Filed Pursuant to Rule 424(b)(5)
Registration No. 333-222323
PROSPECTUS SUPPLEMENT
(To Prospectus dated December 28, 2017)
Federative Republic of Brazil
U.S.$1,500,000,000 3.750% Global Bonds due 2031
U.S.$750,000,000 4.750% Global Bonds due 2050
Brazil is offering U.S.$1,500,000,000 aggregate principal amount of its 3.750% global bonds due 2031 (the 2031 bonds) and U.S.$750,000,000 aggregate principal amount of its 4.750% global bonds due 2050 (the 2050 bonds). We refer to the 2031 bonds and the 2050 bonds collectively as the global bonds. Brazil will pay interest: (i) on the 2031 bonds on March 12 and September 12 of each year, commencing on March 12, 2022, and (ii) on the 2050 bonds on January 14 and July 14 of each year, commencing on July 14, 2021. The 2031 bonds will mature on September 12, 2031 and the 2050 bonds will mature on January 14, 2050. The offering of the global bonds of each series, each pursuant to this prospectus supplement, are not conditioned upon one another.
The 2050 bonds will be a further issuance of, and will form a single series with the existing U.S.$3,250,000,000 aggregate principal amount of Brazils 4.750% global bonds due 2050 (ISIN US105756CB40, Common Code 207893234, CUSIP 105756 CB4) issued on November 14, 2019 and December 8, 2020 (original 2050 bonds). The 2050 bonds offered hereby will have the same terms and CUSIP number as, and will trade interchangeably with, the original 2050 bonds immediately upon settlement. After giving effect to the offering, the total amount outstanding of Brazils global bonds due 2050 will be U.S.$4,000,000,000.
Brazil may redeem (1) the 2031 bonds, in whole or in part, before maturity, at par plus the Make-Whole Amount and accrued interest, and (2) the 2050 bonds, in whole or in part, before July 14, 2049, at par plus the Make-Whole Amount and accrued interest, or on or after July 14, 2049 at par plus accrued interest, in each case, as described in the section entitled Description of the Global BondsOptional Redemption in this prospectus supplement. The global bonds will not be entitled to the benefit of any sinking fund.
The global bonds will be issued under an indenture, and each of the 2031 bonds and the 2050 bonds constitutes a separate series under the indenture. The global bonds will contain collective action clauses. Under these provisions, which differ from the terms of Brazils 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.
The original 2050 bonds are listed, and 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 2031 Bond |
Total for the 2031 Bonds |
Per 2050 Bond |
Total for the 2050 Bonds |
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Public offering price (1) |
98.948 | % | U.S.$ | 1,484,220,000 | 97.333 | % | U.S.$ | 729,997,500 | ||||||||
Underwriting discount |
0.200 | % | U.S.$ | 3,000,000 | 0.200 | % | U.S.$ | 1,500,000 | ||||||||
Proceeds, before expenses, to Brazil (1) |
98.748 | % | U.S.$ | 1,481,220,000 | 97.133 | % | U.S.$ | 728,497,500 |
(1) | For the 2031 bonds: plus accrued interest, if any, from July 7, 2021, the date Brazil expects to deliver the 2031 bonds offered by this prospectus supplement. |
For the 2050 bonds: plus accrued interest totaling U.S.$17,119,791.67, or U.S.$22.83 per U.S.$1,000 principal amount of the 2050 bonds, from January 14, 2021 to, but not including July 7, 2021, the date Brazil expects to deliver the 2050 bonds offered by this prospectus supplement, and any additional interest to the date of delivery, if later. |
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, Luxembourg (Clearstream, Luxembourg) against payment on or about July 7, 2021.
Joint Lead Managers and Joint Bookrunners
Bradesco BBI |
Goldman Sachs & Co. LLC | HSBC |
The date of this prospectus supplement is June 30, 2021.
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.
Prospectus Supplement
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This summary highlights information contained elsewhere in this prospectus supplement and the accompanying prospectus. It is not complete and may not contain all of the information that you should consider before investing in the global bonds. You should read this entire prospectus supplement and the accompanying prospectus carefully.
The Issuer
Overview
Brazil is the fifth largest country in the world and occupies nearly half the land area of South America. Brazil shares a border with every country in South America except Chile and Ecuador. The capital of Brazil is Brasília, and the official language is Portuguese. As of December 31, 2020, Brazils estimated population was approximately 211.8 million.
Brazil is a federative republic with broad powers granted to the Federal Government. Brazil is officially divided into five regions consisting of 26 states and the Federal District, where Brasília is located.
Government
The federal Constitution provides for three independent branches of government: an executive branch headed by the president; a legislative branch consisting of the bicameral National Congress; and a judicial branch consisting of the Federal Supreme Court and lower federal and state courts.
Under the Constitution, the president is elected by direct vote for a four-year term and is eligible to be reelected for a second four-year term. The presidents powers include the right to appoint ministers and key executives in selected administrative posts. On October 28, 2018, Jair Messias Bolsonaro, the candidate of the conservative political party Partido Social Liberal (PSL) was elected President of the Republic.
The legislative branch of government consists of a bicameral National Congress composed of the Senate and the Chamber of Deputies. The Senate has 81 senators, who are elected for staggered eight-year terms, and the Chamber of Deputies has 513 deputies, who are elected for concurrent four-year terms. Each state and the Federal District is entitled to elect three senators. The number of federal deputies is based on a proportional representation system weighted in favor of the less-populated states, which assures the smaller states an important role in the National Congress as the population increases in the larger states. During the last general election, which took place in October 2018, 513 deputies and 54 of 81 senators were elected. These officials took office on February 1, 2019.
Judicial power is exercised by the Federal Supreme Court (composed of 11 Justices), the Superior Court of Justice (composed of 33 Justices), the federal regional appellate courts, military courts, labor courts, electoral courts and the several lower federal courts and state courts, comprising both appellate courts and courts of first instance. The Federal Supreme Court, whose members are appointed by the president for life (with mandatory retirement at 75 years of age), has ultimate appellate jurisdiction over decisions rendered by lower federal and state courts on constitutional matters.
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Selected Brazilian Economic Indicators
2016 | 2017 | 2018 | 2019 | 2020 | ||||||||||||||||
Gross Domestic Product (GDP) |
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(in R$ billions at current prices) |
R$ 6,269.3 | R$ 6,585.5 | R$ 7,004.1 | R$ 7,407.0 | R$ 7,447.9 | |||||||||||||||
(in U.S.$ billions at current prices) (1) |
U.S.$ 1,800.1 | U.S.$ 2,063.2 | U.S.$ 1,916.2 | U.S.$ 1,877.3 | U.S.$ 1,444.2 | |||||||||||||||
Real GDP Growth (2) |
(3.3)% | 1.3% | 1.8% | 1.4% | (4.1)% | |||||||||||||||
Population (millions) (3) |
206.1 | 207.7 | 208.5 | 210.1 | 211.8 | |||||||||||||||
GDP per Capita (in U.S.$ billions at current prices) |
U.S.$ 8,774.4 | U.S.$ 9,976.5 | U.S.$ 9,190.7 | U.S.$ 8,933.4 | U.S.$ 6,820.0 | |||||||||||||||
Unemployment Rate (4) |
11.5% | 12.7% | 12.3% | 11.9% | 13.5% | |||||||||||||||
IPCA Rate (5) |
6.3% | 3.0% | 3.8% | 4.3% | 4.5% | |||||||||||||||
IGP-DI Rate (6) |
7.2% | (0.4)% | 7.1% | 7.7% | 23.1% | |||||||||||||||
Nominal Exchange Rate Change (7) |
(16.5)% | 1.5% | 17.1% | 4.0% | 28.9% | |||||||||||||||
Domestic Real Interest Rate (8) |
7.3% | 6.8% | 2.6% | 1.6% | (1.7)% | |||||||||||||||
Balance of Payments (in U.S.$ billions) |
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Exports |
184.3 | 218.0 | 239.5 | 225.8 | 210.7 | |||||||||||||||
Imports |
139.7 | 160.7 | 196.1 | 199.3 | 178.3 | |||||||||||||||
Current Account |
(24.5) | (22.0) | (51.5) | (65.0) | (24.1) | |||||||||||||||
Capital and Financial Account (Net) |
0.3 | 0.4 | 0.4 | 0.4 | 0.3 | |||||||||||||||
Overall Balance (Change in Reserves) |
(16.1) | (17.1) | (52.3) | (64.4) | (21.8) | |||||||||||||||
Reserve Assets |
(9.2) | (5.1) | (2.9) | 26.1 | 14.23 | |||||||||||||||
Total Official Reserves |
372.2 | 382.0 | 387.0 | 366.9 | 362.0 | |||||||||||||||
Public Finance (% of GDP) (9) |
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Central Government Primary Balance (10) |
2.5% | 1.8% | 1.7% | 1.2% | 10.0% | |||||||||||||||
Consolidated Public Sector Primary Balance (11) |
2.5% | 1.7% | 1.6% | 0.9% | 9.4% | |||||||||||||||
Federal Public Debt (in R$ billions) |
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Domestic Federal Public Debt (DFPD or DPMFi) |
R$ 2,986.4 | R$ 3,435.5 | R$ 3,728.9 | R$ 4,083.2 | R$ 4,766.2 | |||||||||||||||
External Federal Public Debt (EFPD or DPFe) |
R$ 126.5 | R$ 123.8 | R$ 148.2 | R$ 165.7 | R$ 243.5 | |||||||||||||||
Federal Public Debt as % of Nominal GDP |
49.7% | 54.0% | 55.4% | 57.4% | 67.3% | |||||||||||||||
Total Federal Public Debt (in R$ billions) (12) |
R$ 3,112.9 | R$ 3,559.3 | R$ 3,877.1 | R$ 4,248.9 | R$ 5,009.6 | |||||||||||||||
General Government Gross and Net Debts |
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General Government Gross Debt (GGGD or DBGG) (in R$ billions) (13) |
R$ 4,378.5 | R$ 4,854.7 | R$ 5,272.0 | R$ 5,500.1 | R$ 6,615.8 | |||||||||||||||
DBGG as % of GDP |
69.8% | 73.7% | 75.3% | 74.3% | 88.8% | |||||||||||||||
Public Sector Net Debt (NPSD or DLSP) (in R$ billions) (14) |
R$ 2,892.9 | R$ 3,382.9 | R$ 3,695.8 | R$ 4.041.8 | R$ 4,670.0 | |||||||||||||||
DLSP as % of GDP |
46.1% | 51.4% | 52.8% | 54.6% | 62.7% |
Note: | Numbers may not total due to rounding. |
(1) | Converted into U.S. dollars based on the weighted average exchange rate for each applicable year. |
(2) | Cumulative over four quarters per year. |
(3) | Estimated. |
(4) | Annual average unemployment rate. |
(5) | Broad National Consumer Price Index (Índice de Preços ao Consumidor Amplo or IPCA), as reported by the National Bureau of Geography and Statistics (Fundação Instituto Brasileiro de Geografia e Estatística or IBGE). |
(6) | The General Price Index-Domestic Supply (Índice Geral de Preços-Disponibilidade Interna or IGP-DI) is one of many inflation indicators used in Brazil (IGP-DI being one of the most widely used). The IGP-DI is calculated by the Getúlio Vargas Foundation, an independent research organization. |
