The volume of commercial paper issued in the first half of this year was low – R$ 7.5 billion in 20 operations – but that's not the most noteworthy thing about them. The odd thing is that none of them was registered with the Brazilian Securities and Exchange Commission (CVM) or applied for a waiver of registration. In 2009, CVM-registered promissory note offerings reached R$ 9.5 billion.

The radical change is explained by Instruction 476, which automatically grants exemption from registration in the case of public offerings with restricted distribution efforts. "The rule works because there's only a limited number of buyers", observes João Carlos Zani, a director at BBI, Bradesco’s investment banking division. Indeed, commercial paper and Instruction 476 seem made for each other. To benefit from the rule, issuers must offer the security to 50 qualified investors or less, of which a maximum of 20 may acquire the product. Also, each investor must invest at least R$ 1 million.

The reason for the general slowdown in commercial paper offerings, registered or otherwise, is the economic scenario. In times of calm, companies are able to raise funds at attractive costs by issuing longer term securities. Precisely the opposite happened in 2008 during the crisis, when sky-high funding prices led companies to favor quickly maturing instruments. At that time, R$ 25.9 billion were raised via commercial paper – far above standard levels. Few companies need such short-term funding at present. "They have the option of issuing debentures, also under Instruction 476, with longer maturity periods", Zani says.