federal Taxation” in the accompanying prospectus. This discussion describes the material U.S. federal income tax consequences of your purchase, ownership and disposition of a global bond acquired at the issue price pursuant to this offering. The discussion is based on the provisions of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), and the regulations promulgated thereunder by the U.S. Department of the Treasury (the “Treasury Regulations”), rulings and judicial decisions interpreting the Code as of the date that this prospectus supplement was issued. These authorities may be repealed, revoked or modified, possibly with retroactive effect, so the discussion below might not be reliable in the future. This discussion does not cover any U.S. state, U.S. local or non-U.S. tax issues, nor does it cover issues under the U.S. federal estate or gift tax laws.

Brazil has not sought any ruling from the U.S. Internal Revenue Service (the “IRS”) with respect to the statements made and the conclusions reached in this discussion, and there can be no assurance that the IRS will agree with all of such statements and conclusions. A different treatment from that described below could adversely affect the amount, timing, and character of income, gain or loss in respect of an investment in the global bonds.

This discussion deals only with holders that hold a global bond as a capital asset for U.S. federal income tax purposes (generally, property held for investment). This discussion does not purport to deal with all aspects of U.S. federal income taxation that may be relevant to a particular holder in light of the holder’s circumstances.

In particular, this discussion assumes that you are not subject to any special U.S. federal income tax rules, including, among others, the special tax rules applicable to:

 

•

persons subject to special tax accounting rules under Section 451(b) of the Code;

 

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•

dealers in securities or currencies;

 

•

securities traders using a mark-to-market accounting method;

 

•

banks or life insurance companies;

 

•

regulated investment companies;

 

•

real estate investment trusts;

 

•

persons subject to the alternative minimum tax;

 

•

persons that purchase or sell global bonds as part of a wash sale for U.S. federal income tax purposes;

 

•

persons that purchase or sell global bonds as part of a hedging transaction or as a position in a straddle or conversion transaction;

 

•

partnerships or other entities treated as partnerships for U.S. federal income tax purposes, or persons holding the global bonds through partnerships or other pass-through entities;

 

•

U.S. Holders (as defined below) that do not use the U.S. dollar as their functional currency; or

 

•

tax-exempt organizations.

If any of these assumptions are not correct in your case, the purchase, ownership or disposition of a global bond may have U.S. federal income tax consequences for you that differ from, or are not covered in, this discussion.

If a partnership (including any entity treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of a global bond, the tax treatment of a partner in that partnership generally will depend on the status of the partner and the activities of the partnership. Holders of global bonds that are partnerships and partners in those partnerships should consult their own tax advisor regarding the U.S. federal income tax consequences of purchase, ownership and disposition of the global bonds.

In certain circumstances (see “Description of the Global Bonds—Optional Redemption”), we may be obligated to pay a premium to optionally redeem the global bonds. These potential payments may implicate the provisions of the Treasury Regulations relating to “contingent payment debt instruments.” If the global bonds have an issue price that does not exceed the stated principal amount of the global bonds, then the foregoing potential obligation to pay a premium generally may be ignored under these regulations. Furthermore, under these regulations, a contingency should not cause a debt instrument to be treated as a contingent payment debt instrument if, as of the issue date, such contingency is considered “remote” or “incidental” or, in certain circumstances, it is significantly more likely than not that the contingency will not occur. We intend to take the position that the foregoing potential obligation to pay a premium should not cause the global bonds to be treated as contingent payment debt instruments for U.S. federal income tax purposes. Our position is binding on a holder unless such holder discloses its contrary position in the manner required by the applicable Treasury Regulations. It is possible that the IRS may take a different position, in which case, if such position is sustained, the timing and amount of income included and the character of the income recognized with respect to the global bonds may be materially and adversely different from the consequences discussed herein. The remainder of this discussion assumes that the global bonds will not be treated as contingent payment debt instruments. You should consult your own tax advisors regarding the possible application of the contingent payment debt instrument rules to the global bonds.

Brazil expects, and the remainder of this summary assumes, that the global bonds will be issued with less than a de minimis amount of “original issue discount” for U.S. federal income tax purposes.

You should consult your own tax advisor concerning the U.S. federal, U.S. state, U.S. local, non-U.S. and other tax consequences to you of the purchase, ownership or disposition of a global bond.

 

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Deemed Taxable Exchange

A change made to the terms of the global bonds pursuant to the “collective action clauses” may give rise to a deemed taxable exchange of the global bonds for U.S. federal income tax purposes upon which gain or loss is realized if the modified global bond differs materially either in kind or extent from the original global bond (a “Significant Modification”). Such gain or loss would generally be measured by the difference between the fair market value of the global bond after the Significant Modification and the holder’s tax basis in such global bond before the Significant Modification. A modification of a global bond that is not a Significant Modification does not create a deemed exchange for U.S. federal income tax purposes. Under applicable Treasury Regulations, the modification of a global bond is a Significant Modification if, based on all of the facts and circumstances and taking into account all modifications of the global bond collectively (other than modifications that are subject to special rules), the legal rights or obligations that are altered and the degree to which they are altered is “economically significant.” The applicable Treasury Regulations also provide specific rules to determine whether certain modifications, such as a change in the timing of payments, are significant. See the discussion under “Description of the Securities—Meetings and Amendments—Collective Action Clause” in the accompanying prospectus for more information about potential amendments of certain key terms of the global bonds.

