The capital market is a core component of the financial system, bridging the distance between investors looking for opportunities and companies or entities in need of funds for their projects.
It facilitates project and business funding through the issue of securities or assets to raise funds directly in the market, offering investors the chance to diversify their portfolios, and potentially achieve higher returns.
Real estate industries such as residential and large commercial enterprises, infrastructure, power and mobility, and agribusiness, have been operating with the capital market, working closely with a number of market makers, managers, and distributors, to capitalize on their agility to grow their business.
In real estate, for instance, Real Estate Investment Funds (FIIs) and Real Estate Receivables Certificates (CRIs) are widely used to fund projects.
In agribusiness, products such as Agribusiness Receivables Certificates (CRAs) and Agribusiness Letters of Credit (LCAs) make it possible to raise funds for producers and companies in the industry.
In turn, infrastructure projects leverage Credit Rights Investment Funds (FIDCs) for Infrastructure, and incentivized debentures, as mechanisms to finance long-term projects, such as those aimed at highways, power, and sanitation.
According to DANTE ALBERTO JEMMA COBUCCI, founding partner of ENTRY CAPITAL, a company specializing in investment fund management and finance structuring, “it is healthy for a Company to build a connection with the capital market, since it may resort, in several scenarios, to investors, debt contracting, partnerships, and new ventures, relying on its effective governance, consistency, speed, and creativity.”
In Brazil, the capital market is regulated by the Brazilian Securities and Exchange Commission (CVM), responsible for supervising, governing, and furthering the securities market, with the Central Bank (Bacen) playing a key role in safeguarding the stability and solidity of the domestic financial system, such as by overseeing financial institutions.
Investments in the capital market are targeted at either fixed income or variable income as the best known assets for investors, each with their own characteristics.
Whereas the returns of fixed income are predictable, variable income usually follows market trends.
That being said, all types of investments pose risks that should be borne in mind, such as market risk, which is impacted by economic or political factors, risk of default by securities issuers, asset liquidity risk, operational risk brought by nonconforming processes, and risk of fluctuations in interest and exchange rates.
Part of these risks can be mitigated through contractual clauses, such as collaterals, specific obligations imposed on issuers, and repo agreements. For instance, collateral clauses may be established to ensure that, in the event of default, investors have access to certain issuer assets. In addition, specific obligations may also be imposed on issuers, ranging from certain financial ratios to repo agreements.
As for contractual structures, many instruments can help control business relationships, aiming at specific needs, such as subscription agreements, distribution agreements, brokerage agreements, and custody agreements.
And the financial market also has distinct types of operations, with different characteristics and purposes. One of them is structured investments geared to funding certain capital-intensive projects, also called project finance, the issuance of shares through public offerings or private investment rounds, and M&A transactions.
It is vitally important that society, individually or organized in companies and entities, develops increasing engagement with the financial market, its investment and funding alternatives, its regulation, instruments, and forms of protection, let alone its multiple forms of operation, in order to develop alternative means of investment, and propel the domestic economy.
Available in: https://www.migalhas.com.br/depeso/439886/desmistificando-o-mercado-de-capitais-e-suas-estruturas-contratuais
MAURÍCIO AUDE and EVANDRO CÉSAR ALEXANDRE DOS SANTOS
REFERENCES
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<https://www.gov.br/investidor/pt-br/investir/tipos-de-investimentos/fundos-de-investimentos/risco>
<https://www.anbima.com.br/pt_br/especial/mercado-capitais-para-voce.htm>
<https://borainvestir.b3.com.br/objetivos-financeiros/investidor-qualificado-entenda-a-diferenca-entre-os-tipos/>
<https://www.b3.com.br/data/files/72/11/E5/B6/543BF7100BE67AF7AC094EA8/Manual%20de%20Administracao%20de%20Risco%20da%20Camara%20B3.pdf>
< https://traivefinance.com/blog/mercado-de-capitais/mercado-de-capitais-para-o-agronegocio/>
<https://www.infomoney.com.br/guias/direito-de-subscricao/>
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Main capital market laws
Provides for the securities market and creates the Securities and Exchange Commission.
Provides for corporations.
Establishes the Inspection Rate for securities markets, and makes other measures.
Provides for the constitution and tax regime of Real Estate Investment Funds and Investment Funds in Agro-Industrial Production Chains (Fiagro); and makes other provisions. (Wording given by Law No. 14.130, of 2021)
Provides for crimes of “laundering” or concealment of assets, rights and values; the prevention of the use of the financial system for the offenses provided for in this Law; creates the Financial Activities Control Board – COAF, and makes other provisions.
Provides for the regulation, enforcement, and supervision of securities markets or collective investment contracts, and makes other measures.
Provides for the performance of chambers and providers of clearing and settlement services, within the scope of the Brazilian payment system, and makes other provisions.
Amends and adds provisions in Law No. 6.404, of December 15, 1976, which provides for Corporations Act, and Law No. 6.385, of December 07, 1976, which provides for the securities market, and creates the Securities and Exchange Commission.
Provides for the equity of real estate development, Real Estate Letter of Credit, Real Estate Credit Bill, and Bank Credit Bill, amends Decree-Law No. 911, of October 01, 1969, Laws No. 4.591, of December 16, 1964, No. 4.728, of July 14, 1965, and No. 10.406, of January 10, 2002, and makes other provisions.
Provides for the Agricultural Certificate of Deposit – CDA, the Agricultural Warrant – WA, the Agribusiness Certificate of Credit Rights – CDCA, the Agribusiness Letter of Credit – LCA, and the Agribusiness Receivables Certificate – CRA, gives new wording to the provisions of Laws No. 9.973, of May 29, 2000, which provides for the storage system of agricultural products, No. 8.427, of May 27, 1992, which provides for the granting of an economic subsidy in rural credit operations, No. 8.929, of August 22, 1994, which establishes the Rural Product Bill – CPR, No. 9.514, of November 20, 1997, which provides for the Real Estate Financing System, and establishes the fiduciary sale of real estate, and changes the Inspection Rate referred to in Law No. 7.940, of December 20, 1989, and other measures.
Regulates the court-supervised and out-of-court reorganization and bankruptcy of business owners and business companies.
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