1. University of California
Anderson Management School
Introduction to International Business
Marc Buchman
By Luiz Guilherme Osorio and
Antonio Henrique Cunha Santos
Los Angeles
2015

2. PROEX: Programa de Financiamento às Exportações (Exportation Financing Program)
Introduction
In the present essay we would like to explain what is PROEX (Programa de
Financiamento à Exportação - Export Financing Program), a Brazilian ruled program
designed to boost the country’s exportations.
We are going to identify why it is important; which kind of companies can
benefit from; which products and services can be financed by this program; how can a
firm apply for this financing and who is the institution responsible for its management.
The main purpose is to give an idea of how an export company can benefit from this
financing program and what are the intentions of Brazilian government to do so.
In order to answer those questions, we are going to talk about a little bit of the
historical, political and economic facts that lead the State to create this credit line. Later
on, we intend to describe what it is and how it works, and finally conclude on whether it
is or not beneficial for the country’s international commerce and export companies.
History
As we can see around the world’s History, international trade and commerce has
been considered one of the best strategies to grow domestic income. Since Adam Smith
published his most famous work “An Inquiry into the Nature and Causes of the Wealth
of Nations” (1776), governments stared to emphasize their capacity to deal beyond their
borders. In this book, Smith says that international trade benefits all nations involved
and boosts their income when dealing with one another.

3. Several other theories have been developed since Smith published his book but
all of them agree that international trade brings more advantages than disadvantages to
the countries involved on it. Although they might have different positions in which
ways it should be implemented, they have a common ground that considers commerce
between countries a good asset for their balance of payments.
In Brazil it was no different. During the years of 1960’s, the country created its
first financing program to support business owners when dealing in foreign markets.
The idea was to grow and diversify exportations but keep high importation rates to
protect the national industry. This was one of the most important principles followed by
the Theory of Import Substitutions put in practice by the government in that occasion.
In the 1980’s, due to the severe economic crises, the exports financing were
driven to a less important position in government actions in order to concentrate the
efforts to control the hyperinflation that was destroying the country’s currency. Only in
the 1990’s with the market opening and the abandon of the imports substitution policy,
the exports financing were able to come back on stage. The government created the
FINAMEX managed by the BNDES (Banco Nacional do Desenvolvimento Econômico
e Social) and the PROEX (Programa de Financiamento à Exportação) managed by
Banco do Brasil.
The years of 1990’s were the period of reorganization in International Trade in
Brazil. With new institutions, Ministries, departments, banks (both private and public),
think tanks and non-governmental organizations connected to the producers, the
exportations got much more dynamic and started to grow in a stable prospect.
In the 2000’s, the commodity boom in the world made exportations a huge
source of revenue to the government and companies. Those revenues boosted the

4. industrial production and investment in the internal market, while the surplus of
manufactured goods was being shipped to our neighbors in South America and African
countries.
What is PROEX?
Every economic activity offers risks to anyone who is involved on it.
International trade offers an even bigger risk, because the agents are dealing in different
countries and many times never seen each other before. This situation causes a lack of
trust which shall be mitigated in order to make international transactions possible.
Mechanisms of financing imports and exports were designed to try to minimize those
risks.
Following this objective, Brazilian government created basically two programs
of exporting finance aid: PROEX and BNDES-Exim. Although both have a huge
importance in lowing risks and funding exportations, we’ve chosen to talk about
PROEX, because it has a bigger focus on small and medium companies.
PROEX is a tool created by the Brazilian government to support and finance
exportation of goods and services produced by national companies. This program
focuses, as said before, on small and medium companies, in which gross annual sales
mustn’t be higher than R$ 600 million reais (around US$ 172 million dollars). And also
in national commercial banks that provide loans for exporters. The idea is to guarantee
the loans and exportations with National Treasury.
The legal dispositive that support PROEX is the law number 10.184/01 that
creates two divisions in the program: PROEX-Financiamento and PROEX-Equalização.
The first one (PROEX-Financiamento) is responsible for the post-shipping financing
and can be provided to the seller (supplier’s credit) or to the importer (buyer’s credit)

5. using Letters of Credit. The financing has a limit of 85% of the exporting value, but can
be wide to 100% for small and medium companies.
The second division (PROEX-Equalização) refers to commercial bank’s loans
and covers the difference in interest rates from money taken in the international
financial market. This is a way to minimize Foreign Exchange risks and provide interest
rates compatible and competitive in the international market. PROEX-Equalização is
supposed to hedge the commercial banks and make their interest rates similar to the
ones provided internationally.
The government agent responsible for those programs is Banco do Brasil who
pays the exporters the amount of the contract as soon as the business is done. This way
they (exporters) can offer a bigger deadline in order to give the importers a wider
possibility to honor their payment. Both, the Brazilian exporter and the foreign
importer, are able to benefit from this credit. The exported goods can also be negotiated
in any Incoterm.
The Credit Conditions are negotiated by the exporter with Banco do Brasil and
concerns guarantees, interest rates, the time to pay the loan and the percentage of the
transaction value that is going to be covered. The only requirement from BB is that
interest rates shall be paid each semester. There is no limit for the loans in terms of
values, and the government also guarantees 95% of the commercial risks and 100% of
political ones.
A big number of goods and services are the object of this financing system and
are listed on Portaria MDIC nº 587/02 from Ministério do Desenvolvimento, Indústria e
Comércio (Ministry of Development, Industry and Commerce). Almost all goods are
included (90% of all goods in the exporting list) except for commodities. Services like

