The first of the alternatives bearing currency risk would be a Eurodollar loan under Resolution 63 of the Central Bank of Brazil. In general, the cost of a six-month Resolution 63 loan included the six-month LIB OR (London Interbank Offered Rate), which in late August was quoted at 12.25 percent per annum, plus a spread of 2.25 percent per annum over LIBOR, plus an upfront local commission of 7 percent per annum, and plus an upfront tax (Financial Transactions Tax) of 0.25 percent on principal plus financial charges. The remittance of interest on foreign loans was subject to an effective withholding tax of 20 percent of the sum of LIBOR plus any spread. Financial charges (including any foreign exchange losses) on Morris de Minas borrowing, however, were deductible in computing profits subject to the Brazilian corporate profits tax.
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