- 37 -
with Rhodes (the Citibank senior executive who functioned as the
BAC's chairman) and certain other BAC members to advise the BAC
with respect to how the Brazilians had decided to resolve the
withholding issue. During the meeting, the Planning Minister
initially asked the Central Bank's general counsel to review and
discuss the generally applicable Brazilian law with respect to the
payment of withholding tax on interest remittances made abroad.
The Planning Minister then telephoned the Brazilian Finance
Minister to find out whether the applicable Brazilian law had been
clarified with respect to the Central Bank's payment of withholding
tax on its restructuring debt interest remittances. He learned
that the Brazilian IRS would issue a ruling to the Central Bank,
which would hold that the Central Bank was required to withhold on
interest remittances during the relending periods of the phase I
DFA, phase II DFA, phase I CGA, and phase II CGA, beginning January
1, 1984.18 The Planning Minister advised Rhodes and the other BAC
members of this anticipated ruling. He indicated that the Finance
Ministry would shortly send a telex to the BAC confirming this,
which telex was received by Rhodes on or about January 24, 1984.
This anticipated ruling discussed at the January 22, 1984, meeting
18 The foreign lenders who were seeking DARF's from the
Central Bank wanted to receive DARF's with respect to the 1983
restructuring debt interest payments made to them. In addition
to enabling them to claim potential foreign tax credits for 1983,
they believed that the Internal Revenue Service was more likely
to challenge the foreign tax credits claimed by them with respect
to the 1984 restructuring debt interest payments if no similar
foreign tax credits had been claimed by them for 1983.
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