The Brazilian minister of finance yesterday (Wednesday) unveiled plans to introduce covered bonds in Brazil as part of a package of measures aimed at boosting the country’s housing market and improving the availability of credit.

Minister Guido Mantega (pictured) said that the introduction of the new, dual recourse instruments, letras imobiliárias garantidas (guaranteed real estate notes), is aimed at increasing the availability of funding for housing finance.

In a presentation accompanying the minister’s announcement, several advantages of the new instrument were cited, including: legal certainty in long term financing; a reduction in property financing costs; and the ability to attract investors, including foreign investors.

It is understood that the new instruments, as long as they are of maturities of at least two years, will be exempt from income tax.

The overall package includes other measures relating to home equity loans, the creation of a new property register, and enhancing loan recovery prospects.

“What everyone wants is to increase competitiveness, reduce costs and simplify transactions,” said Mantega.

Housing finance specialists in Brazil had been aware that the ministry of finance had been working on a draft law but several recently told The CBR that they had not seen any progress since last year and were not expecting it to be finalised soon.

Interest in covered bonds in Latin America has been growing in recent years. In August 2013 Banco Santander Chile sold the first issue under Chilean covered bond legislation that had been unveiled the previous year, while in May 2012 Panama’s Global Bank issued a $200m (Eu150m) contractually-based deal. The Chilean issue was sold domestically and the Panamanian internationally. Covered bond projects have also been underway in countries such as Mexico and Uruguay.