(7) | Year-over-Year percentage change of the nominal exchange rate: (+) depreciation or (-) appreciation of the real against the U.S. dollar (sell side). |
(8) | Domestic Real Interest Rate represents the accumulated Selic (Sistema Especial de Liquidação e Custódia or Selic) rate, adjusted to exclude effects of IPCA. |
(9) | Calculated using the below the line method, with respect to changes in the public sectors total net debt (domestic or external). Surpluses are represented by negative numbers and deficits are represented by positive numbers. |
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(10) | Central Government includes (i) the National Treasury (Secretaria do Tesouro Nacional), (ii) the Social Security System (Sistema da Previdência Social) and (iii) the Central Bank. Primary Balance represents revenues minus expenditures, excluding interest expenditures on public debt. |
(11) | Consolidated Public Sector includes (i) the Central Government, Regional Governments (including state and municipal governments) and (ii) the state-owned enterprises, with the exception of Petróleo Brasileiro S.A.Petrobras (Petrobras) and Centrais Elétricas Brasileiras S.A.Eletrobras (Eletrobras). Primary Balance represents revenues minus expenditures, excluding interest expenditures on public debt. |
(12) | Total Federal Public Debt, as reported by the National Treasury. |
(13) | General Government Gross Debt (General Government Gross Debt or GGGD) defined as private and public sector financial debt of the federal, state and municipal governments, with the exception of (i) state-owned company debt (at all government levels) and (ii) Central Bank liabilities. |
(14) | Public Sector Net Debt (Public Sector Net Debt or PSND) refers to total liabilities of the non-financial public sector (as deducted from public sector financial assets held by (i) non-financial private agents, (ii) public financial agents and (iii) private financial agents. PSND includes Central Bank assets and liabilities including international reserves and the monetary base. |
Source: IBGE; Getúlio Vargas Foundation; Central Bank; National Treasury.
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The Global Bonds
The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information appearing elsewhere in this prospectus supplement and the accompanying prospectus.
Issuer | Federative Republic of Brazil. | |
Title of Security | For the 2031 bonds: 3.750% Global Bonds due 2031.
For the 2050 bonds: 4.750% Global Bonds due 2050. | |
Aggregate Principal Amount Offered | For the 2031 bonds: U.S.$1,500,000,000.
For the 2050 bonds: U.S.$750,000,000. | |
Maturity Date | For the 2031 bonds: September 12, 2031.
For the 2050 bonds: January 14, 2050. | |
Interest Rate | For the 2031 bonds: 3.750% per annum, computed on the basis of a 360-day year of twelve 30-day months.
For the 2050 bonds: 4.750% per annum, computed on the basis of a 360-day year of twelve 30-day months. | |
Interest Payment Dates | For the 2031 bonds: March 12 and September 12 of each year, commencing March 12, 2022.
For the 2050 bonds: January 14 and July 14 of each year, commencing July 14, 2021. | |
Price to Public | For the 2031 bonds: 98.948% of the principal amount, plus accrued interest, if any, from July 7, 2021.
For the 2050 bonds: 97.333% of the principal amount, plus accrued interest totaling U.S.$17,119,791.67, or U.S.$22.83 per U.S.$1,000 principal amount of the 2050 bonds, from January 14, 2021 to, but not including July 7, 2021, and any additional interest to the date of delivery, if later than July 7, 2021. | |
Qualified Reopening | The 2050 bonds will be a further issuance of, and will form a single series with the existing U.S.$3,250,000,000 aggregate principal amount of Brazils 4.750% global bonds due 2050 (ISIN US105756CB40, Common Code 207893234, CUSIP 105756 CB4) issued on November 14, 2019 and December 8, 2020. The 2050 bonds offered hereby will have the same terms and CUSIP number as, and will trade interchangeably with, the original 2050 bonds immediately upon settlement. After giving effect to the offering, the total amount outstanding of Brazils global bonds due 2050 will be U.S.$4,000,000,000. | |
Form | Brazil will issue the global bonds in the form of one or more book-entry securities in fully registered form, without coupons. Brazil will not issue the global bonds in bearer form. |
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Denominations | Brazil will issue the global bonds only in denominations of U.S.$200,000 and integral multiples of U.S.$1,000 in excess thereof. | |
Payment of Principal and Interest | Principal and interest on the global bonds will be payable in U.S. dollars or other legal tender, coin or currency of the United States of America. | |
Status | The global bonds will constitute direct, general, unconditional, unsecured (except as described under the heading Debt SecuritiesNegative 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 principal of, premium, if any, on, and interest on of the global bonds. The global bonds of each series 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. | |
Optional Redemption | The global bonds of each series will be subject to redemption at the option of Brazil before maturity, on terms described under Description of the Global BondsOptional Redemption in this prospectus supplement. The global bonds will not be entitled to the benefit of any sinking fund. | |
Negative Pledge | The global bonds will contain certain covenants, including restrictions on the incurrence of certain liens. | |
Default | The global bonds will contain events of default, the occurrence of which may result in the acceleration of Brazils obligations under the global bonds of any series prior to maturity upon notice by holders of at least 25% of the aggregate principal amount of the outstanding global bonds of such series. | |
Collective Action Clauses | The global bonds will contain provisions regarding future modifications to their terms that differ from those applicable to Brazils outstanding public external indebtedness issued prior to July 2, 2015. Those provisions are described in the sections of this prospectus supplement entitled Description of the Global BondsAmendments and Waivers and Certain Amendments Not Requiring Holder Consent. | |
Listing and Admission to Trading | The original 2050 bonds are listed, and application will be made to list the global bonds, on the Luxembourg Stock Exchange for trading on the Euro MTF Market. | |
Trustee | The global bonds will be issued pursuant to an indenture, dated as of July 2, 2015 (the indenture), between Brazil and The Bank of New York Mellon, as trustee, and each of the 2031 bonds and the 2050 bonds will constitute a separate series under the indenture. | |
Taxation | For a discussion of the Brazilian and United States tax consequences associated with the global bonds, see TaxationBrazilian Taxation and United States Federal Income Taxation in this prospectus supplement and Debt SecuritiesTax Withholding; Payment of Additional Amounts in the accompanying prospectus. Investors should consult their own tax advisors in determining the non-United States, United States federal, state, local and any other tax consequences to them of the purchase, ownership and disposition of the global bonds. |
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Further Issues | From time to time, without the consent of holders of the 2031 bonds or the 2050 bonds, as the case may be, 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 applicable series of global bonds (or the same except for the amount of the first interest payment and the issue price), provided that such additional debt securities are issued pursuant to a qualified reopening of the original series or are otherwise treated as part of the same issue of debt instruments as the original series for U.S. federal income tax purposes. Additional 2031 bonds and 2050 bonds issued in this manner will be consolidated with, and will form a single series with, any other outstanding notes of such series. See Description of the Global BondsFurther Issues of the Global Bonds in this prospectus supplement. | |
Governing Law | The global bonds will be governed by, and interpreted in accordance with, the laws of the State of New York without regard to those principles of conflicts of laws that would require the application of the laws of a jurisdiction other than the State of New York; provided that all matters related to the consent of holders and modifications to the indenture or the global bonds will always be governed by and construed in accordance with the laws of the State of New York; provided further that the laws of Brazil will govern all matters governing authorization and execution of the indenture and the global bonds by the Federative Republic of Brazil. | |
Arbitration Clause | The global bonds will contain an agreement on the part of Brazil, the trustee and the holders of the global bonds that any dispute, controversy or claim arising out of or relating to the indenture or the global bonds shall be finally settled by arbitration in New York, New York in accordance with the Arbitration Rules of the United Nations Commission on International Trade Law (excluding Article 26 thereof) in effect on the date of the indenture, 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. In arbitration proceedings, Brazil will not raise any defense that it could not raise but for the fact that it is a sovereign state. Brazil will not waive and expressly reserves any right to sovereign immunity from any legal process to which it may be entitled in jurisdictions other than Brazil with respect to the enforcement of any award rendered by an arbitral tribunal constituted under the terms of the global bonds or the indenture. No arbitration proceeding under the indenture or the global bonds shall be binding upon or in any way affect the right or interest of any person other than the claimant or respondent with respect to such arbitration. The provisions are described further in the section entitled Arbitration and Enforceability in the accompanying prospectus. |
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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
Developments relating to the outbreak of the coronavirus may have a continued material adverse impact on our economy.
The global outbreak of COVID-19, and public health measures to mitigate it, are having a material impact on the economy in Brazil and around the world. The scope, magnitude and duration of the impact on Brazil cannot yet be determined. COVID-19 could increase the risks described elsewhere in this section.
