The bankruptcy petition of mobile phone carrier Oi SA, the biggest ever in Brazil, poses no threat to the country's financial system, central bank director Aldo Mendes said on Tuesday, Reuters reported. The company's petition late on Monday to seek protection from creditors on 65.4 billion reais ($19.2 billion) in liabilities, raised alarms about the exposure of local lenders. Speaking at an event in Sao Paulo, Mendes, director of monetary policy, also said the bank is waiting on international economic events before deciding whether to intervene in the local currency market.
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Brazil
Brazil’s troubled telephone company Oi SA on Monday filed the largest bankruptcy protection request in the country’s history just days after debt restructuring talks with creditors collapsed, The Wall Street Journal reported. The filing of Oi and six subsidiaries lists 65.4 billion reais ($19.26 billion) in debt. In its filing, the company said it chose judicial reorganization to preserve the value of its holdings and to continue providing service to its customers.
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An ambitious constitutional amendment to freeze budget spending would cut the uncertainty over public finances that is the root cause of Brazil’s deep recession, according to the country’s new finance minister, the Irish Times reported on a Financial Times story. “With this kind . . . of tough fiscal policy . . . everyone will be able to project the numbers,” Henrique Meirelles said.
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Pedro Parente is on a mission to restore financial health and public trust to Petrobras, the Brazilian state-controlled oil company that for the past two years has been at the center of the country’s biggest-ever corruption scandal, Bloomberg News reported. A veteran business leader, Parente said his immediate task as the new chief executive officer of the world’s most indebted crude producer is slashing leverage without turning to the government for a bailout. Then the company will be able to focus on accelerating deep-water projects through greater cooperation with its partners, he said.
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Brazil’s worst recession in recent history continued into 2016, data showed Wednesday, as rising unemployment and deepening political turmoil dragged the once-dynamic economy into its fifth consecutive quarter of decline, The Wall Street Journal reported. Gross domestic product shrank 0.3% in the first quarter of 2016 from the previous three months in seasonally adjusted terms, the Brazilian Institute of Geography and Statistics, or IBGE, said.
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An appeals court ruling on whether a Liberian mortgage is valid for a Brazilian-owned oil production ship, due on Wednesday, could cast doubt on the future of secured lending for such vessels in the world's largest deepwater market. The court in São Paulo is due to decide on the appeal by Nordic Trustee ASA to overturn a February ruling that the $500 million mortgage registered in Liberia is invalid for the OSX3 floating production, storage and offloading vessel, or FPSO, owned by a subsidiary of OSX Brasil SA.
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Brazilian authorities are expanding their sweeping investigation into corruption at Petróleo Brasileiro SA to include more of the state oil company’s suppliers, according to a person involved, a move likely to extend the probe into next year, The Wall Street Journal reported. Investigators in the so-called Car Wash probe have until recently been focused mainly on a bribery-and-bid-rigging scheme centered on construction companies that work with Petrobras, as the state oil company is known.
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The state of Rio de Janeiro missed an $8.4 million payment to an international creditor as a debt crisis in Brazil’s state governments deepened amid what the federal Finance Ministry has called “out-of-control personnel expenditures,” The Wall Street Journal reported. The payment, which was due Monday to the French Development Agency, had to be postponed following months in which revenues have fallen short of spending obligations, a person familiar with the matter said.
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Demand for loans among Brazilian companies slumped in April, credit research company Serasa Experian said on Wednesday, a sign that the highest borrowing costs in nine years and the harshest recession in eight decades hampered their ability to take on fresh credit, Reuters reported. The number of requests for new loans dropped 11.6 percent in April from the prior month, and fell 4.2 percent from the same month a year earlier, Serasa said in a statement. In the first four months, demand for consumer credit dropped 8.1 percent.
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Smaller corporate lenders are better positioned to weather Brazil's worst recession in decades, but need to be monitored closely as clients grapple with soaring defaults and bankruptcy filings, the head of the nation's deposit guarantee fund said. Banks in the so-called middle-market segment have tightened loan disbursement standards and scaled down the use of borrowed money to boost lending, although they are struggling to predict defaults, which recently hit a six-year high.
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