Volume 5, Number 21, Page 6
Recent Developments
Antitrust/Antidumping Cases
MEXICO
Alleged Monopolistic Practices Under Investigation
The Federal Commission on Competition announced its investigation into alleged monopolistic practices. One of the cases under investigation is related to banking services, the other deals with maritime insurance for ships. Diario Oficial, 9/30/98.
Antidumping Duties on Chinese Sodium Compounds Revised
SECOFI announced its preliminary decision on the revision of an antidumping investigation into two sodium compounds imported from China. On Oct. 18, 1994, SECOFI published its decision to impose antidumping duties of 208.81 percent on the Chinese products. An appeal was presented to SECOFI which for the time being leaves the antidumping duties as established. A final decision on the appeal will be published in the following months. Diario Oficial, 10/5/98.
Elimination of Antidumping Duties to be Studied
The possible effects of the elimination of antidumping duties set on certain steel connections from China, are being studied by SECOFI. On April 15, 1993, SECOFI imposed antidumping duties of 33.34 percent on the imports from China of certain steel connections. Manufacturas Cifunsa, S.A. de C.V. requested that SECOFI not eliminate the duties, alleging that they represent 100 percent of the domestic production of the referred steel connections and eliminating the antidumping duties will harm domestic production. Diario Oficial, 10/5/98.
Banking & Credit
BRAZIL
Latin capital US banks interested in Brazil again
New York, 10/13/98 - When Carlos Lima, the international fixed income senior manager for Banco Bozano, Simonsen, started talking to visitors at the inauguration of the bank's Miami branch last week, he was surprised by the background of a relatively large group present. They were directors of US banks controlled by latin capital, who had suddenly become interested in Brazilian risk once again. On the whole, these banks had lines of $1 billion to Brazil. Lima found that this volume was exagerated, but he would not be surprised if something like $400 million or $500 million were effectively allocated to the Brazil risk. Latin capital US banks became interested in Brazilian risk basically because returns are once again high. Getulio Bittencourt, Gazeta Mercantil
COLOMBIA
Reporting Rules Amended
Colombian banking entities will no longer have to report before the Superintendency of Banking any interbanking loan operations they perform, unless such loans exceed over 7 percent of the assets of the banking entity performing the operation. This will definitely ease the requisites to be complied with by these entities, for the performance of repurchasing operations. By Gomez Pinzón y Asociados.
Business Organizations
COLOMBIA
Capital Requirements to be Amended
The Superintendency of Corporations, March 30th reconsidered its previous opinion related to the legal viability of decreasing the corporate capital through an effective reimbursement of contributions in the event that such a reduction had arisen from the asset revaluation account. It is the opinion of the Superintendency that such an operation is no longer to be considered as being fraudulent. Among the considerations made by the Superintendency to arrive to this conclusion, it is of significant importance to note that for that Office the reduction of the corporate capital with effective reimbursement, after the capitalization of the revaluation of assets account is viable, but only to the extent that if it were to occur, the diminishment of the corporate assets does not affect the general pledge to which creditors to the company are entitled. In any event and to engage in such an operation, it is necessary to observe all regulations related to the matter, specially articles 145 et. seq. of the Colombian Commerce Code.
Finally it is important to note that according to a prior concept of the National Directorship of Taxes and Customs ("DIAN"), the distribution of valuables accruing from the diminishment of capital with effective re-imbursement constitutes taxable income for the shareholders. By Gomez Pinzón y Asociados.
Communications
MEXICO
Telecom Related Treaties Ratified
The SRE published several decrees ratifying different telecommunications related treaties. The following are the treaties ratified by the government:
Final Acts of the Kyoto Conference of 1994, which amend the Constitution and the Agreement of the International Telecommunications Union of Geneva, 1992.
Amendments to the Agreement of the Satellite Telecommunications International Organization (Intelsat) agreed upon the 21 Conference of the Organization on August 31, 1995.
Amendments to the Operational Agreement of Intelsat aproved in the 26 Conference of the Organization on April 16, 1996.
Diario Oficial, 10/9/98.
Customs
ARGENTINA
Claim for exports to the U.S.
The Argentine Foreign Office (Cancilleria) and the United States will attempt to reconcile various commercial differences that have strained trade relations. Vice President of the Commerce Department Richard Fischer will meet with Secretary Jorge Campbell to discuss the elimination of trade barriers faced by Argentine products entering the U.S. market. These products include fresh meat, sugar, peanuts, tobacco and cheese. The high tariffs imposed on Argentine citrus exports will also be discussed.
Elimination of restrictions of this type is expected to partially correct the traditional trade deficit Argentina has had with the United States.
Between 1991 and 1996, Argentina received nearly 12.5 billion dollars from American investors and it is anticipated that by the year 2000, 29.1 % of total foreign investment will come from the United States, the equivalent of 11 billion dollars.
