CMN simplifies payment system in Mercosur local currencies

A mechanism that allows transactions in local currencies between Brazil, Argentina, Paraguay and Uruguay, the Local Currency Payment System (SML) was simplified and standardized. The National Monetary Council (CMN) approved, this Thursday (20), a resolution that makes the use of the system cheaper and expands the types of financial institutions able to use the tool.

The financial institutions that operate the SML have had their operating procedures simplified. Control mechanisms for credit operations and system operation were standardized. The CMN also authorized more financial institutions to operate in the SML, offering it as an additional product to customers of institutions authorized to operate in foreign exchange.

“The updates have the potential to promote competition, reduce the cost to the end user, improve security, reduce payment times, integrate the SML with innovations in the financial system and contribute to the BC’s supervisory efficiency,” the agency said in a note. .

Internal Debate

According to the BC, the measure resulted from a debate among the body’s technicians, without a request from the federal government. “Nothing arrived for my team,” said the deputy head of the BC’s Department of International Affairs, Marcelo Aragão. He stated that the new rules made it more attractive for financial institutions to offer the SML in transactions between Mercosur countries.

One of the main changes, explained Aragão, concerns the possibility that all institutions that operate with foreign exchange can make transactions within the SML. Until now, transfers had to go through a “settlement account”, which had a confusing concept, according to the BC technician.

Established by agreement between the Central Banks, the SML dispenses with the exchange contract and allows one of the parties, usually the exporter, to fix the price of the goods or services in the currency of their country. Both natural and legal persons can use the mechanism. This eliminates exposure to risks arising from changes in exchange rates and encourages economic integration among participating countries.

Since 2008, the SML in which the Brazilian Central Bank participates have moved around BRL 50 billion. The agreements are closed bilaterally, therefore the BC needs to establish an SML with each country that adheres to the system. The National Congress must ratify each bilateral agreement.

The simplification of commercial transactions between Brazil and Argentina was one of the objectives announced during the trip that President Luiz Inácio Lula da Silva made to the neighboring country, in January. However, according to Aragão, the Central Bank had been discussing changes to the SML since 2017.