Consist of granting foreign currency-denominated guarantees. Some foreign trade transactions take place through international tenders that require bank guarantees.
- Commission.
- Expenses remittable to cover the costs of advice and confirmation by the overseas bank, when applicable.
The most common and recognized are:
Guarantee | Coverage | Amount | Term |
Bid Bond | Reimbursement of losses arising from the bidder’s refusal to sign the agreement after winning a tender. | Usually 5% to 10% of the amount of the Proposal | Term of the tender. |
Performance Bond | Reimbursement of losses caused by non-fulfillment of the agreement between the parties. | Reimbursement amount as set forth in the agreement. | Tenor of the Agreement. |
Advance Payment Guarantee | Reimbursement of advance payments under an agreement between the parties which has not been fulfilled. | The amount of the advance payment plus charges. | Tenor of the Agreement. |
Stand By | Repayment of loans. | Loan amount plus charges. | Term of the Loan. |
Aval | On foreign currency drafts issued by a foreign exporter of goods and services against a Brazilian importer. | Amount of the draft. | Term of the draft. |