The Chamber concluded, on Tuesday, November 4 , the voting on Bill 3674/08, which establishes Brazil´s Sovereign Fund (FSB), a mechanism designed to fund strategic Brazilian business projects abroad, and to soothe the effects of the international credit crisis and of other moments of drop in economic activity.

The subject was approved as a substitute bill proposed by Deputy Peter Eugene (PT-PE), of the Committee for Finances and Taxation. The House rejected three motions to amend the text, which will still be voted by the Senate.

The first additional fund allocation the government intends to invest in the fund is R$ 14 billion, coming from the exceeding primary surplus and its equivalents, which are currently, to 0.5% of the Gross Domestic Product (GDP). They also may be directed to share investment funds of mixed-economy companies, such as Petrobras and Banco do Brasil, to the extent that the Union keeps being the controlling shareholder of these companies.

Among the changes made by the substitute bill, more than a federal bank can now be the official operator of the resources of the fund, and a ban was set on the use of money redeemed from FSB in continuing expenses (servant payments, for example). The original text established that the fund would be administered by only one bank.

Rejected Highlights

One of the rejected motions, by DEM, intended to allow that only preferred shares of mixed-economy companies without voting rights be directed to the Fund, as established in the amendment proposed by Deputy Roberto Magalhaes (DEM-PE). Before the voting, the rapporteur explained that the fund would lose much with this change, because most shares under the Union´s power are common shares with voting rights.

The Chamber also rejected the PSDB´s motion, which wanted to exclude the option to use the resources obtained by means of issuance of public debt securities for allocation in the fund.

Another rejected motion of PSDB intended to exclude the creation of the Fiscal Investment and Stabilization Fund (FFIE), which will be a kind of operational fund to apply resources of FSB; the Union will be its sole quota holder.

The FFIE will have the same goals of the sovereign fund, but the Union will not be responsible for any obligation beyond the limits of its quota, which will not be funded by government securities. The policies for its application will be defined by by-laws approved by the Ministry of Finance.

Science and technology
The final amendment voted on Tuesday was proposed by Deputy Alceni Guerra (DEM-PR), who requested that 30% of the resources called away from the fund, within the limit of R$ 1 billion, be invested in productive parks of science and technology. He acknowledged that the amendment would be rejected at this time and accepted the suggestion of Deputy Miro Teixeira (PDT-RJ) to forward it to the Executive as an indication that could be transformed in another bill.
"In Japan, industries from the same sector get loans with zero interest rate and, in Brazil, we get loans with an interest of 9% via BNDES," affirmed Alceni, claiming for more incentives for science and technology research.

Report - Eduardo Piovesan
Editing - Newton Araujo Jr. /Rejane  Xavier