BRAZIL
Brazil imposes new import restrictions.
These import restrictions are to encompass agricultural products, pharmaceuticals, and foodstuffs. Based on data from the Argentine Chamber of Exporters, the value of Argentine exports affected by these new restrictions total 1.9 billion dollars, which represents 23.89 % of the total exports to Brazil in 1997. These measures were the result of a record high commercial deficit in September. The measure is also expected to have a positive effect with regards to balancing out domestic products with imports.
MEXICO
Rules on Certificate of Origin Amended
SECOFI published an amendment to the provisions establishing the rules for the determination and certification of the country of origin of goods imported into Mexico. The rules deal with products affected by antidumping duties. The amendments basically include the free trade agreement between Mexico and Nicaragua to the text of the provisions. Diario Oficial, 10/12/98.
Seed Imports Subject to Standards
The Department of Agriculture, Livestock and Rural Development (SAGAR) published a standard establishing sanitary requirements for the importation of grains and seeds. NOM-028-FITO-1995 applies not only to seeds and grains by themselves, it also apples to means of transportation of such goods, such as trucks, ships and trains, it also applies to containers or packages of such products. The standard does not cover seeds used for planting. Diario Oficial, 10/12/98.
Energy
BRAZIL
Ipiranga to strike partnership with Mobil
The Brazilian petroleum company, Ipiranga, and the United States petroleum company, Mobil, began conversations to establish a partnership in the area of exploration and production of petroleum, together with Petrobrás. The information was given Tuesday by João Pedro Gouvêa Vieira Filho, a member of the Administration Council and of the Executive Committee of the group. 'The talks are only beginning. This is an area that interests us, but in which we still do not have much experience, which is why we have to study the subject a lot. We are also talking with other companies,' said an executive of the group.
The businessman said that Ipiranga's plan is to invest approximately R$ 500 million in new business over the next three years, depending on the contractual and tributary conditions established by the government for joint ventures with Petrobrás. Eliane Velloso and Fernando Thompson, Gazeta Mercantil.
GUATEMALA
Privatization Announced
The Ministry of Energy hopes to receive the amount of 200 million dollars in the next few months for the sale of INDE (Instituto Nacional de Electrificacion); including Empresa de Distribucion de Occidente and Empresa de Distribucion de Oriente. This would equal three times the appraisal determined by the Schroders/Citicorp Investment Bank.
The Ministry considers that the key will be to publicize how efficient the business with INDE can be.
The distribution process will have certain obligations; the buyers of the distribution companies must assume responsibility to provide electric power to the entire country until the year 2004. With this objective, the INDE, the Ministry of Energy and investments groups, through Mercados Energeticos from Argentina and CIDEA from El Salvador designed the plan included in the contract.
Environment
MEXICO
Standards on Christmas Trees Published
The Department of the Environment, Natural Resources and Fisheries (Semarnap) published a technical standard applicable to Christmas trees imported into Mexico. NOM-013-RECNAT-1997 establishes sanitary measures for Christmas trees of several species. Diario Oficial, 9/28/98.
Foreign Investment
BOLIVIA
Law protects investments originating from the U.S.
Last September the National Senate ratified an Investment Protection treaty with the United States. This bi-lateral agreement will facilitate the entry of American capital and technology into the Bolivia. The majority of foreign investment entering Bolivia comes from the American coal industry. Bolivia’s appeal to investors includes not only its geographic location, but also its membership in the Andean Pact, Mercosur and the commercial agreements with Mexico, the European Union and the United States.
Government Administration
MEXICO
Bylaws of Industry Policy Commission Published
SECOFI published the bylaws of the Industry Policy Commission. The Commission is a technical consultation entity for the federal government which analyzes, proposes and coordinates activities of federal agencies in matters related to industrial policies and foreign trade. The Commission also publishes studies related to industry policy and foreign trade. The Commission is formed by the Secretaries of SECOFI, SHCP, SECODAM, STPS, SEP and the general directors of other entities. Diario Oficial, 9/30/98.
Central Bank Bylaws Amended
The Central Bank (Banco de Mexico) announced several amendments to its bylaws. The amendments add functions to several of the departments of the Bank and the names of two areas of the Bank were changed. Diario Oficial, 10/14/98.
Insurance
MEXICO
Reserve Requirements Set
The Department of the Treasury (SHCP) announced new reserve rules for insurance companies. The new rules relate to the creation and valuation of the reserves for liabilities that have not been settled. The previous rules published on April 13, 1994 were repealed. Diario Oficial, 9/30/98.
