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Montevideo, December 8th 2021 - 04:06 UTC

 

 

Brazil approves bankruptcy reform bill

Monday, December 27th 2004 - 20:00 UTC
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A major reform of Brazil's bankruptcy laws has been approved by Congress; a move which is hoped will cut costs for business.

The 1993 bill was finally approved with the strong support from President Luiz Inacio Lula da Silva and reverts the 1945 standing law which gave priority to workers, second tax revenues and finally private creditors.

The new legislation changes giving creditors priority and limiting payments to workers to a maximum of 150 times the minimum monthly salary which is currently almost 100 US dollars.

The law also makes it more difficult for a company to declare bankruptcy but considers a 180 days protection period to give time for a recovery plan to be worked out.

The proposals were opposed in the past by leftist parties, including Mr. Lula's Workers Party because they considered that they undermined workers rights.

However President Lula da Silva became a strong promoter of the reforms arguing that the country's bank lending margins were among the highest in the world and was damaging the economy besides increasing company's costs.

Financial analysts believe the new law will help reduce the spread between the interest rates of banks and federal funds.

But other analysts say this is not enough to bring down interest rates, the Central Bank must change its policy, targeting not only inflation but also economic growth.

The basic federal funds rate known as Selic currently stands at 17,5% with inflation below 9%.

Categories: Mercosur.

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