U.S. Holders

This section applies to you if you are a “U.S. Holder,” meaning that you are the beneficial owner of a global bond and you are:

 

•

an individual who is a citizen or resident of the United States for U.S. federal income tax purposes;

 

•

a corporation (or other entity classified as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or any state thereof or the District of Columbia;

 

•

an estate whose income is subject to U.S. federal income taxation regardless of its source; or

 

•

a trust (A) if a court within the United States is able to exercise primary supervision over your administration and one or more “United States persons” as defined in the Code (each a “U.S. Person”) have authority to control all your substantial decisions, or (B) that was in existence on August 20, 1996 and has made a valid election under the Treasury Regulations to be treated as a U.S. trust.

If you are not a U.S. Holder, this section does not apply to you and you should refer to “––Non-U.S. Holders” below.

Payments of Interest. Payments or accruals of stated interest on a global bond generally will be taxable to you as ordinary income. If you generally report your taxable income using the accrual method of accounting, you must include payments of interest in your income as they accrue. If you generally report your taxable income using the cash method of accounting, you must include payments of interest in your income when you actually or constructively receive them.

You must include any tax withheld from the interest payment as ordinary income even though you do not in fact receive it. You may be entitled to deduct or credit this tax, subject to applicable limits. You will also be required to include in income as interest any additional amounts paid with respect to withholding tax on the global bonds, including withholding tax on payments of such additional amounts. For purposes of the foreign tax credit provisions of the Code, interest (including any additional amounts) on a global bond generally will constitute foreign source income and will be categorized as passive or another category of income depending on your circumstances.

Disposition of Global Bonds. If you sell or otherwise dispose of a global bond, you generally will recognize a gain or loss equal to the difference between your “amount realized” and your “adjusted tax basis” in the global

 

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bond. Your “amount realized” generally will be the value of what you receive for selling or otherwise disposing of the global bond, other than amounts that represent interest that is due to you but that has not yet been paid (which, generally will be taxed to you as ordinary income to the extent not previously included in income). Your “adjusted tax basis” in the global bond generally will equal the amount that you paid for the global bond.

Gain or loss from the sale or other disposition of a global bond generally will be capital gain or loss, and will be long-term capital gain or loss if at the time you sell or dispose of the global bond, you have held the global bond for more than one year, or will be short-term capital gain or loss if you have held the global bond for one year or less. Net capital gains of non-corporate taxpayers may be taxed at lower rates than items of ordinary income. Your ability to offset capital losses against ordinary income is limited. Any capital gains or losses that arise when you sell or dispose of a global bond generally will be treated as U.S. source income, or loss allocable to U.S. source income, for purposes of the foreign tax credit provisions of the Code.

Medicare Tax. A U.S. Holder that is an individual or estate, or a trust that does not fall into a special class of trusts that is exempt from such tax, will be subject to a 3.8% Medicare tax on the lesser of (i) the U.S. Holder’s “net investment income” (or, in the case of an estate or trust, the “undistributed net investment income”) for the relevant taxable year and (ii) the excess of the U.S. Holder’s modified adjusted gross income for the taxable year over a certain threshold (which in the case of individuals will be between $125,000 and $250,000, depending on the individual’s circumstances). A U.S. Holder’s net investment income generally will include its interest income and its net gains from the disposition of the global bonds, unless such interest income or net gains are derived in the ordinary course of the conduct of a trade or business (other than a trade or business that consists of certain passive or trading activities). If you are an individual, estate or trust, you are urged to consult your own tax advisor regarding the applicability of the Medicare tax to your income and gains in respect of your investment in the global bonds.

Information with Respect to Foreign Financial Assets. Owners of “specified foreign financial assets” with an aggregate value in excess of $50,000 on the last day of the taxable year, or $75,000 at any time during the taxable year may be required to file information reports with respect to such assets with their U.S. federal income tax returns. Depending on your circumstances, higher threshold amounts may apply. “Specified foreign financial assets” include any financial accounts maintained by non-U.S. financial institutions, as well as any of the following, but only if they are held for investment and not held in accounts maintained by financial institutions: (i) stocks and securities issued by non-U.S. Persons, (ii) financial instruments and contracts that have non-U.S. issuers or counterparties, and (iii) interests in non-U.S. entities. The global bonds may be treated as specified foreign financial assets and you may be subject to this information reporting regime. Failure to file information reports may subject you to penalties. You should consult your own tax advisor regarding your obligation to file information reports with respect to the global bonds.

Non-U.S. Holders

This section applies to you if you are a “Non-U.S. Holder,” meaning that you are a beneficial owner of a global bond and are not a partnership for U.S. federal income tax purposes and not a “U.S. Holder” as defined above.

Payments of Interest. Subject to the discussion of backup withholding below, you generally will not be subject to U.S. federal income tax, including withholding tax, on interest that you receive on a global bond unless you are engaged in a trade or business in the United States and the interest on the global bond is treated for U.S. federal income tax purposes as “effectively connected” to that trade or business (and in addition, if an income tax treaty applies, the interest is attributable to a permanent establishment or fixed place of business maintained by you within the United States). If you are engaged in a U.S. trade or business and the interest income is deemed to be effectively connected to that trade or business, you generally will be subject to U.S. federal income tax on that interest in the same manner as if you were a U.S. Holder (unless the interest is excluded under an applicable tax treaty). In addition, if you are a corporation for U.S. federal income tax purposes, your interest income subject to

 

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tax in that manner may increase your liability under the U.S. branch profits tax currently imposed at a 30% rate (or a lower rate under an applicable tax treaty).

Disposition of Global bonds. Subject to the backup withholding discussion below, you generally will not be subject to U.S. federal income tax or withholding tax for any capital gain that you realize when you sell or otherwise dispose of a global bond unless:

 

•

that gain is effectively connected for U.S. federal income tax purposes to any U.S. trade or business you are engaged in (and in addition, if an income tax treaty applies, the gain is attributable to a permanent establishment or fixed base in the United States); or

 

•

if you are an individual, you are present in the United States for 183 days or more in the taxable year in which you sell or otherwise dispose of the global bond and either (i) you have a tax home (as defined in the Code) in the United States during the taxable year in which you sell or otherwise dispose of the global bond, or (ii) the gain is attributable to any office or other fixed place of business that you maintain in the United States.

