The Superior Court of Justice (SCJ) will judge on November 14 the correction of compulsory loans of Eletrobras. For experts at Vision Brazil Investments, the decision of the Judiciary will reflect the determination of the country’s institutions to comply with the laws.
“It (STJ) want to know what is the degree of confidence in the institutions, the level of local legal certainty and if the country has an environment of political and economic stability”, argues Amaury Fonseca Junior, founding partner of Vision Brazil Investments with Fabio Greco, both fund managers focused on institutional investors.
The lawsuit judged by the court questions the need to pay compensatory interest of 6% per year provided by law on credit, which, although already judicially recognized, has not yet been honored.
This is an example of a case that is important to the financial market. For foreign investors, what weighs on the time to choose a country to put their money is if the local government demonstrates commitment to comply with the laws.
According to Fabio Greco, also founding partner of Vision Brazil Investments, all these issues are relevant to the investor, be it Brazilian or foreign. “These are indicators that the rules will not be changed during the course of the game and that the contracts will be fulfilled,” Fabio Greco says.
Understand the case
Also, By Fabio Greco from Vision Brazil Investments, to finance the construction of the Itaipu hydroelectric power plant and other infrastructure works in the electricity sector, the state company established this obligatory loan, charging it between 1977 and 1993 for industries that used more than 2,000 kwh monthly (for example: a bakery uses more than that amount of energy per month). The charge was made directly to the light bill, meaning companies did not have the option of not contributing.
Hundreds of thousands of private companies have subsidized the Brazilian government for more than 15 years. The counterpart to this loan would be to return the amounts to consumers in 20 years, with full correction and interest of 6% per year by means of conversions of the debt in shares of the state or in cash.
A period of hyperinflation in Brazil
When the time came to reimburse the values taken between 1980 and 1990, a period of hyperinflation in Brazil, the agreement did not happen and the matter was brought to justice and for more than a decade creditors have been waiting for the debt.
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