Labor Law
MEXICO
Security Related Measures Announced
The Department of Labor and Social Services (STyPS) published new technical standards related to safety in the workplace. NOM-026-STPS-1998 establishes the colors, hygiene and safety signals, and identification of risks for the fluids that are transported by pipelines in the workplace. Diario Oficial, 10/13/98.
Securities
BRAZIL
JP Morgan launches Telebrás receipt in New York
A new receipt called RTB, equivalent to the Telebrás Portfolio Receipt (RCTB) in Brazil, will be traded on the New York Stock Exchange starting Tuesday. Apart from the company's American Depositary Receipts (ADRs) and the 'holder' receipt created by Merrill Lynch (which represents the 12 new holding companies), investors will have the alternative RTB, whose depositary bank is JP Morgan.
According to Roy Marmelo, ADR vice president of the institution for Latin America, the receipt has operating and cost advantages. 'The RTB is operated like shares and can be exchanged immediately. The “holder” receipt must first be changed into ADRs and then into shares, which makes the process a lot slower,' said Marmelo. According to Marmelo, to issue or cancel receipts, the investor will pay $0.05 per ADR. “To enter the “holder,” between $0.10 and $0.15 (the prices are defined in a scale), apart from $0.10 to cancel the ADR and $0.02 for the receipt's custody,” said Marmelo. Paula de Santis, Gazeta Mercantil.
Taxes
COLOMBIA
Rules on Trusts Amended
Last April the 20th the DIAN (National Tax and Customs Directorship) issued legal opinion No. 25301 in which it stated that a trust’s beneficiary must include in his annual income tax return the profits obtained from the trust even if the beneficiary and the settlor are one single person; consequently, this income must be included in the financial statements of the latter in despite of the legal autonomy that exists between the assets given in trust and the settlor himself. By Gomez Pinzón y Asociados.
Foreign Income Tax Rules Changed
By means of the expedition of Decree 858 last May 8, the government established the withholding at source of income tax for income coming from abroad at one single rate of 3 percent. In the past the rate for taxpayers that had to file a tax return was of 6 percent and for those who did not have that obligation was the 3%. By Gomez Pinzón y Asociados.
Exemptions Published
According to legal opinion No. 31555 issued by the DIAN (National Tax and Customs Directorship), a branch of a foreign company is not obliged to invest in security bonds if there is a tax exemption reciprocity agreement or treaty duly approved by a Colombian law between Colombia and the country of origin of the company. By Gomez Pinzón y Asociados.
MEXICO
Tax Rules Amended
The SHCP announced the amendments to the tax rules applicable for 1998. This are the sixth time the SHCP amends the tax rules for this year. The amendments include changes to several tax annexes as well. Diario Oficial, 10/15/98.
Transportation
MEXICO
Organizational Manual Published
The Department of Communications and Transportation (SCT) published its own organizational manual. The manual sets up the structure of the SCT, as well as the functions of the different departments and offices inside the SCT. Diario Oficial, 10/12/98.
Various
BRAZIL
World Bank offers Brazil $4.5 billion
The World Bank will take part in the international help package to Brazil with a $4.5 billion input, said Eliana Cardoso, a political economics specialist for the institution in Latin America. The funds, once they are requested by the government, will finance sector adjustment programs and will be rapidly available. Last year, the bank lent Brazil $1.6 billion for investment projects, including privatization in Brazilian states. Normally, Brazil - the fourth largest client after China, India and Indonesia - receives $1.5 billion to $2 billion solely for investments, according to Gobind Nankani, World Bank director in Brazil. The novelty is that for the first time, the World Bank will finance structural reform on a federal level. Maria Helena Tachinardi, Gazeta Mercantil.
Anticipated privatizations may reach $10bn
“Economic stability is a top priority. Achievement of this and growth are the priorities of President Fernando Henrique Cardoso's second mandate. The economy must begin functioning now.” These were the words used by the communications minister, Luiz Carlos Mendonça de Barros, at a Brazilian journalists meeting in Paris last Saturday. The minister also said that Brazil could rely on around $10 billion this year, due to the privatizations to be held in 1999. Marcelo Rezende, Gazeta Mercantil.
CENTRAL AMERICA
Central America presents list of products to Mexico for new treaty.
The Salvadoran Negotiating Commission will provide a list of products for the new Free Trade Agreement between Mexico and the North Triangle (Guatemala, El Salvador and Honduras). The list will include new service areas: ground and air transportation, However, the list does not include agricultural products sensitive to the Salvadoran economy such as milk and meat.
After carefully examining the list, the private sector has expressed its satisfaction and also expressed hope that the Mexican market will become more flexible as a result of the proposals.
El Salvador has not yet considered accepting Mexican agricultural products. They feel it would result in unfair competition, due to the subsidization program the Mexican government has in place.
Mexico has yet to propose its product list, but the negotiators hope that the proposal will benefit both sides.