If you are described under (1) above, you generally will be subject to U.S. federal income tax on such gain in the same manner as a U.S. Holder and, if you are a corporation for U.S. federal income tax purposes, you may also be subject to the U.S. branch profits tax as described above. If you are described under (2) above, you generally will be subject to a 30% U.S. federal tax on the gain derived from the sale or other taxable disposition of a global bond, which may be offset by certain U.S. source capital losses (notwithstanding the fact that you are not considered a U.S. resident for U.S. federal income tax purposes). Any amount attributable to accrued but unpaid interest on a global bond generally will be treated in the same manner as payments of interest made to you, as described above under “—Payments of Interest.”

Backup Withholding and Information Reporting

If you are a U.S. Holder, and unless you prove that you are exempt, information reporting requirements will apply to payments of principal and interest to you if such payments are made within the United States or by or through a custodian or nominee that is a “U.S. Controlled Person,” as defined below. Backup withholding will apply to such payments of principal and interest if (i) you fail to provide an accurate taxpayer identification number; (ii) in the case of interest payments, you fail to certify that you are not subject to backup withholding; (iii) you are notified by the IRS that you have failed to report all interest and dividend income required to be shown on your U.S. federal income tax returns; or (iv) you fail to demonstrate your eligibility for an exemption.

If you are a Non-U.S. Holder, you generally are exempt from these withholding and reporting requirements, but you may be required to comply with certification and identification procedures in order to prove your exemption. If you hold a global bond through a non-U.S. partnership, these certification procedures would generally be applied to you as a partner. If you are paid the proceeds of a sale or redemption of a global bond effected at the U.S. office of a broker, you generally will be subject to the information reporting and backup withholding rules. In addition, the information reporting rules will apply to payments of proceeds of a sale or redemption effected at a non-U.S. office of a broker that is a “U.S. Controlled Person,” as defined below, unless the broker has documentary evidence that the holder or beneficial owner is not a U.S. Holder or the holder or beneficial owner otherwise establishes an exemption. A U.S. Controlled Person includes:

 

•

a U.S. Person;

 

•

a controlled foreign corporation for U.S. federal income tax purposes;

 

•

a non-U.S. Person 50% or more of whose gross income is effectively connected with a U.S. trade or business for tax purposes for a specified three-year period; or

 

•

a non-U.S. partnership in which U.S. Persons hold more than 50% of the income or capital interests or which is engaged in a U.S. trade or business.

 

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Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from a payment to you generally will be allowed as a refund or a credit against your U.S. federal income tax liability as long as you provide the required information to the IRS in a timely manner.

 

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UNDERWRITING

Brazil and the underwriters for the offering named below have entered into a terms agreement dated April 5, 2023 with respect to the global bonds. Subject to certain conditions, each underwriter has severally agreed to purchase the principal amount of the global bonds indicated in the following table:

 

Underwriter		Principal Amount of Global Bonds
BNP Paribas Securities Corp.		U.S.$	750,000,000
BofA Securities, Inc.		U.S.$	750,000,000
Morgan Stanley & Co. LLC		U.S.$	750,000,000
Total		U.S.$	2,250,000,000

Global bonds sold by the underwriters to the public will initially be offered at the respective public offering price set forth on the cover of this prospectus supplement plus accrued interest, if any, from April 13, 2023, the date Brazil expects to deliver the global bonds offered by this prospectus supplement, and any additional interest to the date of delivery, if later than April 13, 2023. If all global bonds are not sold at such public offering price, the underwriters may change the offering price and the other selling terms. The underwriters may offer and sell the global bonds through certain of their affiliates.

The underwriters propose to offer the global bonds initially at the public offering price on the cover page of this prospectus supplement and to securities dealers at that price less a selling concession of 0.100% of the principal amount of the global bonds. The underwriters and any such securities dealers may allow a discount of 0.050% of the principal amount of the global bonds on sales to other broker/dealers. After the initial public offering of the global bonds, the underwriters may change the public offering price and concession and discount to broker/ dealers. The offering of the global bonds by the underwriters is subject to receipt and acceptance and subject to the underwriter’s right to reject any order in whole or in part.

It is expected that delivery of the global bonds will be made against payment therefor on or about April 13, 2023. Under SEC Rule 15c6-1 under the Securities Exchange Act of 1934, as amended, trades in the secondary market generally are required to settle in two business days, unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade global bonds prior to two business days before delivery will be required, by virtue of the fact that the global bonds initially will settle on April 13, 2023, to specify an alternate settlement cycle at the time of any such trade to prevent a failed settlement and should consult their own advisor.

Brazil has been advised by the underwriters that the underwriters intend to make a market in the global bonds but are not obligated to do so and may discontinue market making at any time without notice. No assurance can be given as to the liquidity of the trading market for the global bonds.

The global bonds are offered for sale in those jurisdictions where it is legal to make such offers. Only offers and sales of the global bonds in the United States, as part of the initial distribution thereof or in connection with resales thereof under circumstances where this prospectus supplement and the accompanying prospectus must be delivered, are made pursuant to the registration statement, of which the prospectus, as supplemented by this prospectus supplement, forms a part.

