-38-
remit profits and capital outside Brazil at the official exchange
rate, avoid or reduce supplementary withholding taxes and, upon the
ultimate sale of the investment, remit the proceeds of the sale free
of tax up to the amount of registered foreign capital. In February
1987, when Brazil declared a temporary moratorium on interest
payments on its debt, foreign investors possessing a certificate of
registration were still able to receive dividends outside Brazil at
the official exchange rate.
Petitioner had several options with respect to its 1986 blocked
deposits:22 (1) Hold the blocked deposits and participate in the
debt restructuring process; (2) sell the deposits on the secondary
market to another party; or (3) convert the deposits into an equity
interest in a Brazilian company pursuant to the Central Bank's debt-
equity conversion program. The only options that would reduce
petitioner's blocked deposit holdings and decrease its foreign debt
exposure were selling the debt on the secondary market for cash or
swapping the debt for equity in a Brazilian company.
C. Papel e Celulose Catarinense, S.A.
Petitioner decided to engage in a debt-equity conversion and
in that regard began examining investment possibilities in Brazilian
companies. In November 1986, petitioner received an Information
22 Petitioner could only use 1986 deposits to participate
in the debt-equity conversion at issue in this case. These
deposits were governed by the 1984 and 1986 DFA's.
Page: Previous 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 NextLast modified: May 25, 2011