Export Prepayment transactions are widely entered into by medium- and large-sized Brazilian exporters and funded by foreign banks, funds, and trading companies, as lenders, to advance proceeds of export.
Also known as ‘Pré-Pagamento de Exportação’ (PPE), this transaction aim to finance a portion of the massive volume of Brazilian exports, which totaled US$348 billion in 2025.
Based on recent experience, here are four legal insights for foreign banks, funds, and trading companies when structuring export prepayments with Brazilian exporters:
1. Conduct a Risk Assessment of the Potential Export Prepayment, Exporter, Guarantors, and Collateral: Risk assessment is one of the most critical elements for financiers evaluating PPE transactions.
Over the past three years, the risk assessment process in Brazil has significantly improved thanks to the use of technological tools and access to key data and documentation. These enable the identification and anticipation of material risks regarding borrowers/exporters and their businesses, guarantors, and collateral.
2. Conduct Detailed Legal Due Diligence on the Exporter, Guarantors, and Collateral: Legal due diligence is a “must-do” in export prepayment transactions. It allows financiers to gain a true understanding of material risks that could prevent the transaction from proceeding or, if the deal closes, identify issues requiring careful post-closing monitoring.
Aspects related to (i) the borrowing company and guarantors, such as their financial, corporate, and tax status, as well as debts, defaults, and litigation; (ii) the underlying assets—such as their formation, third-party rights, and encumbrances; and (iii) real and personal guarantees (sureties/guarantees) are always analyzed with great care.
3. Draft the PPE Agreement and Collateral Instrument Incorporating Measures for Default Scenarios: The Export Prepayment Agreement is executed not only to ensure regulatory compliance and outline the terms, conditions, and obligations of the parties involved, but primarily to protect lenders in the event of monetary or non-monetary default.
Structuring PPE transactions with this perspective in mind results in legal instruments capable of effectively protecting lenders and mitigating risks during periods of financial stress or default.
4. Monitor Post-Closing Compliance with Obligations by the Borrower, Guarantors, and Collateral: Close, ongoing monitoring of compliance by the borrower and guarantors, as well as the status of collateral, following the signing, closing, and disbursement of the transaction provides lenders with a realistic view of the operation’s progress.
This enables immediate decision-making and action regarding necessary adjustments or default situations, and offers a strategic advantage to lenders, allowing for the anticipation of events that could have a negative impact.
Given the multi-billion-dollar annual volume of Export Prepayment transactions entered into with Brazilian exporters, foreign banks, funds, and trading companies should follow the steps outlined above to ensure proper structuring and to mitigate the risks inherent in these operations.