In connection with the offering, the underwriters may purchase and sell the global bonds in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater aggregate principal amount of global bonds than they are required to purchase in the offering. Stabilizing transactions consist of certain bids or purchases made for the purpose of preventing or retarding a decline in the market price of the global bonds while the offering is in progress. These activities by the underwriters may stabilize, maintain or otherwise affect the

 

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market price of the global bonds. As a result, the price of the global bonds may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued by the underwriters at any time. These transactions may be effected on the Luxembourg Stock Exchange, in the over-the-counter market or otherwise.

Brazil estimates that its share of the total expenses of this offering, excluding the underwriting discounts, will be approximately U.S.$450,000.

Purchasers of the global bonds may be required to pay stamp taxes and other charges in accordance with the laws and practices of the country of purchase in addition to the public offering price set forth on the cover of this prospectus supplement.

The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities.

The underwriters and certain of their affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with us or our affiliates. Affiliates of certain of the underwriters provide advisory services to affiliates of the issuer from time to time. They have received, or may in the future receive, customary fees and commissions for these transactions.

In the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve securities and/or instruments of the issuer. The underwriters and their respective affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

If any of the underwriters or their affiliates has a lending relationship with us, certain of those underwriters or their affiliates routinely hedge, and certain other of those underwriters may hedge their credit exposure to us consistent with their customary risk management policies. Typically, the underwriters and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in our securities, including potentially the notes offered hereby. Any such credit default swaps or short positions could adversely affect future trading prices of the notes offered hereby.

The underwriters have specifically agreed to act as follows in each of the following places:

Austria:

The information in the offer materials does not constitute a public offering (öffentliches Angebot) to investors in Austria and must not be used in conjunction with a public offering pursuant to Austrian Capital Market Act (Kapitalmarktgesetz) in Austria or, if considered a public offering (öffentliches Angebot), is exclusively made on the basis of exemptions from the obligation to publish an approved prospectus in line with the Austrian Capital Market Act (Kapitalmarktgesetz). No prospectus pursuant to the Austrian Capital Market Act (Kapitalmarktgesetz) has been or will be approved (gebilligt) by or notified (notifiziert) to the Austrian Financial Market Authority (Finanzmarktaufsicht) and no such prospectus has been or will be published in Austria in any way which would constitute a public offering under Austrian law (whether presently or in the future), nor has been or will such prospectus be deposited with the filing office (Meldestelle) of Oesterreichische Kontrollbank AG.

The information in the offer materials (e.g., invitation supplement, prospectus supplement and prospectus) is being made available in Austria for the sole purpose of providing information about the securities described

 

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herein solely to individually qualified investors in Austria. The information contained in the Offer materials is being made available on the condition that it is solely for the use of the recipient as a potential and individually qualified investor and may not be passed on to any other person or reproduced in whole or in part.

Consequently, the securities are not authorized for public offering under the Austrian Capital Markets Act (Kapitalmarktgesetz) and no public offers or public sales or invitation to make such an offer may be made. No advertisements may be published and no marketing materials may be made available or distributed in Austria in respect of the securities. A public offering of the securities in Austria without the prior publication of a prospectus in accordance with the Austrian Capital Market Act would constitute a criminal offense under Austrian law.

Belgium:

In Belgium, this Invitation is not, directly or indirectly, being made to, or for the account of, any person other than to qualified investors (gekwalificeerde beleggers/investisseurs qualifiés) within the meaning of Article 2, e) of Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC. (Règlement (UE) 2017/1129 du 14 juin 2017 du Parlement européen et du Conseil concernant le prospectus à publier en cas d’offre au public de valeurs mobilières ou en vue de l’admission de valeurs mobilières à la négociation sur un marché réglementé, et abrogeant la directive 2003/71/CE / Verordening (EU) 2017/1129 van het Europees Parlement en de Raad van 14 juni 2017 betreffende het prospectus dat moet worden gepubliceerd wanneer effecten aan het publiek worden aangeboden of tot de handel op een gereglementeerde markt worden toegelaten en tot intrekking van Richtlijn 2003/71/EG) (“The Regulation”) , as amended or replaced from time to time, and that do not qualify as consumers (consumenten/consommateurs) within the meaning of Article I.1, 2° of the Belgian Code of Economic Law of February 28, 2013 (Qualified Belgian Investors). As a result, and further to Article 1, 4, a of The Regulation this Invitation does not constitute a public offer pursuant to Article 3, 1 of The Regulation, as amended or replaced from time to time. Consequently, the Invitation has not been and will not be notified to, and the offer memorandum and any other offering material relating to the offer has not been, and will not be, submitted to nor approved by the Belgian Financial Services and Markets Authority (Autoriteit voor Financiële Diensten en Markten/Autorité des Services et Marchés Financiers) pursuant to the Belgian laws and regulations applicable to the public offering of securities. The Invitation as well as any other materials relating to the Invitation may not be advertised, and this memorandum or any other information circular, brochure or similar document may not be distributed, directly or indirectly, to any person in Belgium other than Qualified Belgian Investors, acting on their own account, and may not be used in connection with any offering in Belgium except as may otherwise be permitted by law.

Brazil:

The global bonds may not be offered or sold to the public in Brazil. Accordingly, this prospectus supplement has not been nor will it be registered with the Brazilian Securities Commission (Comissão de Valores Mobiliários) nor has it been submitted to the foregoing agency for approval. Documents relating to the offer, as well as the information contained therein, may not be supplied to the public in Brazil, as the offering of the global bonds pursuant to this prospectus supplement is not a public offering of securities in Brazil, nor used in connection with any offer for subscription or sale of the global bonds to the public in Brazil.

Canada:

The global bonds may be sold in Canada only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the global bonds must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.

 

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Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus supplement (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.

Pursuant to section 3A.4 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.