The long-term effects of the COVID-19 and other public health crises on the global financial markets and economy are difficult to assess or predict. They may include risks to citizens health and safety, as well as reduced economic activity, which in turn could result in decreased revenue for the government and increased expenditures, among other relevant impacts. It is unclear whether these challenges and uncertainties will be contained or resolved, and what effects they will have on the global financial markets and economy in the long term. We cannot predict the evolution of the disease in Brazil or whether additional restrictions will be required. In addition to measures taken by Brazilian federal, state and local governments, Brazil may be affected by the impact of the disease elsewhere in the region and by measures taken by other countries or organizations, such as orders that suspend travel or that limit trade. The final impact of the COVID-19 pandemic is still uncertain, but it is expected to have a significant adverse effect on our economy.
COVID-19 is also present in Brazil, and the Brazilian government has taken extensive steps to mitigate the spread of the disease and its impact on public health. See Recent DevelopmentsCOVID-19 Developments in this prospectus supplement. The efficacy of these steps cannot yet be evaluated, and it is highly uncertain how long and in what form they will remain in effect. Since March 2020, the government has introduced several measures to address the COVID-19 pandemic. The measures implemented so far have resulted in a slowdown in economic activity that adversely affected economic growth in 2020 and will possibly adversely affect economic growth in 2021, to a degree that we cannot quantify as of the date of this prospectus supplement. Any prolonged restrictive measures put in place in order to control an outbreak of contagious disease or other adverse public health development in Brazil may have a longer lasting material and adverse effect on our economy. The long-term impact of the governmental measures on our economy, and the effectiveness of these measures, cannot be assured. If these measures are insufficient or are not successfully implemented, the effect on the Brazilian economy or on the Brazilian debt sector could be exacerbated.
Brazils economy is vulnerable to external shocks and to more general contagion effects, each of which could have a material adverse effect on Brazils 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.
Brazils 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
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economy. A significant decline in the economic growth or demand for imports of any of Brazils major trading partners, such as China, the European Union, or the United States, could have a material adverse impact on Brazils exports and balance of trade and adversely affect Brazils 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 economic or financial 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 Brazils economy and its ability to raise funding in the external debt markets in the future. See Forward-Looking Statements in this prospectus supplement.
Brazils economy is vulnerable to a number of internal risks, each of which could have a material adverse effect on Brazils economic growth and on the liquidity of, and trading markets for, the bonds.
Brazils 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 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 Brazils credit rating could adversely affect the liquidity of and demand for Brazils debt securities and Brazils access to the international financial markets.
Moodys Credit Ratings, Standard & Poors and Fitch have each rated Brazils long-term foreign and local-currency debt sub-investment grade. Brazils ratings or outlooks may be downgraded further or placed on watch by Moodys, Standard & Poors 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 Brazils 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 Brazils 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 first quarter of 2021, GDP increased by 1.20% compared to the fourth quarter of 2020. Compared to the first quarter of 2020, GDP decreased by 3.80% in the first quarter of 2021 measured on a cumulative 12-month basis. We expect the COVID-19 crisis to have a continued negative impact on GDP. See Recent DevelopmentsCOVID-19 Developments.
Brazil cannot assure investors that its economy will grow in the future. Brazils economic growth depends on a variety of factors, including, among others, international demand and prices for Brazilian exports, climatic factors affecting Brazils 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 Brazils control. A
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sustained or deepened recession could result in a material decrease in Brazils fiscal revenues, or a significant depreciation of the real over an extended period of time could adversely affect Brazils 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.
Brazils 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 Brazils 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 Brazils results of operations and financial condition.
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 Brazils economy, demand for Brazils debt securities and Brazils 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 Brazils economic growth, on the demand for Brazils debt securities, including the global bonds, and on Brazils 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. The original 2050 bonds are listed, and 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.
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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 BondsDefault; Acceleration of Maturity and Meetings and Amendments in this prospectus supplement.
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The information incorporated by reference from Brazils 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 2019 | |
Issuers position within the governmental framework |
The Federative Republic of BrazilForm of Government on pages D-15 to D-16 of Exhibit D | |
Geographic location and legal form of the issuer |
The Federative Republic of BrazilGeography and Population and Form of Government on pages D-14 to D-15 and D-15 to D-16 of Exhibit D | |
Recent events relevant to the issuers solvency |
The Brazilian EconomyHistorical Background and Economy in 2019 on pages D-20 and D-20 to D-22 of Exhibit D | |
Structure of the issuers economy |
Principal Sectors of the Economy on pages D-22 to D-25 of Exhibit D | |
Gross domestic product |
The Brazilian EconomyEconomy in 2019Gross Domestic Product on pages D-20 to D-22 of Exhibit D | |
Brazils political system and government |
The Federative Republic of BrazilForm of Government on pages D-15 to D-16 of Exhibit D | |
Tax and budgetary systems of the issuer |
Public FinanceBudget Process and Taxation and Revenue Sharing Systems on pages D-43 to D-44 and D-45 to D-46 of Exhibit D | |
Gross public debt of the issuer |
Public Debt on pages D-47 to D-58 of Exhibit D | |
Foreign trade and balance of payments |
Balance of PaymentsCurrent Account on pages D-32 to D-39 of Exhibit D | |
Foreign exchange reserves |
Balance of PaymentsReserve Assets on pages D-40 to D-41 of Exhibit D | |
Financial position and resources |
Balance of PaymentsFinancial Account on pages D-39 to D-40 and Public Finance2020 Budget on page D-44 of Exhibit D | |
Income and expenditure figures and 2020 Budget |
Public Finance2020 Budget on page D-44 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 Brazils 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 InformationWhere 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. Brazils 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. 333-222323 filed with the SEC under the U.S. Securities Act of 1933 (the Securities Act) on December 28, 2017. The accompanying prospectus is part of registration statement no. 333-222323. 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 Brazils annual report on Form 18-K for 2019, which was filed with the SEC on August 10, 2020, as amended from time to time (the 2019 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 SECs 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.$, $ 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 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.
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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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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 Brazils 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, such as the COVID-19 pandemic, 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:
| External factors, such as: |
| 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; |
| the duration and severity of the coronavirus (COVID-19) outbreak and its impacts on the global economy; |
| interest rates in financial markets outside Brazil; |
| the impact of changes in the credit rating of Brazil; |
| the impact of changes in the international prices of commodities; |
| economic conditions in Brazils major export markets; and |
| the decisions of international financial institutions regarding the terms of their financial arrangements with Brazil or mature market economies. |
| Internal factors, such as: |
| general economic and business conditions in Brazil; |
| present and future exchange rates of the Brazilian currency; |
| foreign currency reserves; |
| the level of domestic debt; |
| domestic inflation; |
| impact on the Brazilian economy and the government finances of the measures taken to prevent the spread of the coronavirus (COVID-19); |
| the ability of Brazil to effect key economic reforms and to generate a primary budget surplus and advance fiscal and structural reforms; |
| the level of foreign direct and portfolio investment; |
| the level of Brazilian domestic interest rates; |
| political instability in Brazil; and |
| the governments ability to implement and the results of governmental policies and economic reforms. |
| Other factors discussed in the section Risk Factors. |
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The net proceeds to Brazil from the sale of the global bonds will be approximately U.S.$2,209,717,500, 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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The information included in this section supplements the information about Brazil contained in Brazils 2019 Annual Report, as amended. To the extent the information in this section is inconsistent with the information contained in the 2019 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 2019 Annual Report.
COVID-19 DEVELOPMENTS
As of June 28, 2021, Brazil had reported 18.42 million confirmed cases of the coronavirus (commonly referred to as COVID-19), of which 513,474 were fatal. 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.
The Republic has adopted several stimulus measures in reaction to the COVID-19 crisis. The total amount of expenditures related to those measures in 2020 was R$524.0 billion. In 2021, the amount of expenditures forecasted is R$106.7 billion, of which R$37.5 billion have been already spent. 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 our citizens and investing in appropriate protective equipment, and (iii) implementing a plan to purchase and administer vaccines for COVID-19.
On March 15, 2021, a new fiscal regime became effective that provides for emergency aid in an amount of up to R$44 billion through direct payments to vulnerable populations to address the impact of the COVID-19 crisis. These fiscal measures are meant to address the needs of vulnerable populations and provide emergency aid while safeguarding public finances.
The budgetary guidelines for 2021 (2021 Budgetary Guidelines), approved on December 31, 2020, set the official GDP forecast for 2021 at 3.2%, which was revised to 3.5% on May 21, 2021, in light of economic recovery. If the COVID-19 crisis continues, the GDP forecast may be further revised.
As of June 28, 2021, Brazil had administered approximately (i) 71.21 million of the first dose of the COVID-19 vaccine and (ii) 25.60 million of both doses of the COVID-19 vaccine The Republic expects to administer up to 39.81 million vaccine doses in June 2021, including both first and second doses of the vaccine, and 600 million vaccine doses by the end of 2021.
On April 13, 2021, the Senate initiated the COVID-19 CPI, a parliamentary initiative tasked with investigating the actions of the Federal Government during the course of the COVID-19 pandemic. The COVID-19 CPI is also investigating the use and application of Federal Government resources by states and municipalities to address the impact of the COVID-19 pandemic.
OTHER RECENT DEVELOPMENTS
Political Developments
Corruption Investigations
Multiple investigations into public corruption have been ongoing since 2014. The investigations, which initially targeted an alleged bribery, money laundering and embezzlement scheme involving the provision of goods and services to Petrobras, a majority state-owned company, grew in scope to encompass wide-reaching anti-corruption investigations in many stages.
In March 2021, the Brazilian Supreme Court annulled former President Luiz Inácio Lula da Silvas convictions and reinstated President Lulas political rights.
Legislative Reforms
On January 24, 2021, the new bankruptcy regime, which aims to revise the framework for both judicial and extrajudicial restructurings and modernize the Republics existing bankruptcy regime, became effective.
