Brazil freezes foreign companies’s remittances

The move has been described by observers as part of a plan to put pressure on international banks during negotiations on Brazil’s staggering foreign debt. Brazil, the fifth largest country in the world and a major debtor nation, faces a significant interest payment this month on its $115 bil lion foreign debt. The recent action to withhold remittances of foreign companies is seen as an effort designed to seek relief from the country’s international creditors.

A spokesman for Brazil’s Central Bank recently told reporters in Rio de Janeiro that foreign companies were informed of the decision to retain profit remittances in July, and that there had been no objections.

But, the dividend withholding announcement came as a surprise to a number of companies, including Consolidated TVX Mining Corp (TSE), which earlier this year repatriated its first dividend payment to Canadian shareholders.

Most of Consolidated TVX’s main producing gold mines are in Brazil. The company also has a major interest, along with Placer Dome Inc. (TSE) in the large La Coipa gold-silver mine in northern Chile.

Consolidated TVX President Ian Telfer told The Northern Miner he was surprised by Brazil’s recent move to freeze remittances, but he said it is not likely to affect his company’s next dividend payment.

Says Telfer: “Brazil may have notified the big companies like IBM and Coca Cola about the plan to retain remittances, but the news certainly never got down to our level.”

He noted that Brazil has not interfered with foreign companies’ dividend repatriation for the past five years. The last time a similar situtation occurred was back in 1983.

Telfer said his company plans to pay another dividend next spring. He predicted the current issue with the banks will be settled by then.

“This is a short-term situation, and it’s not likely to have any affect whatsoever on Cons TVX,” he said. “This may continue for six months or so, but if Brazil cuts off dividends to big firms like Coca-Cola and IBM indefinitely, those companies will just stop investing in the country altogether.”

Brazilians will be voting this November for a new civilian president in the first direct presidential elections held since the 1960s. Leading in the polls by a wide margin is a candidate who is expected to encourage more foreign investment, privatization and a number of other market-oriented measures.

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