Cayman Islands:

No invitation whether directly or indirectly may be made to the public in the Cayman Islands to subscribe for the global bonds.

Chile:

PURSUANT TO THE SECURITIES MARKET LAW OF CHILE AND NORMA DE CARÁCTER GENERAL (RULE) NO. 336, DATED JUNE 27, 2012, ISSUED BY THE FINANCIAL MARKET COMMISSION OF CHILE (COMISIÓN PARA EL MERCADO FINANCIERO OR “CMF”) (“RULE 336”), THE GLOBAL BONDS MAY BE PRIVATELY OFFERED TO CERTAIN QUALIFIED INVESTORS IDENTIFIED AS SUCH BY RULE 336 (WHICH IN TURN ARE FURTHER DESCRIBED IN RULE NO. 216, DATED JUNE 12, 2008, AND RULE 410 DATED JULY 27, 2016, BOTH OF THE CMF).

RULE 336 REQUIRES THE FOLLOWING INFORMATION TO BE MADE TO PROSPECTIVE INVESTORS IN CHILE:

 

1.

DATE OF COMMENCEMENT OF THE OFFER: APRIL 5, 2023. THE OFFER OF THE GLOBAL BONDS IS SUBJECT TO RULE 336;

 

2.

THE SUBJECT MATTER OF THIS OFFER ARE SECURITIES NOT REGISTERED IN THE SECURITIES REGISTRY (REGISTRO DE VALORES) OF THE CMF, NOR IN THE FOREIGN SECURITIES REGISTRY (REGISTRO DE VALORES EXTRANJEROS) OF THE CMF; HENCE, THE GLOBAL BONDS ARE NOT SUBJECT TO THE OVERSIGHT OF THE CMF;

 

3.

SINCE THE GLOBAL BONDS ARE NOT REGISTERED IN CHILE THERE IS NO OBLIGATION BY THE ISSUER TO DELIVER PUBLIC INFORMATION ABOUT THE GLOBAL BONDS IN CHILE; AND

 

4.

THE GLOBAL BONDS SHALL NOT BE SUBJECT TO PUBLIC OFFERING IN CHILE UNLESS REGISTERED IN THE RELEVANT SECURITIES REGISTRY OF THE CMF.

Prohibition of Sales to EEA Retail Investors:

Each underwriter has represented and agreed, severally and not jointly, that it has not offered, sold or otherwise made available and will not offer, sell or otherwise make available any global bonds which are the subject of the offering contemplated by this prospectus supplement in relation thereto to any retail investor in the EEA. For the purposes of this provision:

 

(a)

the expression “retail investor” means a person who is one (or more) of the following:

 

(i)

a retail client as defined in point (11) of Article 4(1) of MiFID II; or

 

(ii)

a customer within the meaning of the Insurance Distribution Directive, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; and

 

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(b)

the expression “offer” includes the communication in any form and by any means of sufficient information on the terms of the offer and the global bonds to be offered so as to enable an investor to decide to purchase or subscribe for the global bonds.

Prohibition of Sales to UK Retail Investors:

Each underwriter has represented and agreed, severally and not jointly, that it has not offered, sold or otherwise made available and will not offer, sell or otherwise make available any global bonds which are the subject of the offering contemplated by this prospectus supplement in relation thereto to any retail investor in the UK. For the purposes of this provision:

 

(a)

The expression a “retail investor” means a person who is one (or more) of the following:

 

(i)

a retail client, as defined in point (8) of Article 2 of Regulation (EU) No 2017/565 as it forms part of domestic law by virtue of the EUWA; or

 

(ii)

a customer within the meaning of the provisions of the FSMA and any rules or regulations made under the FSMA to implement Directive (EU) 2016/97, where that customer would not qualify as a professional client, as defined in point (8) of Article 2(1) of Regulation (EU) No 600/2014 as it forms part of domestic law by virtue of the EUWA; and

 

(b)

the expression an “offer” includes the communication in any form and by any means of sufficient information on the terms of the offer and the global bonds to be offered so as to enable an investor to decide to purchase or subscribe for the global bonds.

United Kingdom:

This document is only being distributed to and is only directed at (i) persons who are outside the United Kingdom, or (ii) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the “Order”), or (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”). The global bonds will only be available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire the global bonds will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.

Each underwriter has, severally and not jointly, represented, warranted and agreed that:

 

•

it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of the global bonds in circumstances in which Section 21(1) of the FSMA does not apply to the issuer; and

 

•

it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the global bonds in, from or otherwise involving the United Kingdom.

France:

The global bonds may not be offered or sold or caused to be offered or sold, directly or indirectly, to the public in France and neither this prospectus supplement and the related prospectus, which have not been submitted to the clearance procedure of the French Autorité des marchés financiers (“AMF”), nor to a competent authority of another Member State of the European Economic Area that would have notified its approval to the

 

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AMF Regulation (EU) 2017/1129 of the European Parliament and of the Council of June 14, 2017, and repealing Directive 2003/71/EC (the “Prospectus Regulation”), nor any other offering material or information contained therein relating to the global bonds may be released, issued or distributed or caused to be released, issued or distributed, directly or indirectly, to the public in France, or used in connection with any offer for subscription, exchange or sale of the global bonds to the public in France.

Any such offers, sales and distributions may be made in France only to (i) qualified investors (investisseurs qualifiés) acting for their own account, and/or to (ii) investment services providers authorized to engage in portfolio management services on behalf of third parties and/or to (iii) limited group of investors (cercle restreint d’investisseurs) acting for their own account, all as defined in, and in accordance with, Articles L.411-2, II, D.411-1 and D.411-4, D.744-l, D.754-l and D.764-1 of the French Code monétaire et financier.