On February 24, 2021, the new Central Bank independence law, which aims to limit political interference with the authority of the Central Bank, became effective.
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On April 1, 2021, the new bidding law for the public sector, which aims to reform the existing framework that governs how the government enters into contracts with private parties for the provision of goods and services in order to reduce instances of corruption and fraud, became effective.
On April 9, 2021, the new regulatory framework for natural gas, which establishes a competitive market for natural gas with the aim of attracting new investments to the sector, reducing costs and reducing the consumption of natural gas, became effective.
On June 25, 2021, the Minister of Economy sent a tax reform bill to Congress, which includes measures to (i) simplify the existing income tax framework, (ii) reduce tax distortions and (iii) end certain income tax privileges without reducing revenues for the Federal Government (the Tax Reform Bill). The Tax Reform Bill is currently pending congressional approval.
Cabinet Changes
On March 23, 2021, Marcelo Queiroga was appointed as Minister of Health. On March 30, 2021, Luiz Eduardo Ramos took office as Ministry of Chief of Staff, Anderson Torres took office as Ministry of Justice, Walter Souza Braga Netto took office as Ministry of Defense, Carlos Alberto Franco França took office as Ministry of Foreign Affairs, Flávia Arruda took office as Secretariat for the Presidency of the Government and André Mendonça took office as Attorney-General for the Federal Government. On June 23, 2021, Joaquim Pereira Leite, prior Secretary for the Amazon and Environmental Services, was appointed as Minister of Environment.
Employment and Labor
Employment Levels
From January 1, 2021 to April 30, 2021, 957,889 jobs were created, compared to the loss of 763,232 jobs from January 1, 2020 to April 30, 2020. As of April 30, 2021, formal employment increased by 0.30% as compared to March 31, 2021, resulting in an increase of 120,935 jobs.
In the first quarter of 2021, the unemployment rate in Brazil was 14.70%, an increase of 0.80% percentage points compared to the fourth quarter of 2020 and an increase of 2.50% compared to the first quarter of 2020.
Wages
As of January 1, 2021, the minimum monthly wage for 2021 was set at R$1,100.00, representing an increase of 5.26% compared to the 2020 minimum monthly wage of R$1,045.00.
The 2021 Budgetary Guidelines estimated a minimum monthly wage of R$1,088.00, considering the INPC (National Consumer Price Index) at 4.1%. However, in light of an effective INPC of 5.45% in 2020, on December 30, 2020, the Federal Government enacted a provisional measure to increase the minimum monthly wage to R$1,100.00, with the aim of avoiding loss in purchase power.
The minimum monthly wage for 2022 is forecasted at R$1,147.00, representing an increase of 4.27% compared to the 2021 minimum monthly wage of R$1,100.00.
Social Security
As April 30, 2021, (i) the monthly benefits accumulated in the preceding 12-month period paid by the Brazilian Social Security System increased by 1.38% compared to the same period in 2020 and (ii) the Brazilian Social Security System payments decreased by 10.03% compared to April 30, 2020 (in real terms).
THE FEDERATIVE REPUBLIC OF BRAZIL
THE BRAZILIAN ECONOMY
The economy in 2021 has been adversely affected by COVID-19 but has shown signs of recovery. See Recent DevelopmentsCOVID-19 Developments.
Economy in 2021
Brazil is currently experiencing a severe drought and, as a result, there have been occurrences of water shortages in the southeastern, midwestern and northeastern regions of the Republic. The drought may lead to an increase in energy prices and an increased risk of power shortages and wildfires as well as impacts to the Brazilian economy, including the agriculture sector.
Gross Domestic Product
In the first quarter of 2021, GDP increased by 1.20% compared to the fourth quarter of 2020. Compared to the first quarter of 2020, GDP decreased by 3.80% in the first quarter of 2021 measured on a cumulative 12-month basis.
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The GDP results from the first quarter of 2021 were mainly influenced by the agriculture and investments sectors, which increased by 5.70% and 4.60%, respectively, compared to the fourth quarter of 2020.
Principal Sectors of the Economy
Public Utilities
Following unfavorable hydrological conditions in May 2021, the Brazilian Electricity Regulatory Agency (Agência Nacional de Energia Elétrica or ANEEL) reactivated the power tariff flag system, setting a red tariff flag (level 2) for June 2021 and July 2021. The red tariff flag provides for an additional cost of R$6.243 for each 100kWh of energy consumed.
Privatizations
From January through April, 2021, the PPI (Investment Partnership Program) awarded 30 contracts to private operators, totaling more than R$3.7 billion in revenues and more than R$12.3 billion in investments.
In 2021, the PPI expects to award approximately 103 additional contracts to private operators, with projected investments totaling R$445 billion.
On June 21, 2021, the Chamber of Deputies approved a provisional measure for the privatization of the state-owned electricity holding company Eletrobas. The provisional measure will become effective upon ratification by the President.
FINANCIAL SYSTEM
Monetary Policy and Money Supply
Selic
In June 2021, COPOM increased the Selic interest rate to 4.25% per annum.
Inflation
The IPCA increased 0.31% in April 2021 and 0.83% in May 2021. With respect to the 12-month period ended on May 31, 2021, the index increased 8.06%, which is 1.30% above the rate of 6.76% 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 Brazilian Central Bank) and exchange rate starting at R$5.05/US$1 and evolving according to the purchase power parity (PPP), stand around 5.8% for 2021 and 3.5% for 2022. This scenario assumes a path for the Selic rate that ends 2021 at 6.25% per annum and rises to 6.50% per annum in 2022. In this scenario, inflation projections for administered prices are 9.7% for 2021 and 5.1% for 2022.
For 2024, the CMN set the inflation target at 3.00% with a tolerance interval of plus or minus 1.5 percentage points.
Foreign Exchange Rates
Foreign Exchange Rates
The Brazilian Real-U.S. Dollar exchange rate, as published by the Central Bank, was R$4.94 to US$1.00 (sell side) on June 28, 2021.
Financial Institutions
BNDES
In March 2021, the National Monetary Council increased the long-term interest rate used for loans granted by BNDES (TJPL) from 4.39% to 4.61% per annum for the second quarter of 2021. As of June 2021, the applicable rate for new BNDES loans (TLP) was at IPCA plus 2.87% per annum.
Banking Supervision
Loan Loss Reserves
As of May 2021, credit operations in arrears for over 90 days were at 2.37%, a 0.15% increase compared to April 2021 (2.22%). As of May 2021, the level of credit operations in arrears with respect to credits granted to families was 3.02%, a 0.06% increase compared to April 2021 (2.96%). Arrears of credits provided to legal entities had a slight increase in May 2021, when compared to April 2021 (from 1.27% to 1.51%).
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BALANCE OF PAYMENTS
As of May 31, 2021, the current account registered a deficit of US$8.33 billion (0.55% of GDP) for the preceding 12-month period. For the same period, the capital account registered a surplus of approximately US$172.30 million and foreign direct investment amounted to US$39.32 billion (2.60% of GDP).
As of June 24, 2021, the international reserves volume amounted to US$352.44 billion (23.29% of GDP).
PUBLIC FINANCE
The following table sets forth revenues and expenditures of the Federal Government from 2017 through 2020 and the budgeted amounts for 2021.
Table No. 1
Primary Balance of the Central Government (1)
(in billions of Reais)
2017 | 2018 | 2019 | 2020 | 2021 Budget (5) |
||||||||||||||||
1 Total Revenues |
1,383.1 | 1,488.3 | 1,635.1 | 1,467.8 | 1,752.1 | |||||||||||||||
1.1 RFB Revenues (2) |
835.6 | 905.1 | 946.1 | 899.5 | 1,110.7 | |||||||||||||||
1.2 Fiscal Incentives |
(1.4 | ) | 0.0 | 0.0 | 0.1 | 0.0 | ||||||||||||||
1.3 Social Security Net Revenues |
374.8 | 391.2 | 413.3 | 404.8 | 441.2 | |||||||||||||||
1.4 Non RFB Revenues |
174.1 | 192.0 | 275.7 | 163.6 | 200.1 | |||||||||||||||
2 Transfers by Sharing Revenue |
228.3 | 256.7 | 288.3 | 263.8 | 318.8 | |||||||||||||||
3 Total Net Revenue |
1,154.7 | 1,231.5 | 1,346.8 | 1,204.0 | 1,433.3 | |||||||||||||||
4 Total Expenditures |
1,279.0 | 1,351.8 | 1,441.8 | 1,947.1 | 1,621.0 | |||||||||||||||
4.1 Social Security Benefits |
557.2 | 586.4 | 626.5 | 663.9 | 706.8 | |||||||||||||||
4.2 Personnel and Social Charges |
284.0 | 298.0 | 313.1 | 321.3 | 335.4 | |||||||||||||||
4.3 Other Mandatory Expenditures |
197.3 | 201.3 | 195.2 | 720.2 | 304.5 | |||||||||||||||
4.4 Discretionary expenditures All Branches |
240.5 | 266.0 | 307.0 | 241.7 | 274.2 | |||||||||||||||
5 Brazilian Sovereign Wealth Fund (FSB) |
0.0 | 4.0 | 0.0 | 0.0 | 0.0 | |||||||||||||||
6 Primary Balance (3) |
(124.3 | ) | (120.2 | ) | (95.1 | ) | (743.2 | ) | (187.7 | ) | ||||||||||
7 Methodological Adjustment |
7.6 | 6.6 | 6.8 | 1.9 | | |||||||||||||||
8 Statistical Discrepancy |
(1.8 | ) | (2.6 | ) | (0.6 | ) | (4.0 | ) | | |||||||||||
9 Central Government Primary Balance (4) |
(118.4 | ) | (116.2 | ) | (88.9 | ) | (745.3 | ) | (187.7 | ) | ||||||||||
10 Nominal Interest |
(340.9 | ) | (310.3 | ) | (310.1 | ) | (266.7 | ) | | |||||||||||
11 Central Government Nominal Balance (4) |
(459.3 | ) | (426.5 | ) | (399.0 | ) | (1,011.9 | ) | |
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 sectors total net debt (domestic or external). Surpluses are represented by positive numbers and deficits are represented by negative numbers. |
(5) | Estimates in 2021 Budget Bill and reviewed by the Primary Revenue and Expenditure Report (May 2020). |
Source: National Treasury Secretariat
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The following table sets forth the expenditures of the Federal Government by function for 2017 through 2020, and the budgeted amounts for 2021. The figures in the table below are not directly comparable to those set forth in Table No. 1 above, entitled Primary Balance of the Central Government given that the expenditures set forth in Table No. 1 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. 2 below).