6. construction, machinery repair, telemarketing, law services, oil and gas extraction, IT,
engineering, entertainment, advertisement, architecture, research and development,
design, among others, are also supported by this financing.
The loan term, the period of time someone has to pay the debt, goes from 2
months to 10 years and is defined by the total value of the goods being shipped. The
exporter has to be in a regular situation in all the fiscal institutions and has no debts with
the Federal Government. The payment can be in dollars or any other convertible
currency.
Conclusion
Different countries face different problems when dealing in the international
market. But some of these problems can be quite the same; they are usually red tape
bureaucracy, costs of transportation, costs of shipping, financing, among others. CNI
(Confederação Nacional das Indústrias) a private organization of the manufactures
pointed that financing is considered the fourth biggest barrier for exporting in Brazil.
One report from the World Bank also shows that in order to export more, Brazil
should improve competitiveness of its firms and invest in infrastructure to low the costs
of production. Although the report shows we have a huge amount of diverse products
commercialized in many different markets, some issues still have to be addressed to
improve the quality and quantity of exports.

7. Products and Markets (2008-10)
In the recent years, the commodity boom has concentrated the attention of
exports, and overshadowed machinery, electric and technological products. Exports as a
whole represent a small percentage of Brazil’s GDP (11. 2 % in 2010), as the country
focuses its economy in the internal market. However, with the cooling of the internal
market, government decided to pay more attention to international trade and facilitate it
as much as it could.
Export Technological Content

8. One of the first actions was to expand the amount of credit available in 1.5
billion dollars in 2015, especially in PROEX. More than half of exporting firms are
small or medium business, and this program is design to them. They represent only
10.7% of the total exportation value while big companies are responsible for 89%. This
difference explains why the focus went to small and medium companies, in order to
improve the revenues that they already have.
Exporting by size of firms (2004)
Other actions were the Concessions Program designed by the Federal
Government to attract private investor for infrastructure achievement. In this program,
ports, railways and airports were and are being expanded to wide their capacity for
cargo and people.
A research made by IPEA (Instituto de Pesquisas Econômicas Aplicadas) an
economic think tank, have shown that the systems of export financing are indeed
achieving their goals to boost Brazilian exportations and also improving technology
skills in the firms. The amount of money available for the exporting business has also
increased if we look the series for the past years, which means that the number and
value of exportations have increased as well.

9. Annual budget for loan in both programs.
Therefore it is possible to affirm that those financing programs, and PROEX in
particular, are fundamental to the maintenance of stable growth of exportations. There is
a huge space for expansion in Brazil’s international commerce and a wide variety of
goods and services to be sold. Government is investing in infrastructure and technology
to improve the commercial relations and the competitiveness among the firms.
Although international market represents a small part of Brazil’s GDP, the
intention is to make it grow, especially in manufacture and technology sectors. Services
are also having a special attention because it represents 69% of GDP and have a bigger
value when negotiated outside the borders. The biggest problem in this expansion is the
economic cooling of several countries in the world, especially in China, Europe, USA
and Argentina, our biggest partners in trade. A good solution to that is the widening of
MERCOSUL, more attention and participation in African economies and in Caribbean
region. Those economies are growing fast and in high rates, though they have a small
size, and can contribute to enlarge Brazil’s exports.

10. References:
REZENDE, Tatiane Palma. Financiamento de exportações: caso PROEX e BNDES-
Exim. 2006. Florianópolis. Universidade Federal de Santa Catarina. Avaiable in:
http://tcc.bu.ufsc.br/Economia293768
CANUTO, Otaviano; CAVALLARI Mateus; REIS, José Guilherme. Brazilian
Exports: Climbing Down a Competitiveness Cliff. Washington D.C.:Policy Research
Working Paper 6302: World Bank, 2013. Avaiable in:
BRASIL. Ministério de desenvolvimento, indústria e comércio exterior. Medidas de
apoio ao financiamento e garantia das exportações brasileiras: Programa de
financiamento à exportação-PROEX; Fundo de garantia à exportação-FGE. Avaiable in:
<http://www.desenvolvimento.gov.br/arquivo/secex/camex/20031128MedidasExp
ortacao.pdf>.
MOREIRA, Sérvulo Vicente; TOMICH, Frederico; RODRIGUES; Maria da Glória.
PROEX e BNDES-Exim: Construindo o Futuro. Brasília: IPEA, 2006. (texto pra
discussão n° 1156).
CANUTO, Otaviano; CAVALLARI, Matheus; REIS, José Guilherme. Brazilian
Exports Climbing Down a Competitiveness Cliff. Avaiable in:
http://documents.worldbank.org/curated/en/2013/01/17150344/brazilian-exports-
climbing-down-competitiveness-cliff