In the event that the global bonds purchased or subscribed by investors listed above are offered or resold, directly or indirectly, to the public in France, the conditions relating to public offers set forth in Articles L. 411-1, L. 411-2, L. 412-1 and L. 621-8 to L. 621-8-3 of the French Code monétaire et financier must be complied with. Investors in France and persons into whose possession offering materials come must inform themselves about, and observe, any such restrictions.

Germany:

This prospectus does not constitute a prospectus compliant with the Prospectus Regulation and does therefore not allow any public offering in the Federal Republic of Germany (“Germany”). No action has been or will be taken in Germany that would permit a public offering of the Bonds, or distribution of a prospectus or any other offering material relating to the Bonds. In particular, no prospectus (Prospekt) within the meaning of the Prospectus Regulation and the German Securities Trading Act (Wertpapierprospektgesetz) or any other applicable laws in Germany has been or will be published in Germany, nor has this prospectus been filed with or approved by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht) for publication in Germany.

This prospectus is strictly for use of the person who has received it. It may not be forwarded to other persons or published in Germany.

Hong Kong:

The global bonds may not be offered or sold in Hong Kong, by means of any document other than (i) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong (the “SFO”) and any rules made under the SFO; or (ii) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies Ordinance (Winding Up and Miscellaneous Provisions Ordinance (Cap. 32) of Hong Kong (the “C(WUMP)O”) or which do not constitute an offer to the public within the meaning of C(WUMP)O, and no advertisement, invitation or document relating to the global bonds may be issued or may be in the possession of any person for the purpose of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the global bonds, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to global bonds which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the SFO and any rules made under the SFO.

The contents of this prospectus supplement and the corresponding prospectus have not been reviewed by any regulatory authority in Hong Kong. Each intermediary or purchaser of the global bonds is advised to exercise caution in relation to any offer of the global bonds and, if in any doubt about any of the contents of this prospectus supplement and the corresponding prospectus, should obtain independent professional advice.

 

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Italy:

The offering of the global bonds has not been registered with the Commissione Nazionale per le Società e la Borsa (“CONSOB”) pursuant to Italian securities legislation and, accordingly, no global bonds may be offered, sold or delivered, nor copies of this prospectus supplement and the accompanying prospectus or any other documents relating to the debt securities may be distributed in Italy except:

(a) to “qualified investors”, as referred to in Article 100 of Legislative Decree No. 58 of 24 February 1998, as amended (the “Decree No. 58”) and defined in Article 26, paragraph 1, letter d) of CONSOB Regulation No. 16190 of 29 October 2007, as amended (“Regulation No. 16190”) pursuant to Article 34-ter, paragraph 1, letter b) of CONSOB Regulation No. 11971 of 14 May 1999, as amended (“Regulation No. 11971”); or

(b) in any other circumstances where an express exemption from compliance with the offer restrictions applies, as provided under Decree No. 58 or Regulation No. 11971.

Any offer, sale or delivery of the global bonds or distribution of copies of this prospectus, any prospectus supplement or any other documents relating to the debt securities in Italy must be:

(a) made by investment firms, banks or financial intermediaries permitted to conduct such activities in Italy in accordance with Legislative Decree No. 385 of 1 September 1993, as amended (the “Banking Law”), Decree No. 58 and Regulation No. 16190 and any other applicable laws and regulations;

(b) in compliance with Article 129 of the Banking Law, and the implementing guidelines of the Bank of Italy, as amended; and

(c) in compliance with any other applicable notification requirement or limitation which may be imposed, from time to time, by CONSOB or the Bank of Italy or other competent authority.

Please note that, in accordance with Article 100-bis of Decree No. 58, where no exemption from the rules on public offerings applies, the subsequent distribution of the global bonds on the secondary market in Italy must be made in compliance with the public offer and the prospectus requirement rules provided under Decree No. 58 and Regulation No. 11971.

Japan:

The global bonds have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended, the “Financial Instruments and Exchange Act”) and each manager has represented and agreed that it has not offered or sold, and will not offer or sell any global bonds, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (as defined under Article 6, Paragraph 1, Item 5 of the Foreign Exchange and Foreign Trade Act of Japan (Act No. 228 of 1949, as amended)), or to others for re-offering or resale, directly or indirectly, in Japan or to, or for the benefit of, a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Act and any other applicable laws, regulations and ministerial guidelines of Japan.

Luxembourg:

The global bonds may not be offered to the public in Luxembourg, except in the following circumstances:

(a) in the period beginning on the date of publication of a prospectus in relation to those global bonds which have been approved by the Commission de surveillance du secteur financier (CSSF) in Luxembourg or, where appropriate, approved in another relevant European Union Member State and notified to ESMA and the CSSF, all in accordance with the Prospectus Regulation, and ending on the date which is 12 months after the date of such publication (hereafter a “Public offer”);

 

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(b) at any time to qualified investors, which, pursuant to the Prospectus Regulation, means persons or entities that are listed in points (1) to (4) of Section I of Annex II to Directive 2014/65/EU, and persons or entities who are, on request, treated as professional clients in accordance with Section II of that Annex, or recognised as eligible counterparties in accordance with Article 30 of Directive 2014/65/EU unless they have entered into an agreement to be treated as non-professional clients in accordance with the fourth paragraph of Section I of that Annex. For the purposes of applying the first sentence of this point, investment firms and credit institutions shall, upon request from the issuer, communicate the classification of their clients to the issuer subject to compliance with the relevant laws on data protection;

(c) an offer of securities addressed to fewer than 150 natural or legal persons per Member State, other than qualified investors; and/or,

(d) at any time in any other circumstances which do not require the publication by the issuer of a prospectus pursuant to Article 1 (4) of the Prospectus Regulation.

