2024-02-06 13:33:47
Last Friday, February 2nd, the National Monetary Council – CMN – changed the resolution that dealt with exempt real estate and agribusiness collateral. This resolution will affect operations LCI, LCA, LIG, CRI e CRAwhich are exempt from income tax.
But how does this actually affect your investments? To help answer this question, we invited Wallace Cavoli, Head of Strategy and Allocation here at Renova Invest.
What are LCI, LCA, LIG, CRI & CRA assets?
LCI, LCA, LIG, CRI and CRA are fixed income class assets. They are exempt from income tax, bring a good return to the investor in addition to offering security to the investor. Therefore, there is so much demand for them within the financial market.
LCI – Real Estate Credit Letter: It is a fixed income security issued by financial institutions with the aim of raising funds for the real estate sector. The investor lends money to the bank and, in return, receives interest and monetary correction over time.
LCA – Agribusiness Letter of Credit: Similar to the LCI, the LCA is a fixed income security issued by financial institutions to finance agribusiness. The investor lends money to the bank and, in return, receives interest and monetary correction.
LIG – Guaranteed Real Estate Letter : It is a credit title issued by financial institutions to finance the real estate sector. LIG is guaranteed by a guarantee made up mainly of real estate credits. Like LCI and LCA, it offers the investor a return in the form of interest and monetary correction. But, unlike LCI and LCA, the FGC does not guarantee this investment.
CRI – Real Estate Receivables Certificate: It is a credit title issued by securitization companies that represents the promise of payment of real estate credits, such as rent, installments of real estate financing, among others. Investors purchase CRIs and receive periodic interest payments and principal repayments.
CRA – Agribusiness Receivables Certificate: Similar to the CRI, the CRA is a credit title issued by securitization companies that represents the promise to pay agribusiness credits, such as agricultural financing, rural lease contracts, among others. Investors purchase CRAs and receive periodic interest payments and principal repayments.
Why the change in legislation on these assets?
Assuming that all these letters of credit are debt issues, the only difference being the origin of the debt – real estate or agricultural – it is understood that companies issue these debts in the market to invest in both the real estate sector and the agribusiness sector. . And it makes a lot of sense for the investor to buy these assets, as they are exempt from income tax.
Therefore, it is a win-win relationship. The investor has access to a tax-free product with good gains and the issuer is able to invest in its projects. Because these sectors are strategic for national development, it makes perfect sense for the government to invest in them. Hence the encouragement.
However, many companies in other sectors were issuing this type of debt, without actually being included in real estate or agricultural assets.
Imagine that a company from a sector other than real estate issues a Certificate of Real Estate Receivables (CRI). Normally, we would expect the money raised to be used for investments related to civil construction, in terms of infrastructure, right? However, there are cases in which some companies use resources to pay rent, instead of financing direct real estate projects. This may sound a little strange, as the main purpose of the CRI is to support operations in the infrastructure real estate market. This situation highlights the importance of understanding how resources are used in different financial contexts, ensuring transparency and alignment with investment objectives.
So could it be considered a tax maneuver?
It is worth remembering that under previous legislation, this type of issuance is in no way illegal, immoral or any type of fiscal maneuver. However, this was not the main intention of tax incentives, which were always investments in infrastructure.
In a way, yes, real estate investment is taking place, but not necessarily for actual construction. And in addition to the tax exemption for this letter of credit. This combination raises questions about the effectiveness and transparency of investments in general, especially when it comes to financial instruments designed to stimulate specific sectors of the economy.
Remembering that there was also a great ease in issuing these debts, the government understood that it made sense to change this legislation, to make investments more directed towards these sectors.
The actions implemented aim to improve the effectiveness of public policies to encourage the agribusiness and real estate sectors, ensuring that the respective financial instruments are supported by operations aligned with the original purposes of their creation, and contributing to strengthening the credit market.
And what is the impact of this for the investor?
On a daily basis, not many changes happen for the investor. Just the fact that we will have fewer LCI, LCA, LIG, CRI and CRA products available, which means that investors need to diversify their portfolio more, looking for assets with similar gains.
However, despite a likely drastic decrease in these assets, the few options available will be 100% directed towards agricultural and real estate infrastructure, which could help the country’s economy.
In any case, there are always portfolio diversification options for Investment Funds or incentivized debentures.
It is also important to point out that this resolution will benefit the fund sector. Making this sector more competitive. In other words, if on the one hand we will have fewer CRI, CRA, LCI, LCA and LIG assets, we certainly have more investment options.
In short, it is important to have an investment advisor by your side to help you diversify your portfolio and maintain your gains, regardless of any change in legislation. Therefore, always count on Renova Invest advisors.
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