Aurelia Butler

BRASILIA (Reuters) – Nearly 40% of the extra revenue that Brazil’s government needs to erase its budget deficit next year hinges on one strategy: the Brazilian Treasury’s top lawyer using a stronger hand to negotiate some 67 billion reais ($13 billion) from tax disputes.Anelize Almeida, the Treasury’s attorney general, told Reuters she expects to haul in even more.Underpinning her confidence is a recent rule change for tax trials that awards the government a victory in the case of a split vote on the federal tax appeal board CARF, where companies and individuals dispute their tax obligations.Many private economists view Finance Minister Fernando Haddad’s revenue projections with skepticism, arguing he should trim spending to guarantee the government follows its ambitious new fiscal rules.But Almeida insisted the outlook for more revenue from tax disputes is conservative, and stressed that in addition to what is already outlined in the 2024 budget, the government is focusing on the 100 largest and most promising tax cases in the courts, with some 180 billion reais at stake.”What comes in is profit,” she said, adding that state-run oil firm Petrobras, which is involved in four cases totaling around 40 billion reais, has shown itself more willing to negotiate a settlement.The 100 judicial cases she is prioritizing involve companies that have made a deposit as collateral in their dispute, improving the odds of actual payment.At CARF, where companies that lose to the government can later appeal to the courts, she said that revenue forecasts reflect just a fraction of what is on the docket. One subset of 1,500 cases represent around 800 billion reais, Almeida said. “And 1,500 cases for CARF to adjudicate in a year is highly feasible, highly reasonable,” the Treasury’s attorney general said.($1 = 5.1863 reais) More

LONDON (Reuters) – Ukraine has been sounding out major investors over plans to restructure the country’s $20 billion in international debt and the possibility of raising fresh financing, three people with knowledge of the discussions told Reuters.Interactions have intensified in recent weeks led bythe head of the debt management office, Yuri Butsa, who has been seeking investor feedback, they said.Talks with bondholders were due to start early next year. But concerns that international backing for Ukraine may be waning and few indications that the conflict is close to abating have brought fresh momentum into debt talks, the sources said. The U.S. in late September passed a stop-gap funding bill to avoid a government shutdown that did not include aid for Kyiv.Bondholders agreed in August 2022 two a two-year payment freeze after Russia’s invasion in February shattered its economy and finances, forcing it into a sovereign default. Most of Ukraine’s bilateral lenders have suspended repayment obligations until 2027.Butsa had many direct meetings with creditors, one source familiar with the discussion said on condition of anonymity. Ukraine’s ambition is to tap markets early, the source added, to help shore up access to financing while its International Monetary Fund programme runs to 2027, the person said.Talks are informal and bondholders have yet to form a creditor committee, the sources added.   Ukraine’s finance ministry and debt management office said they would provide comment later.Under the four-year $15.6 billion IMF loan programme approved in April, the Fund stipulated that Kyiv has to overhaul its debt, but did not prescribe a timing.    FROM DEBT REWORK TO FRESH FUNDS    As part of a debt restructuring, Ukraine would issue new bonds to existing holders once losses on existing debt had been agreed upon. But given the risk inherent in lending to a nation at war, investors said they would favour some form of guarantee or backstop by Ukraine’s partners to agree to the deal.The market wants to see some sort of credit enhancement, said a second source familiar with the situation, adding thismight prove more difficult for Ukraine to obtain given how much public money had already flowed into the country. Credit enhancements help reduce the default risk by the issuer and thereby borrowing costs – for example through guarantees.In addition to issuing bonds as part of the debt restructuring, Ukraine also told investors it is weighing options to raise fresh additional financing, the sources said.    The options include collateralized and guaranteed structures that could form part of a restructuring solution and potentially facilitate financing for the country, the third source said.    These could see Ukraine’s international partners – either multilaterals or individual countries – provide collateral for new bonds, akin to the so-called Brady bonds issued by Latin American countries in the late 1980s that were backed by U.S. Treasuries.    Whether Ukraine would be able to raise fresh funds from capital markets is unclear, as IMF programmes generally do notenvisage that countries can seek non-concessional funding whilst undergoing a debt overhaul.    How willing large asset managers would be to lend more money to Ukraine also remains to be seen, the first source said.    The real challenge is making sure that new money commitments from private-sector creditors really materialise, said the first source. Ukraine required much more than $1 billion a year, the person said.   More

ROME (Reuters) – Italy is lobbying its European Union partners with increasing urgency to approve more flexible budget rules, according to government sources, as bond spreads widen and Rome fears that deviations from its 2024 spending targets will trigger a disciplinary procedure from Brussels.Giorgia Meloni’s government is particularly concerned that future accounting rulings by the EU’s statistics arm Eurostat could push up next year’s fiscal deficit, three officials said, making Rome’s position even more vulnerable.The bloc’s fiscal rules, suspended since 2020 due to the COVID-19 pandemic, are due to return next year with amendments now being negotiated by EU governments, and Italy is proposing ways to make it as lenient as possible.These include favourable treatment of various types of investments as well as higher defence spending and financial and military aid to Ukraine.Italy’s latest proposal, the officials said, would shield it against a review by Eurostat in the coming months of how costly tax credits for green home improvements are accounted for.Italy has already included them in past budgets, which has inflated its deficits for the last three years.However Eurostat, using technical accounting criteria, may decide they should be shifted to 2024 and beyond, revising down deficits for the years when limits were suspended and increasing them when updated fiscal rules return.In this case, Italy would almost certainly fall foul of a Stability Pact reform proposed by the European Commission – the most concrete on the table so far – so Italian officials are arguing that Eurostat’s potential revisions should count as a “relevant factor” to avoid a disciplinary procedure.The Commission has so far not commented on individual countries’ proposals for Stability Pact reform, and was not immediately available for comment on this story.Brussels is proposing to focus fiscal consolidation on net primary expenditure – excluding discretionary fiscal revenues, interest costs and cyclical spending on unemployment support.The Italian Treasury has committed to keep Italy’s net primary spending growth “well below” the 1.3% ceiling requested by Brussels for 2024.But an unfavourable ruling by Eurostat would make this impossible, one of the officials said.A Commission decision that Italy’s 2024 budget is not compliant with EU rules would probably compound mounting market pressure on Rome’s debt, which is proportionally the second-largest in the euro zone after Greece’s.Italy’s budget framework, approved by the cabinet on Sept. 27, hiked next year’s deficit goal to 4.3% from a previous 3.7% and targeted its return below the EU’s 3% ceiling only in 2026, with virtually no debt reduction over the same period.The plan was ill-received by markets, with the closely-watched gap between the yields on Italian 10-year BTP bonds and equivalent German Bunds exceeding 208 basis points on Monday, the widest since January. More