For the purposes of this provision, the expression an offer of global bonds to the public in relation to any global bonds in Luxembourg means the communication in any form and by any means of sufficient information on the terms of the offer and the global bonds to be offered so as to enable an investor to decide to purchase the global bonds, as defined in the Prospectus Regulation or any variation thereof or amendment thereto.

Peru:

The global bonds and the information contained in this prospectus supplement have not been and will not be registered with or approved by SMV, SBS or the Lima Stock Exchange. Accordingly, the global bonds cannot be offered or sold in Peru, except if such offering is a private offering under the securities laws and regulations of Peru. The Peruvian securities market law establishes that any offering may qualify as a private offering if it is directed exclusively to institutional investors.

Spain:

The global bonds may not be offered, sold or distributed in Spain except in circumstances which do not constitute a public offer of securities in Spain within the meaning of Article 35 of the restated text of the Securities Markets Act approved by Royal Legislative Decree 4/2015, dated 23 October (Real Decreto Legislativo 4/2015, de 23 de octubre, por el que se aprueba el texto refundido de la Ley del Mercado de Valores), Royal Decree 1310/2005 of 4 November (Real Decreto 1310/2005 de 4 de noviembre), and supplemental rules enacted thereunder.

Singapore:

This prospectus supplement and the accompanying prospectus have not been, and will not be, registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus supplement and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the global bonds may not be circulated or distributed, nor may the global bonds be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to any person in Singapore other than (i) to an institutional investor (as defined in Section 4A of the SFA) pursuant to Section 274 of the SFA, (ii) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA and (where applicable) Regulation 3 of the Securities and Futures (Classes of Investors) Regulations 2018 of Singapore or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the global bonds are subscribed or purchased in reliance on an exemption under Sections 274 or 275 of the SFA, the global bonds shall not be sold within the period of six months from the date of the initial acquisition of the global bonds, except to any of the following persons:

 

(i)

an institutional investor (as defined in Section 4A of the SFA);

 

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(ii)

a relevant person (as defined in Section 275(2) of the SFA); or

 

(iii)

any person pursuant to an offer referred to in Section 275(1A) of the SFA,

unless expressly specified otherwise in Section 276(7) of the SFA or Regulation 37A of the Securities and Futures (Offers of Investments) (Securities and Securities-based Derivatives Contracts) Regulations 2018 of Singapore. Where the global bonds are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

a. a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

b. a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,

securities or securities-based derivatives contracts (each as defined in Section 2(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the global bonds pursuant to an offer made under Section 275 of the SFA except:

1. to an institutional investor or to a relevant person as defined in Section 275(2) of the SFA, or (in the case of such corporation) where the transfer arises from an offer referred to in Section 276(3)(i)(B) of the SFA or (in the case of such trust) where the transfer arises from an offer referred to in Section 276(4)(i)(B) of the SFA;

2. where no consideration is or will be given for the transfer;

3. where the transfer is by operation of law;

4. pursuant to Section 276(7) of the SFA; or

5. as specified in Regulation 37A of the Securities and Futures (Offers of Investments) (Securities and Securities based Derivatives Contracts) Regulations 2018 of Singapore.

Any reference to the SFA is a reference to the Securities and Futures Act, Chapter 289 of Singapore, and a reference to any term as defined in the SFA or any provision in the SFA is a reference to that term as modified or amended from time to time including by such of its subsidiary legislation as may be applicable at the relevant time.

Switzerland:

The offer of the global bonds is made in Switzerland on the basis of a private placement, not as a public offering. The global bonds may not be publicly offered, directly or indirectly, in Switzerland within the meaning of the Swiss Financial Services Act (“FinSA”) and no application has or will be made to admit the global bonds to trading on any trading venue (exchange or multilateral trading facility) in Switzerland. Neither this prospectus supplement nor any other offering or marketing material relating to the global bonds constitutes a prospectus pursuant to the FinSA, and neither this prospectus supplement nor any other offering or marketing material relating to the global bonds may be publicly distributed or otherwise made publicly available in Switzerland.

 

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VALIDITY OF THE GLOBAL BONDS

The validity of the global bonds will be passed upon for Brazil by Anelize Lenzi Ruas de Almeida, the Procuradora-Geral da Fazenda Nacional (Attorney General of the National Treasury) or another duly authorized Attorney of the National Treasury, as to matters of Brazilian law, and by Arnold & Porter Kaye Scholer LLP, New York, New York, United States counsel to Brazil, as to matters of New York law. The validity of the global bonds will be passed upon for the underwriters by Sullivan & Cromwell LLP, New York, New York, United States counsel to the underwriters, as to matters of New York law, and Pinheiro Neto Advogados, São Paulo, SP, Brazil, Brazilian counsel to the underwriters, as to matters of Brazilian law.

Certain statements with respect to matters of Brazilian law in this prospectus supplement and the prospectus have been passed upon by the Attorney General of the National Treasury or another duly authorized Attorney of the National Treasury, and are made upon his authority.

OFFICIAL STATEMENTS AND DOCUMENTS

Information included in this prospectus supplement which is identified as being derived from a publication of, or supplied by, Brazil or one of its agencies or instrumentalities is included on the authority of that publication as a public official document of Brazil. All other information in this prospectus supplement is included as a public official statement made on the authority of Fernando Haddad, Minister of Finance.

 

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GENERAL INFORMATION

Due Authorization

Brazil has authorized the creation and issue of the global bonds pursuant to Senate Resolution No. 20 of the Federal Senate of Brazil dated November 16, 2004, enacted pursuant to Article 52 of the Constitution of the Federative Republic of Brazil.

