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Brazil

Foreign capital in the Brazilian financial systemNoronha Advogados, London

After a judicial battle which lasted months, and resulted in successive delays in the privatization of Banespa (Bank of the State of São Paulo), the auction took place on November 20 2000, at the Stock Exchange of Rio de Janeiro. The winner was Santander, the largest private bank of Spain, which paid approximately $3.6 billion, a premium of 281% over the minimum price set by the federal government. With the acquisition of Banespa, Santander is now the third-largest private bank in Brazil. The Spanish bank had already acquired three other Brazilian banks: Banco Geral do Comércio ($130 million), Banco Noroeste ($260 million) and Grupo Meridional ($650 million), which includes the Banco Bozano, Simonsen.

The share of foreign capital in the total of assets of the Brazilian financial system has now increased to 27.8%. By comparison, in December 1995 this share was 8.96%. Foreign banks are now owners of approximately $120 billion of the total amount of $415 billion in assets.

The Brazilian financial market has experienced great changes since 1994, with the increase in privatizations of state financial institutions, and mergers and acquisition of private ones.

Banco do Brasil, a federal government bank, is still the largest Brazilian bank with 17.6% of all assets, followed by the Caixa Econômica Federal, another federal institution, with 15%.

Banco Itaú, the second-largest private bank of Brazil, won the auction for the Banestado (Bank of the State of Paraná), for approximately $800 million, a premium of 303% over the minimum price. The auction was held October 17 2000, at the Stock Exchange of Paraná.

After these privatizations, the 10-largest banks in Brazil are: 1) Banco do Brasil; 2) Caixa Econômica Federal; 3) Bradesco; 4) Banco Itaú; 5) Banco Santander; 6) Unibanco; 7) ABN Amro Bank; 8) Banco Safra; 9) HSBC Bank Brasil; and 10) Nossa Caixa Nosso Banco.

Foreign investment in the Brazilian stock exchanges

Resolution No. 2.786, issued by the National Monetary Council on October 18 2000, exempts foreign investors of CPMF payments when they invest in the stock exchanges.

CPMF is a federal contribution created by Law No. 9.311 of October 24 1996 and is incurred in all financial transactions. The present rate is 0.3% over the amount of the transaction.

With the new rule, foreign investors will be able to pay dollars for shares directly to the Brazilian Company of Liquidation and Custody (CBLC). The CBLC will be responsible for the payment in reals (R) to the share's seller. This will avoid the transfer of money through current accounts, and consequently, the payment of CPMF.

Eliana Maria Filippozzi

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