Table No. 2
Expenditures of the National Treasury by Function
(in millions of Reais)
2017 | 2018 | 2019 | 2020 | 2021 Budget (1) |
||||||||||||||||
Legislative |
6,213.4 | 6,373.8 | 6,573.1 | 6,305.4 | 8,515.8 | |||||||||||||||
Judiciary |
29,404.9 | 31,068.7 | 32,621.9 | 31,448.0 | 39,195.1 | |||||||||||||||
Essential to Justice |
5,929.9 | 6,040.1 | 6,426.9 | 6,635.8 | 8,316.9 | |||||||||||||||
Administration and Planning |
22,773.1 | 25,988.3 | 22,978.8 | 22,229.0 | 29,092.9 | |||||||||||||||
National Defense |
63,156.8 | 71,058.7 | 78,465.7 | 76,588.4 | 81,019.3 | |||||||||||||||
Public Security |
8,097.4 | 8,216.4 | 8,449.2 | 9,872.1 | 12,186.1 | |||||||||||||||
Foreign Affairs |
2,757.9 | 3,002.1 | 3,093.7 | 3,647.0 | 3,833.5 | |||||||||||||||
Social Assistance |
84,098.8 | 87,977.1 | 94,914.7 | 412,348.8 | 101,931.2 | |||||||||||||||
Social Security |
654,512.2 | 681,663.7 | 725,885.6 | 764,238.7 | 807,115.3 | |||||||||||||||
Health |
101,423.3 | 107,759.5 | 113,907.8 | 151,122.6 | 118,359.9 | |||||||||||||||
Labor |
69,900.0 | 70,861.2 | 72,480.8 | 75,874.9 | 77,966.3 | |||||||||||||||
Education |
88,631.0 | 90,927.8 | 88,224.8 | 82,166.2 | 111,763.6 | |||||||||||||||
Culture |
949.7 | 960.2 | 715.7 | 581.2 | 1,659.7 | |||||||||||||||
Citizenship Rights |
1,344.0 | 929.7 | 828.9 | 885.8 | 1,047.8 | |||||||||||||||
Urban Planning |
1,822.8 | 1,648.1 | 1,383.2 | 1,270.6 | 1,545.2 | |||||||||||||||
Housing |
6.2 | 5.7 | 11.7 | 2.0 | 13.7 | |||||||||||||||
Sanitation |
714.6 | 558.6 | 454.2 | 825.7 | 365.7 | |||||||||||||||
Environmental Management |
2,908.6 | 3,471.0 | 3,158.2 | 3,433.2 | 3,813.7 | |||||||||||||||
Science and Technology |
5,904.6 | 6,194.5 | 6,278.8 | 6,011.3 | 6,227.0 | |||||||||||||||
Agriculture |
14,487.2 | 15,151.6 | 14,355.2 | 12,438.8 | 24,018.3 | |||||||||||||||
Agricultural Organization |
1,735.9 | 1,571.4 | 1,345.9 | 1,287.8 | 1,354.0 | |||||||||||||||
Industry |
1,973.6 | 1,917.5 | 1,610.1 | 1,458.4 | 1,770.8 | |||||||||||||||
Commerce and Services |
2,088.9 | 2,645.5 | 1,782.6 | 6,908.7 | 3,411.9 | |||||||||||||||
Communications |
1,030.6 | 1,089.0 | 1,122.6 | 1,491.0 | 2,965.1 | |||||||||||||||
Energy |
1,701.2 | 1,753.1 | 2,261.5 | 1,223.9 | 1,392.3 | |||||||||||||||
Transportation |
10,705.5 | 11,352.9 | 8,530.8 | 7,756.9 | 15,549.3 | |||||||||||||||
Sports and Leisure |
310.4 | 286.9 | 159.3 | 101.7 | 292.2 | |||||||||||||||
Special Charges(2) |
815,472.9 | 948,277.2 | 957,429.6 | 1,151,227.9 | 2,627,029.0 | |||||||||||||||
Contingency Reserve(3) |
| | | | 55,828.7 | |||||||||||||||
SubTotal |
2,000,055.2 | 2,188,750.3 | 2,255,451.5 | 2,839,381.7 | 4,147,580.3 | |||||||||||||||
Refinancing Charges |
462,632.7 | 450,198.3 | 476,775.2 | 723,323.4 | | |||||||||||||||
Total |
2,462,687.9 | 2,638,948.7 | 2,732,226.7 | 3,562,705.1 | 4,147,580.3 |
(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 Secretariat and Federal Budget Secretariat
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2021 Budget
The 2021 Budgetary Guidelines set a nominal primary deficit of R$250.89 billion (3.21% of estimated GDP) for the consolidated public sector in 2021. On April 22, 2021, the 2021 budget law (the 2021 Budget Law) was approved.
The following table sets forth the assumptions that were included in the 2021 Budget Law. There is no assurance that such assumptions will prevail, and, as such assumptions were made prior to the increasing effects of COVID-19, it is likely that such outcomes will vary.
Table No. 3
Principal 2021 Budget Assumptions
As of May, 2021 | ||||
Gross Domestic Product |
||||
Nominal GDP (billions of Reais) |
8,418.23 | |||
Real GDP Growth |
3.50% | |||
Inflation |
||||
Domestic Inflation (IPCA) |
5.05% |
Source: Federal Budget Secretariat (SOF) and Economic Policy Secretariat (SPE)
2022 Budget
The budgetary bill for 2022, sent to Congress on April 15, 2021, set a nominal primary deficit of R$177.49 billion (2.00)% of estimated GDP) for the consolidated public sector for 2022. The macroeconomic parameters contemplated by the bill anticipate inflation at 3.50% and a projected GDP growth of 2.50% for 2022.
Table No. 4
Principal 2022 Budget Assumptions
As of April, 2021 | ||||
Gross Domestic Product |
||||
Nominal GDP (billions of Reais) |
8,886.4 | |||
Real GDP Growth |
2.50% | |||
Inflation |
||||
Domestic Inflation (IPCA) |
3.50% |
Source: Federal Budget Secretariat (SOF) and Economic Policy Secretariat (SPE)
Fiscal Balance
In April 2021, the consolidated public sector registered a primary surplus of R$24.26 billion. For the 12-month period ended April 30, 2021, the accumulated balance registered a deficit of R$544.53 billion (7.08% of GDP).
In April 2021, the Brazilian Social Security System registered a deficit of R$18.70 billion, 47.52 % lower (in real terms) than the deficit registered in April 2020. For the 12-month period ended April 30, 2021, the deficit of the Brazilian Social Security System totaled R$261.02 billion (in real terms). At current market prices, the deficit accumulated in the 12-month period ended on April 30, 2021 reached R$248.99 billion.
PUBLIC DEBT
Public Debt Indicators
Public Sector Net Debt
As of April 30, 2021, Public Sector Net Debt was R$4,655.46 billion (60.53% of GDP) compared to R$3,845.30 billion (51.80% of GDP) as of April 30, 2020.
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General Government Gross Debt
As of April 30, 2021, General Government Gross Debt was R$6,665.28 billion (86.66% of GDP) compared to R$5,817.89 billion (78.38% of GDP) as of April 30, 2020.
Federal Public Debt
The following table presents Brazils Federal Public Debt profile as of May 31, 2021.
Table No. 5
Federal Public Debt Profile
May/2021 | May/2021 | Apr/2021 | Apr/2021 | May/2020 | May/2020 | |||||||||||||||||||
% | % | % | ||||||||||||||||||||||
Federal Public Debt (R$ bn) |
R$ | 5,171.2 | 100.0 | % | R$ | 5,089.3 | 100.0 | % | R$ | 4,250.9 | 100.0 | % | ||||||||||||
Domestic |
R$ | 4,940.5 | 95.5 | % | R$ | 4,852.3 | 95.3 | % | R$ | 4,032.9 | 94.9 | % | ||||||||||||
Fixed-rate |
R$ | 1,704.0 | 33.0 | % | R$ | 1,623.5 | 31.9 | % | R$ | 1,250.4 | 29.4 | % | ||||||||||||
Inflation-linked |
R$ | 1,393.8 | 27.0 | % | R$ | 1,409.1 | 27.7 | % | R$ | 1,117.9 | 26.3 | % | ||||||||||||
Selic rate |
R$ | 1,830.3 | 35.4 | % | R$ | 1,806.6 | 35.5 | % | R$ | 1,651.4 | 38.9 | % | ||||||||||||
FX |
R$ | 243.2 | 4.7 | % | R$ | 250.0 | 4.9 | % | R$ | 231.2 | 5.4 | % | ||||||||||||
Others |
| 0.0 | % | | 0.0 | % | | 0.0 | % | |||||||||||||||
External (R$ bn) |
R$ | 230.8 | 4.5 | % | R$ | 237.0 | 4.7 | % | R$ | 218.0 | 5.1 | % | ||||||||||||
Maturity Profile |
||||||||||||||||||||||||
Average Maturity (years) |
3.8 | 3.8 | 4.0 | |||||||||||||||||||||
Maturing in 12 months (R$ bn) |
R$ | 1,185.6 | R$ | 1,248.0 | R$ | 988.3 | ||||||||||||||||||
Maturing in 12 months (%) |
22.9% | 24.5% | 23.2% |
Source: National Treasury
On May 26, 2021, the National Treasury released a revised Annual Borrowing Plan for 2021.
