LCI and LCA: What They Are and Whether They Are Worth Investing In
Have you heard about investments that are exempt from income tax for individuals and also protected by the Credit Guarantee Fund? That’s exactly what Real Estate Credit Letters (LCI) and Agribusiness Credit Letters (LCA) offer — at least on paper. But before rushing to the bank or brokerage to seek these products, it’s worth understanding how they work, what their real advantages are, and where the risks lie that many people overlook.
LCI and LCA have gained popularity in recent years by combining two attractions that Brazilian investors appreciate: tax exemption and relative security. In an environment of high interest rates, like the one Brazil has been experiencing, these securities often stand out on the shelves of banks and investment platforms. But popularity is not synonymous with suitability for all profiles.
In this article, we will clearly explain what these securities are, how they work, what risks are involved, and how to assess whether it makes sense to include them in your financial strategy. No promises of quick wealth and with all the honesty the topic demands.
What Are LCI and LCA
The Real Estate Credit Letter (LCI) and the Agribusiness Credit Letter (LCA) are fixed income securities issued by financial institutions — mainly banks — with the aim of raising funds to finance specific sectors of the economy.
- The LCI directs the funds raised to the real estate sector, financing credits such as housing loans and construction projects.
- The LCA channels the funds to agribusiness, financing rural producers, cooperatives, and companies in the sector.
In practical terms for the investor, this distinction has little impact on the day-to-day. What matters is understanding that by purchasing an LCI or LCA, you are lending money to the issuing bank, which in turn will use it (at least formally) for these purposes. In return, you receive an agreed-upon remuneration at the time of application, plus the exemption from income tax for individuals — a rule provided for in Brazilian legislation to encourage these sectors.
The regulation of these securities is carried out by the Central Bank of Brazil and the Securities and Exchange Commission (CVM), depending on the product format.
How Remuneration Works
LCI and LCA can be remunerated in three main ways:
- Post-fixed: yield linked to an index, usually a percentage of the CDI (Interbank Deposit Certificate), which closely follows the Selic rate. Example: “100% of CDI” or “95% of CDI”.
- Pre-fixed: interest rate defined at the time of application. You know exactly how much you will receive at the end of the term.
- Hybrid (IPCA +): combine a fixed rate with the variation of the IPCA (official inflation index). They protect purchasing power and still offer a real gain.
> Attention: The Selic rate and the CDI are defined by the Monetary Policy Committee (Copom) and the interbank market, respectively, and change over time. To check current values, visit the official website of the Central Bank at bcb.gov.br. Never make an investment decision based on rates mentioned in articles without verifying if they are still valid.
Income Tax Exemption: Truly Understand It
One of the main attractions of LCI and LCA is the income tax exemption for individuals on earnings. This is provided for in Law No. 11,033/2004 and complementary legislation.
For those who invest in a CDB (Bank Deposit Certificate), for example, earnings are taxed according to the IR regressive table:
| Application Term | IR Rate |
|---|---|
| Up to 180 days | 22.5% |
| From 181 to 360 days | 20% |
| From 361 to 720 days | 17.5% |
| Above 720 days | 15% |
Source: Federal Revenue of Brazil
LCI and LCA, being exempt, have a real advantage of net profitability compared to taxed products with equivalent rates. However, it is important to make the correct comparison: an LCA that pays 88% of the CDI may yield less, in practice, than a CDB that pays 110% of the CDI, depending on the term and applicable IR rate.
How to compare: always calculate the net profitability of each option, deducting the IR when applicable. Investment platforms and financial calculators available online for free help in this comparison.
Terms and Liquidity: The Point Many Forget
This is possibly the most underestimated aspect by those who invest in LCI and LCA.
Since January 2024, the National Monetary Council (CMN) has increased the minimum maturity terms of these securities:
- LCI: minimum term of 12 months (previously 90 days)
- LCA: minimum term of 9 months (previously 90 days)
This means that, in many cases, you will not be able to redeem the money before maturity. Some issues allow liquidity in the secondary market, but this may involve negotiating the security at a discount (i.e., receiving less than you applied).
Before investing, explicitly ask:
- What is the maturity term?
- Is there daily liquidity? Under what conditions?
- If I need to exit early, what mechanism is available?
Never apply in LCI or LCA resources that may be needed in the short term. These securities do not replace the emergency reserve.
Security: The Role of the FGC
LCI and LCA issued by financial institutions are covered by the Credit Guarantee Fund (FGC), a private non-profit entity that protects investors in case of bankruptcy of the issuing bank.
The current coverage limits, according to the FGC, are:
- R$ 250,000 per CPF per financial institution
- R$ 1,000,000 per CPF in total, within a four-year period (global limit)
This means that if the issuing bank fails, the FGC covers your application up to these limits. Amounts above this are not guaranteed protection.
> To check the current limits and participating institutions, visit the official FGC website at fgc.org.br.
Important: the FGC is not a federal government guarantee. It is a private fund maintained by the financial institutions themselves. In scenarios of severe systemic crisis, its coverage capacity may be limited — a real risk, although historically infrequent in Brazil.
Advantages and Disadvantages: A Balanced View
| LCI / LCA | |
|---|---|
| Advantages | Income tax exemption for individuals; FGC coverage; diversity of terms and indexes; issuance by large banks and fintechs |
| Disadvantages | Low liquidity (especially after the new minimum term rules); issuer credit risk; profitability may be lower than other taxed products; securities from smaller banks have higher risk |
Additionally, it is worth noting that in 2024 discussions arose in Congress and the government about possible taxation of LCI and LCA to equalize competition with other securities. The rules may change. Always check the current legislation before applying.
If you are thinking about how to structure a portfolio to live off income in the future, the article How much do I need to save to live off income? can help put these investments in perspective within a larger plan.
Is It Worth Investing in LCI and LCA?
There is no single answer to this question — and any article or seller claiming otherwise deserves skepticism. The decision depends on individual variables such as:
- Your investment term: if you need the money in less than 9 to 12 months, these securities are probably not suitable.
- Your risk profile: conservative investors tend to prefer large banks, even if they pay less. Smaller banks usually offer more attractive rates but with higher credit risk.
- Comparison with alternatives: Treasury Direct, CDBs, fixed income funds, and other instruments should be evaluated side by side, always on net profitability.
- The interest rate moment: in cycles of rising interest rates, post-fixed securities tend to benefit; in cycles of decline, pre-fixed and hybrid ones may be more advantageous.
For investors who already have their emergency reserve formed and seek profitability in the medium and long term with some security, LCI and LCA can be interesting components of a diversified portfolio. But they are not — and never were — the only path, nor necessarily the best for everyone.
Conclusion: Information Before Any Decision
LCI and LCA are legitimate, regulated products with characteristics that make them attractive to a portion of Brazilian investors. The IR exemption is real, the FGC coverage exists within the established limits, and the variety of indexes offers flexibility.
But like any investment, they carry risks — of liquidity, issuer credit, and even regulatory, given the possibility of changes in tax rules. Investing without understanding these points is as risky as not investing.
Before applying, compare net profitability, check the term carefully, verify the solidity of the issuing institution, and confirm the FGC limits. And, if possible, consult an investment professional. Small differences in information can represent significant differences in results over time.
This content is for educational and informational purposes only. It does not constitute investment advice, an offer to buy or sell assets, nor personalized financial advice. Each investor has unique objectives, risk profile, and financial situation. To make investment decisions, consult a professional duly qualified and registered with the CVM (Securities and Exchange Commission).