Listing and Listing Agent

Application will be made to list the global bonds on the Luxembourg Stock Exchange for trading on the Euro MTF Market. The Luxembourg listing agent is The Bank of New York Mellon SA/NV, Luxembourg Branch, Vertigo Building-Polaris, 2-4 rue Eugène Ruppert, L-2453 Luxembourg, Luxembourg.

Litigation

Neither Brazil nor any governmental agency of Brazil is involved in any litigation or arbitration or administrative proceeding relating to claims or amounts which are material in the context of the issue of the global bonds and which would materially and adversely affect Brazil’s ability to meet its obligations under the global bonds and the indenture with respect to the global bonds. No such litigation or arbitration or administrative proceeding is pending, or, so far as Brazil is aware, threatened.

Documents Relating to the Global Bonds

Copies of the indenture and the form of global bond may be inspected during normal business hours on any weekday (Saturdays, Sundays and public holidays excepted) at the specified offices of the trustee and paying agents.

Where You Can Find More Information

Brazil has filed its 2021 Annual Report with the SEC. You may request copies of this annual report, including its various exhibits and amendments filed from time to time, by contacting the Brazilian Embassy, 3006 Massachusetts Avenue, N.W., Washington, DC 20008, Attn: Finance Section (telephone: +1 (202) 238-2745). Brazil’s SEC filings (except for certain exhibits) are also available to the public from the SEC’s website at http://www.sec.gov.

The 2021 Annual Report, each additional amendment on Form 18-K/A to that annual report and each subsequent annual report on Form 18-K that Brazil files with the SEC after the date of this prospectus supplement but before the end of the offering of the global bonds are considered part of and incorporated by reference in this prospectus supplement. You may obtain a copy of all such documents, free of charge, at the office of the listing agent in Luxembourg.

Information on Brazil

For so long as any global bonds are listed on the Luxembourg Stock Exchange, copies of the most recent monthly press releases of the Central Bank of Brazil in the English language relating to fiscal policy, the foreign sector and monetary policy, or if such monthly press releases cease to be published, comparable economic information of the Central Bank of Brazil, and any document incorporated by reference in this prospectus supplement may be obtained free of charge at the office of the listing agent for the global bonds and at the office of the trustee during usual business hours on any day (Saturdays, Sundays and public holidays excepted).

Clearing

The global bonds have been accepted for clearing and settlement through DTC, Euroclear and Clearstream (ISIN US105756CF53, CUSIP 105756 CF5).

 

 

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PROSPECTUS

FEDERATIVE REPUBLIC OF BRAZIL

U.S.$26,401,970,000

Debt Securities

Warrants

 

 

Brazil may from time to time offer and sell up to U.S.$26,401,970,000 (or its equivalent in other currencies) aggregate principal amount of its debt securities or warrants or other similar securities to purchase, sell or exchange debt securities.

The securities will be direct, general, unconditional, unsecured and unsubordinated External Indebtedness of Brazil. The securities will rank without any preference among themselves and equally with all other unsecured and unsubordinated External Indebtedness of Brazil and will be backed by the full faith and credit of Brazil. It is understood that this provision shall not be construed so as to require Brazil to make payments under the securities ratably with payments being made under any other External Indebtedness of Brazil.

The securities will contain “collective action clauses,” unless otherwise indicated in the applicable prospectus supplement. Under these provisions, which differ from the terms of Brazil’s external indebtedness issued prior to July 2, 2015, Brazil may amend the payment provisions of the securities and other reserved matters listed in the indenture with the consent of the holders of: (1) with respect to a single series of securities, more than 75% of the aggregate principal amount of the outstanding securities of such series; (2) with respect to two or more series of securities, if certain “uniformly applicable” requirements are met, more than 75% of the aggregate principal amount of the outstanding securities of all series affected by the proposed modification, taken in the aggregate; or (3) with respect to two or more series of securities, more than 66 ²/₃% of the aggregate principal amount of the outstanding securities of all series affected by the proposed modification, taken in the aggregate, and more than 50% of the aggregate principal amount of the outstanding securities of each series affected by the proposed modification, taken individually, whether or not certain “uniformly applicable” requirements are met. See “Debt Securities—Amendments and Waivers—Collective Action Clauses”.

Brazil may offer any combination of debt securities and/or warrants from time to time in one or more offerings. Brazil will provide specific terms of these securities in supplements to this prospectus. You should read this prospectus and any prospectus supplement carefully before you invest.

Brazil may sell the securities directly, through underwriters or through agents designated from time to time. The names of any underwriters or agents will be provided in the applicable prospectus supplement.

 

 

See “Risk Factors” beginning on page 2 to read about certain risks you should consider before investing in the debt securities.

You should read this prospectus and any supplements carefully. You should not assume that the information in this prospectus, any prospectus supplement or any document incorporated by reference in them is accurate as of any date other than the date on the front of those documents.

Neither the Securities and Exchange Commission nor any state securities commission or any other regulatory body has approved or disapproved of these securities or determined whether this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

March 30, 2022

TABLE OF CONTENTS

 

		Page
ABOUT THIS PROSPECTUS			1
FORWARD-LOOKING STATEMENTS			1
DATA DISSEMINATION			2
USE OF PROCEEDS			2
RISK FACTORS			2
DEBT SECURITIES			4
WARRANTS			13
GOVERNING LAW			14
ARBITRATION AND ENFORCEABILITY			14
TAXATION			15
PLAN OF DISTRIBUTION			23
OFFICIAL STATEMENTS			23
VALIDITY OF THE SECURITIES			24
AUTHORIZED REPRESENTATIVE			24
WHERE YOU CAN FIND MORE INFORMATION			24

 

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