-67-
that petitioner could have obtained more cruzados at the parallel
market rate than at the official rate, the Central Bank required
that the conversion take place at the official exchange rate.
This was not a penalty; it was a requirement of engaging in the
debt-equity conversion. As part of the conversion terms,
petitioner agreed that blocked deposits would be converted into
cruzados at the official exchange rate on April 14, 1987.
Petitioner also agreed, as part of the Purchase Agreement, that it
would pay IFC, in exchange for the PCC stock, the cruzados
equivalent of $12.5 million, without any deduction, setoff, or
withholding whatsoever, obtained by converting Brazilian blocked
deposits into cruzados at the official exchange rate. IFC
acknowledged receipt of this cruzado payment and the fact that it
was the equivalent of $12.5 million at the official exchange rate
on April 14, 1987. Thus, we reject Dr. Froot's recommendation of
a discount on account of the official and parallel rate
differentials as an after-the-fact attempt to revalue a
transaction contrary to its agreed-upon terms.
Moreover, investments made in Brazil at the official exchange
rate were entitled to the benefits of registered foreign capital
status; investments made at the parallel rate were not. In this
sense, the Cz$295,200,000 that petitioner obtained by converting
its blocked deposits could easily have the same, if not greater,
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