Table No. 6
Annual Borrowing Plan 2021(1)
Limits for 2021 | ||||||||
Minimum | Maximum | |||||||
Stock of Federal Public Debt (R$ billion) |
||||||||
Federal Public Debt |
5,500.0 | 5,800.0 | ||||||
Composition% |
||||||||
Fixed Rate |
31.0 | 35.0 | ||||||
Inflation Linked |
26.0 | 30.0 | ||||||
Floating Rate |
33.0 | 37.0 | ||||||
Exchange Rate |
3.0 | 7.0 | ||||||
Maturity Profile |
||||||||
% Maturing in 12 months |
22.0 | 27.0 | ||||||
Average Maturity (years) |
3.4 | 3.8 |
(1) | As published on May 26, 2021. |
Source: National Treasury
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Public Debt Management
Golden Rule
In order to assure compliance with the Golden Rule in 2021, on March 15, 2021, the Federal Government requested from Congress an amendment to the 2021 Budgetary Guidelines granting the Federal Government access to an additional amount of R$453.7 billion for expenditure coverage. This request was approved by Congress on March 17, 2021 and by the President on March 22, 2021. On June 16, 2021, the Federal Government requested approval from Congress to access an additional line of credit (credito suplementar) in the amount of R$164 billion (the 2021 Additional Line of Credit). In an effort to grant flexibility within the budget, and as an exception to the Golden Rule, the 2021 Additional Line of Credit would authorize the issuance of debt securities by the National Treasury in an effort to realize revenue from credit operations, together with the creation of the additional line of credit.
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 2021, totaling R$38 billion as of June 2021. The first installment was paid on February 2021. The proceeds of BNDES Early Repayments will be used by the National Treasury exclusively for public debt relief and compliance with the Golden Rule.
External Public Debt
Securities Offerings in 2020
On December 8, 2020, the Federal Government issued an additional US$500 million of its 2.875% Global Bonds due 2025, with interest payable semi-annually every June and December until maturity in June 2025, an additional US$1.25 billion of its 3.875% Global Bonds due 2030, with interest payable semi-annually every June and December until maturity in December 2030, and an additional US$750 million of its 4.750% Global Bonds due 2050, with interest payable semi-annually every January and July until maturity in January 2050.
Regional Public Debt (State and Municipal)
Federal Government Guarantees
As of May 31, 2021, the Federal Government had paid a total of R$36.25 billion in liabilities incurred by states and municipalities. The largest payments were attributed to (i) the State of Rio de Janeiro (R$23.76 billion), which was granted pursuant to the Special Recovery Regime, (ii) the State of Minas Gerais (R$8.41 billion), (iii) the State of Goiás (R$1.93 billion), (iv) the State of Pernambuco (R$354.85 million), (v) the State of Rio Grande do Norte (R$332.25 million), and (vi) the State of Maranhao (R$ 280.16 million). The Federal Government is currently prevented by the STF from recovering any guarantees granted pursuant to the Special Recovery Regime.
Rating Agencies
In May 2021, Fitch Ratings confirmed Brazils long-term foreign currency sovereign credit rating at BB-, maintaining a negative outlook. In June 2021, Standard & Poors confirmed Brazils long-term foreign currency sovereign credit rating at BB-, maintaining a stable outlook.
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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 2031 Bonds
The 2031 bonds will:
| be issued in an aggregate principal amount of U.S.$1,500,000,000. |
| mature at par on September 12, 2031. |
| bear interest at 3.750%, calculated on the basis of a 360-day year consisting of twelve 30-day months, from July 7, 2021. |
| pay interest semi-annually in arrears on March 12 and September 12 of each year, starting on March 12, 2022, to be paid to the person in whose name the 2031 bond is registered at the close of business on the preceding March 9 or September 9. |
| 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 2031 bonds and certain other terms without your consent. |
| contain provisions described in Arbitration and Enforceability in the accompanying prospectus. |
| 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 2031 bonds. The 2031 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 2031 bonds ratably with payments being made under any other External Indebtedness of Brazil. |
| be recorded on, and transferred through, the records maintained by DTC and its direct and indirect participants, including Euroclear and Clearstream, Luxembourg. |
| 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. |
| be available in certificated form only under certain limited circumstances. |
| be redeemable at the option of Brazil before maturity. See Optional Redemption in this prospectus supplement. |
| not be entitled to the benefit of any sinking fund. |
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General Terms of the 2050 Bonds
The 2050 bonds will:
| be issued in an aggregate principal amount of U.S.$750,000,000. |
| mature at par on January 14, 2050. |
| bear interest at 4.750%, calculated on the basis of a 360-day year consisting of twelve 30-day months, from July 14, 2021. |
| pay interest semi-annually in arrears on January 14 and July 14 of each year, starting on July 14, 2021, to be paid to the person in whose name the 2050 bond is registered at the close of business on the preceding January 11 or July 11. |
| form a single series with the existing U.S.$3,250,000,000 aggregate principal amount of Brazils 4.750% global bonds due 2050 (ISIN US105756CB40, Common Code 207893234, CUSIP 105756 CB4) issued on November 14, 2019 and December 8, 2020. The 2050 bonds offered hereby will have the same terms and CUSIP number as, and will trade interchangeably with, the original 2050 bonds immediately upon settlement. |
| 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 2050 bonds and certain other terms without your consent. |
| contain provisions described in Arbitration and Enforceability in the accompanying prospectus. |
| 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 2050 bonds. The 2050 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 2050 bonds ratably with payments being made under any other External Indebtedness of Brazil. |
| be recorded on, and transferred through, the records maintained by DTC and its direct and indirect participants, including Euroclear and Clearstream, Luxembourg. |
| 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. |
| be available in certificated form only under certain limited circumstances. |
| be redeemable at the option of Brazil before maturity. See Optional Redemption in this prospectus supplement. |
| not be entitled to the benefit of any sinking fund. |
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 Brazils 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
S-26
(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
At any time for the 2031 bonds, or prior to July 14, 2049 (six months prior to the maturity date of the 2050 bonds) for the 2050 bonds, Brazil will have the right at its option, upon giving not less than 30 days notice, to redeem any series of global bonds, in whole or in part, at any time or from time to time prior to their maturity, at a redemption price equal to the principal amount thereof, plus the Make-Whole Amount (as defined below), plus accrued and unpaid interest on the principal amount of such series of global bonds to the date of redemption.
At any time on or after July 14, 2049 (six months prior to the maturity date of the 2050 bonds), Brazil will have the right at its option, upon giving not less than 30 days nor more than 60 days notice, to redeem the 2050 bonds prior to their maturity, in whole or in part, at any time or from time to time, at a redemption price equal to 100% of the principal amount of the 2050 bonds to be redeemed, plus accrued and unpaid interest and additional amounts, if any, on the principal amount of the 2050 bonds to, but excluding, the date of redemption.
Make-Whole Amount means, in respect of each series of global bonds, the excess of (i) the sum of the present values of each remaining scheduled payment of principal and interest on such series of global bonds (exclusive of interest accrued to the date of redemption), discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined below) plus (a) in the case of the 2031 bonds, 40 basis points, or (b) in the case of the 2050 bonds, 45 basis points, over (ii) the principal amount of such series of global bonds.
Treasury Rate means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity or interpolated maturity of the Comparable Treasury Issue (as defined below), assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.
Comparable Treasury Issue means the United States Treasury security or securities selected by an Independent Investment Banker (as defined below) as having an actual or interpolated maturity comparable to the remaining term of each series of global bonds to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of investment grade debt securities of a comparable maturity to the remaining term of such global bonds.
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Independent Investment Banker means one of the Reference Treasury Dealers (as defined below) appointed by Brazil.
Comparable Treasury Price means, with respect to any redemption date, (i) the average of the Reference Treasury Dealer Quotations (as defined below) for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotation or (ii) if Brazil obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such quotations.
Reference Treasury Dealer means (a) with respect to the 2031 bonds, each of Goldman Sachs & Co. LLC, HSBC Securities (USA) Inc. and three other dealers selected by Brazil, or their affiliates which are primary United States government securities dealers, and their respective successors, and (b) with respect to the 2050 bonds, each of BNP Paribas Securities Corp., Citigroup Global Markets Inc., Goldman Sachs & Co. LLC and three other dealers selected by Brazil, or their affiliates which are primary United States government securities dealers, and their respective successors; provided that if any of the foregoing shall cease to be a primary United States government securities dealer in New York City (a Primary Treasury Dealer), Brazil will substitute therefor another Primary Treasury Dealer.
Reference Treasury Dealer Quotation means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by Brazil, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to Brazil by such Reference Treasury Dealer at 3:30 p.m. New York time on the third business day preceding such redemption date.
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:
| you own at least U.S.$1,000,000 aggregate principal amount of the global bonds; |
| 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 |
| 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
S-28
be liable with respect to the payments. However, Brazils 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;
(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 Brazils 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:
| 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 |
| 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.
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In addition, so long as any series of global bonds is listed on the Luxembourg Stock Exchange and the rules of such exchange so require, Brazil will maintain a paying agent and transfer agent in Luxembourg.
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.
Certificated Securities
Brazil will issue global bonds in certificated form in exchange for the book-entry securities only if:
| 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; |
| 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 |
| 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, or at the office of the Luxembourg paying agent and transfer agent, 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 either the trustee in New York City or the Luxembourg paying agent and transfer agent, 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 Luxembourg transfer agent. 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.bourse.lu). 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.
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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.
