A Debt Settled

Brazil's recent practice of expropriating U.S. companies was proving both expensive and risky. In February 1962, the state government in Rio Grande do Sul expropriated Companhia Telefonica Nacional, an International Telephone and Telegraph subsidiary. Five months later, the governor of Pernambuco took over a subsidiary of American & Foreign Power Co., Pernambuco Tramways and Power Co. In both cases, the companies received little or no payment, while the companies' legal protests ground their way through Brazil's agonizingly slow courts--years and perhaps decades away from firm settlement. Last week, suddenly, both companies were near a payoff.

The settlements negotiated by the Brazilian government in advance of court rulings, will probably follow similar patterns. On the ITT deal, for example, the Brazilian government will come across with $7,300,000. More than $3,600,000 of this has already been paid to ITT in American dollars; the rest will come in Brazilian cruzeiros as loans to Standard Electrica, S.A., ITT's manufacturing subsidiary in Rio de Janeiro, for plant expansion and modernization. In its negotiations, American & Foreign Power is asking for $8 million to $10 million.

What apparently spurred Brazil into the settlements was a retroactive amendment tacked onto President Kennedy's Foreign Assistance Act of 1962, freezing foreign aid to any country that expropriates U.S.-controlled companies without reimbursing the owners for their loss within a proper time.

This file is automatically generated by a robot program, so reader's discretion is required.