- 35 -
private ruling that ultimately was issued by the Brazilian IRS to
the Central Bank are discussed more fully infra.
During the phase II negotiations, some foreign lenders,
including Citibank, wanted the BAC to negotiate the withholding
issue with the Brazilians. The BAC decided that it could not
negotiate the withholding issue with the Brazilians, as the
withholding issue, although important to a number of foreign
lenders, did not concern all of the foreign lenders.14 Even those
BAC members, like Citibank and Lloyd's Bank, that would
substantially benefit from being able to claim potential foreign
tax credits realized that they could not afford to be accused of
using their positions on the BAC to further their own individual
interests at the expense of other foreign lenders.15 The BAC,
instead, advised the Brazilians that the withholding issue was a
very important issue to a number of foreign banks, and that the
Brazilians would have to resolve the withholding issue as a matter
of the applicable Brazilian law. The BAC further created a
subcommittee to study the withholding issue.
14 Some foreign lenders operated in countries which did
not allow foreign tax credits with respect to Brazilian
withholding tax payments. Still other lenders were not in a tax
position to benefit from claiming potential foreign tax credits.
15 To a significant extent, Citibank sought to segregate
the activities and functions of Rhodes (the Citibank senior
executive who acted as the BAC's chairman) from the individual
concerns and matters which Citibank pursued during the phase II
restructuring negotiations. At various BAC meetings, other
Citibank employees (principally the top employees of Citibank-
Brazil), and not Rhodes, would represent and present Citibank's
position.
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