Further Issues of the Global Bonds
From time to time, without the consent of holders of the 2031 bonds or the 2050 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 such additional debt securities are issued pursuant to a qualified reopening of the original series or are otherwise treated as part of the same issue of debt instruments as the original series for U.S. federal income tax purposes. Additional 2031 bonds and 2050 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):
| change the date on which any amount is payable on the global bonds of such series; |
| 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; |
| reduce the interest rate on the global bonds of such series; |
| 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); |
| change the currency or place of payment of any amount payable on the global bonds of such series; |
| modify Brazils obligation to make any payments on the global bonds of such series (including any redemption price therefor); |
| change the identity of the obligor under the global bonds of such series; |
| 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; |
| change the definition of uniformly applicable or reserve matter modification; |
| 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 |
| 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:
| 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 |
| 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 Brazils 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:
| a description of Brazils economic and financial circumstances which are, in Brazils opinion, relevant to the request for the proposed modification, a description of Brazils existing debts and description of any broad policy reform program and provisional macroeconomic outlook; |
| 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; |
| a description of Brazils 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. |
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 pledgees 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 SecuritiesMeetings 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:
| adding to Brazils covenants for the benefit of the holders; |
| surrendering any of Brazils rights or powers with respect to the global bonds of that series; |
| securing the global bonds of that series; |
| curing any ambiguity or curing, correcting or supplementing any defective provision in the global bonds of that series or the indenture; |
| 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 |
| 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, Luxembourg, 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, Luxembourg 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 DTCs, Euroclears or Clearstream, Luxembourgs 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:
| a limited-purpose trust company organized under the New York Banking Law; |
| a banking organization within the meaning of the New York Banking Law; |
| a member of the Federal Reserve System; |
| a clearing corporation within the meaning of the New York Uniform Commercial Code; and |
| 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, Luxembourg
Like DTC, Euroclear and Clearstream, Luxembourg 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, Luxembourg provide various services to their participants, including the safekeeping, administration, clearance and settlement, and lending and borrowing of internationally traded securities. Euroclear and Clearstream, Luxembourg 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, Luxembourg by clearing through or maintaining a custodial relationship with Euroclear or Clearstream, Luxembourg participants.
Ownership of the Global Bonds through DTC, Euroclear and Clearstream, Luxembourg
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 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, Luxembourg, if you are a participant in such systems, or
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indirectly through organizations that are participants in such systems. Euroclear and Clearstream, Luxembourg 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, Luxembourg 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, Luxembourg, 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. Euroclears or Clearstream, Luxembourgs 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, Luxembourg 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, Luxembourg
Since the purchaser determines the place of delivery, it is important for you to establish at the time of the trade where both the purchasers and sellers accounts are located to ensure that settlement can be on the desired value date. Although DTC, Euroclear and Clearstream, Luxembourg 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, Luxembourg, 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, Luxembourg 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, Luxembourg Participants
Participants in Euroclear and Clearstream, Luxembourg will transfer interests in the global bonds among themselves in the ordinary way according to the rules and operating procedures of Euroclear and Clearstream, Luxembourg governing conventional Eurobonds.
Trading Between a DTC Seller and a Euroclear or Clearstream, Luxembourg Purchaser
When the global bonds are to be transferred from the account of a DTC participant to the account of a Euroclear or Clearstream, Luxembourg participant, the purchaser must first send instructions to Euroclear or Clearstream, Luxembourg through a participant at least one business day prior to the settlement date. Euroclear or Clearstream, Luxembourg 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 participants account and the global bonds will be credited to the depositarys account. After settlement has been completed, DTC will credit the global bonds to Euroclear or Clearstream, Luxembourg, Euroclear or Clearstream, Luxembourg will credit the global bonds, in accordance with its usual procedures, to the participants account, and the participant will then credit the purchasers 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, Luxembourg 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.
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Participants in Euroclear and Clearstream, Luxembourg will need to make funds available to Euroclear or Clearstream, Luxembourg 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, Luxembourg 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, Luxembourg until the global bonds are credited to their accounts one day later.
As an alternative, if Euroclear or Clearstream, Luxembourg has extended a line of credit to a participant, the participant may decide not to pre-position funds, but to allow Euroclear or Clearstream, Luxembourg to draw on the line of credit to finance settlement for the global bonds. Under this procedure, Euroclear or Clearstream, Luxembourg would charge the participant overdraft charges for one day, assuming that the overdraft would be cleared when the global bonds were credited to the participants 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 participants overdraft charges. Of course, this result will depend on the cost of funds (i.e., the interest rate that Euroclear or Clearstream, Luxembourg 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, Luxembourg for the benefit of Euroclear or Clearstream, Luxembourg 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, Luxembourg Seller and DTC Purchaser
Due to time zone differences in their favor, Euroclear and Clearstream, Luxembourg 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, Luxembourg through a participant at least one business day prior to the settlement date. Euroclear or Clearstream, Luxembourg will then instruct its depositary to credit the global bonds to the DTC participants account and receive payment. The payment will be credited in the account of the Euroclear or Clearstream, Luxembourg 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, Luxembourg participant selling the global bonds has a line of credit with Euroclear or Clearstream, Luxembourg 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, Luxembourg and that purchases global bonds from a DTC participant for credit to a Euroclear or Clearstream, Luxembourg accountholder should note that these trades would 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, Luxembourg for one day (until the purchase side of the day trade is reflected in its Euroclear or Clearstream, Luxembourg account) in accordance with the clearing systems 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 borrowers Euroclear or Clearstream, Luxembourg account in order to settle the sale side of the trade; or |
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| 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, Luxembourg accountholder. |
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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 is a summary of material U.S. federal income tax considerations that may be relevant to a holder of a global bond. This summary is based on the provisions of the U.S. Internal Revenue Code of 1986, as amended (the Code), applicable U.S. Treasury regulations, laws, rulings and decisions now in effect, all of which are subject to change, possibly with retroactive effect. This summary deals only with beneficial owners of global bonds that purchase the global bonds at their initial offering price and hold the global bonds as capital assets. It does not address particular tax considerations that may be applicable to investors that are subject to special tax rules, such as banks, tax-exempt entities, insurance companies, regulated investment companies, dealers in securities or currencies, traders in securities electing to mark their positions to market, persons that will hold global bonds as a position in a straddle or conversion transaction, or as part of a synthetic security or other integrated financial transaction, entities taxed as partnerships or the partners therein, persons subject to the alternative minimum tax, U.S. expatriates, nonresident alien individuals present in the United States for more than 182 days in a taxable year, or persons that have a functional currency other than the U.S. dollar.
This summary addresses only U.S. federal income tax consequences, and does not address consequences arising under state, local, non-U.S. tax laws, U.S. federal estate, gift or other tax laws, special timing rules prescribed under section 451(b) of the Code, or the Medicare tax on net investment income. Investors should consult their own tax advisors in determining the tax consequences to them of holding global bonds under such tax laws, as well as the application to their particular situation of the U.S. federal income tax considerations discussed below.
As used herein, a U.S. holder is a beneficial owner of a global bond that is, for U.S. federal income tax purposes, a citizen or resident of the United States or a U.S. domestic corporation or that otherwise is subject to U.S. federal income taxation on a net income basis in respect of the global bond. A non-U.S. holder is a beneficial owner of a global bond that is an individual, corporation, foreign estate, or foreign trust, that is not a U.S. holder.
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U.S. holders
Qualified reopening. The issuance of the 2050 bonds will be treated as a qualified reopening of the original 2050 bonds for U.S. federal income tax purposes. Accordingly, the 2050 bonds offered hereby will be deemed for U.S. federal income tax purposes to have the same issue date, the same issue price and the same adjusted issue price as the original 2050 bonds.
Payments of interest. Payments of interest generally will be taxable to a U.S. holder as ordinary interest income at the time that such payments are accrued or are received in accordance with the U.S. holders method of tax accounting. Such income will generally constitute foreign source passive category income for purposes of the U.S. foreign tax credit rules. However, the portion of the first interest payment on a 2050 global bond that represents a return of accrued interest that a U.S. holder paid as part of the purchase price for the 2050 bond offered hereby (pre-issuance accrued interest), if any, will not be treated as an interest payment, and thus will not be includible in income, for U.S. federal income tax purposes. It is expected, and this discussion assumes, that the global bonds will be issued with less than a de minimis amount of original issue discount (OID).
If a U.S. holder purchases a global bond at a price (excluding accrued interest, which will be excluded from income) greater than its stated principal amount, the U.S. holder will be considered to have purchased the global bond at a premium, and may elect to amortize such premium as an offset to interest income, using a constant-yield method, over the remaining term of the global bond. A U.S. holder that elects to amortize such premium must reduce its tax basis in the global bonds by the amount of the premium amortized during its holding period. Such election, once made, generally applies to all debt instruments held or subsequently acquired by the U.S. holder on or after the first taxable year to which the election applies and may not be revoked without the consent of the U.S. Internal Revenue Service (the IRS).
Purchase, sale and retirement. A U.S. holder that sells, exchanges or otherwise disposes of the global bonds generally will recognize capital gain or loss equal to the difference between the amount realized on the transaction and its tax basis in the global bonds (except that any amount attributable to accrued and unpaid interest, other than pre-issuance accrued interest, if any, will be treated as a payment of interest for U.S. federal income tax purposes, which will be taxable as described above). A U.S. holders tax basis in a global bond generally will be equal to the amount that the U.S. holder paid for the global bond reduced by any amortized premium (as described above) and any previously received payment of pre-issuance accrued interest. Any gain or loss recognized on a taxable disposition of a global bond will be capital gain or loss. If, at the time of the sale, exchange, redemption or other taxable disposition of a global bond, a U.S. holder held the global bond for more than one year, the gain or loss will be long-term capital gain or loss. Otherwise, the gain or loss will be short-term capital gain or loss. Long-term capital gains realized by a non-corporate U.S. holder are generally eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations.
A U.S. holders gain or loss on the sale, redemption, retirement or other taxable disposition of a global bond will generally be U.S. source gain or loss. Accordingly, in the event that Brazilian tax were imposed on the sale or disposition of the global bonds, a U.S. holder may not be able to fully utilize any U.S. foreign tax credits arising from such tax unless the U.S. holder has other foreign source income. Prospective investors should consult their own tax advisors as to the U.S. tax and foreign tax credit implications of such sale, redemption, retirement or other taxable disposition of a global bond.
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Non-U.S. holders
Subject to the discussion of backup withholding below, a non-U.S. holder (as defined above) generally will not be subject to U.S. federal income tax on payments of interest on the global bonds. In addition, a non-U.S. holder generally will not be subject to U.S. federal income tax on gain realized on the sale, exchange, redemption or other taxable disposition of the global bonds.
Information Reporting and Backup Withholding
Payments in respect of the global bonds that are paid within the United States or through certain U.S.-related financial intermediaries are generally subject to information reporting, unless the U.S. taxpayer is an exempt recipient that establishes its exemption when required. Such payments to a non-exempt recipient that is a U.S. taxpayer may also be subject to backup withholding, unless the U.S. taxpayer provides an accurate taxpayer identification number and certifies that it has not lost its exemption from backup withholding. Non-U.S. taxpayers are generally exempt from backup withholding, but may have to comply with certification procedures to prove their entitlement to this exemption. The amount of any backup withholding from a payment to a U.S. or non-U.S. taxpayer will be allowed as a credit against the taxpayers U.S. federal income tax liability and may entitle the taxpayer to a refund, provided that the required information is timely furnished to the IRS.
Certain U.S. taxpayers that own specified foreign financial assets with an aggregate value in excess of U.S.$50,000 on the last day of the taxable year or U.S.$75,000 at any time during the taxable year may be required to file an information statement along with their tax returns, currently on IRS Form 8938, with respect to such assets. Specified foreign financial assets include any financial accounts held at a non-U.S. financial institution, as well as securities issued by a non-U.S. issuer (which will generally include global bonds) that are held for investment and are not held in accounts maintained by financial institutions. Higher reporting thresholds apply to certain individuals living abroad and to certain married individuals. Regulations extend this reporting requirement to certain entities that are treated as formed or availed of to hold direct or indirect interests in specified foreign financial assets based on certain objective criteria. U.S. taxpayers who fail to report the required information could be subject to substantial penalties. In addition, the statute of limitations for assessment of tax would be suspended, in whole or part.
Prospective investors should consult their own tax advisors concerning the application of these rules to their investment in the global bonds, including the application of the rules to their particular circumstances.
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Brazil and the underwriters for the offering named below have entered into a terms agreement dated June 29, 2021 with respect to the global bonds. Subject to certain conditions, each underwriter has severally agreed to purchase the principal amount of the global bonds indicated in the following table:
Underwriter |
Principal Amount of the 2031 bonds |
Principal Amount of the 2050 bonds |
||||||
Banco Bradesco BBI S.A. |
U.S.$ | 500,000,000 | U.S.$ | 250,000,000 | ||||
Goldman Sachs & Co. LLC |
U.S.$ | 500,000,000 | U.S.$ | 250,000,000 | ||||
HSBC Securities (USA) Inc. |
U.S.$ | 500,000,000 | U.S.$ | 250,000,000 | ||||
|
|
|
|
|||||
Total |
U.S.$ | 1,500,000,000 | U.S.$ | 750,000,000 | ||||
|
|
|
|
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 (a) for the 2031 bonds, accrued interest, if any, from July 7, 2021, and (b) for the 2050 bonds, accrued interest from January 14, 2021 to, but not including July 7, 2021, the date Brazil expects to deliver the 2050 bonds offered by this prospectus supplement, and any additional interest to the date of delivery, if later than July 7, 2021. 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 underwriters right to reject any order in whole or in part.
Bradesco Securities Inc. will act as agent of Banco Bradesco BBI S.A. for sales of the global bonds in the United States of America. Banco Bradesco BBI S.A. is not a broker-dealer registered with the SEC, and therefore may not make sales of any global bonds in the United States to U.S. persons. Banco Bradesco BBI S.A. and Bradesco Securities Inc. are affiliates of Banco Bradesco S.A.
It is expected that delivery of the global bonds will be made against payment therefor on or about July 7, 2021. 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 July 7, 2021, 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 market price of the global bonds. As a
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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.$200,000.00.
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 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.
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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 doffre au public de valeurs mobilières ou en vue de ladmission 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.
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 purchasers province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchasers 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.
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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: JUNE 29, 2021. 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. |
INFORMACIÓN A LOS INVERSIONISTAS CHILENOS
DE CONFORMIDAD CON LA LEY N° 18.045, DE MERCADO DE VALORES Y LA NORMA DE CARÁCTER GENERAL N° 336 (LA NCG 336), DE 27 DE JUNIO DE 2012, DE LA COMISIÓN PARA EL MERCADO FINANCIERO (LA CMF), LOS BONOS PUEDEN SER OFRECIDOS PRIVADAMENTE A CIERTOS INVERSIONISTAS CALIFICADOS, A LOS QUE SE REFIERE LA NCG 336 Y QUE SE DEFINEN COMO TALES EN LA NORMA DE CARÁCTER GENERAL N° 216, DE 12 DE JUNIO DE 2008 Y EN LA NORMA DE CARÁCTER GENERAL Nº 410, DE 27 DE JULIO DE 2016, AMBAS DE LA CMF.
LA SIGUIENTE INFORMACIÓN SE PROPORCIONA A POTENCIALES INVERSIONISTAS DE CONFORMIDAD CON LA NCG 336:
1. | LA OFERTA DE LOS BONOS COMIENZA EL 29 DE JUNIO DE 2021, Y SE ENCUENTRA ACOGIDA A LA NCG 336; |
2. | LA OFERTA VERSA SOBRE VALORES NO INSCRITOS EN EL REGISTRO DE VALORES O EN ELREGISTRO DE VALORES EXTRANJEROS QUE LLEVA LA CMF, POR LO QUE TALES VALORES NO ESTÁN SUJETOS A LA FISCALIZACIÓN DE LA CMF; |
3. | POR TRATARSE DE VALORES NO INSCRITOS EN CHILE NO EXISTE LA OBLIGACIÓN POR PARTE DEL EMISOR DE ENTREGAR EN CHILE INFORMACIÓN PÚBLICA SOBRE ESTOS VALORES; Y |
4. | LOS BONOS NO PODRÁN SER OBJETO DE OFERTA PÚBLICA EN CHILE MIENTRAS NOSEAN INSCRITOS EN EL REGISTRO DE VALORES CORRESPONDIENTE DE LA CMF. |
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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 |
(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 (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
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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 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 dinvestisseurs) 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:
Each manager represents, warrants and agrees that the global bonds have not been offered or sold and will not be offered or sold in Hong Kong by means of any document other than (a) in circumstances which do not constitute an offer to the public within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32, Laws of Hong Kong) (the CWUMPO), or (b) to professional investors as defined in the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) (the SFO) and any rules made thereunder, or (c) in other circumstances which do not result in the document being a prospectus as defined in the CWUMPO.
No advertisement, invitation or document relating to the global bonds has been or will be issued, or has been or will be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to the 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 thereunder.
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
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(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 New 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);
(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; and/or
(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.
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The applicability of the selling restrictions provided by Luxembourg law will depend on whether the invitation is to be treated as a public offer or whether it can be made under one of the exemptions of Article 1 (4) of the Prospectus Regulation (a private placement).
For the purposes of this provision, the expression an offer of New Bonds to the public in relation to any New Bonds in Luxembourg means the communication in any form and by any means of sufficient information on the terms of the offer and the New Bonds to be offered so as to enable an investor to decide to purchase the New 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:
Each underwriter has represented and agreed that it has not offered, sold or distributed the global bonds, nor will it carry out any subsequent resale of the global bonds 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); |
(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,
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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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The validity of the global bonds will be passed upon for Brazil by Ricardo Soriano de Alencar, the Procurador-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 Cleary Gottlieb Steen & Hamilton 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 Paulo Roberto Nunes Guedes, Minister of Economy.
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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
The original 2050 bonds are listed, and 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 Brazils 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 2019 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). Brazils SEC filings (except for certain exhibits) are also available to the public from the SECs website at http://www.sec.gov.
The 2019 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, Luxembourg (2031 bonds: ISIN US105756CE88, CUSIP 105756 CE8; 2050 bonds: ISIN US105756CB40, CUSIP 105756 CB4).
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PROSPECTUS
FEDERATIVE REPUBLIC OF BRAZIL
U.S.$10,000,000,000
Debt Securities
Warrants
Brazil may offer up to U.S.$10,000,000,000 (or its equivalent in other currencies) aggregate principal amount of its debt securities with or without 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 Brazils external indebtedness issued prior to July 2, 2015, Brazil may amend the payment provisions of the securities and other reserve 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 outstanding 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.
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 agents designated from time to time or through underwriters or dealers. 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 the supplements carefully. You should not assume that the information in this prospectus or any prospectus supplement or any document incorporated by reference 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 adequate, accurate or complete. Any representation to the contrary is a criminal offense.
December 28, 2017.
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THE ISSUER
The Federative Republic of Brazil
Ministry of Economy
Secretaria do Tesouro Nacional
Esplanada dos Ministérios
Brasília, DF
Brazil
TRUSTEE, PAYING AGENT AND TRANSFER AGENT
The Bank of New York Mellon 240 Greenwich Street New York, New York 10286 United States | ||
LEGAL ADVISORS | ||
To Brazil, as to U.S. law:
To Brazil, as to Brazilian law: |
To the underwriters, as to U.S. law:
To the underwriters, as to Brazilian law: |
LUXEMBOURG LISTING AGENT
The Bank of New York Mellon SA/NV,
Luxembourg Branch
Vertigo Building-Polaris
2-4 rue Eugène Ruppert
L-2453 Luxembourg
Federative Republic of Brazil
U.S.$1,500,000,000 3.750% Global Bonds due 2031
U.S.$750,000,000 4.750% Global Bonds due 2050
PROSPECTUS SUPPLEMENT
Joint Lead Managers and Joint Bookrunners
Bradesco BBI | Goldman Sachs & Co. LLC | HSBC |
June 30, 2021