The Precatorio Market

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The Precatorio Market

• What is a Precatorio?
• Precatorios are money certificates issued by
  the state and municipalities to pay for cases
  they lost in court. They are order of the Justice
  so that the Public Power includes in the budget
  the value of debt resulting from a judicial
  condemnation. They can be called food and
  not feed.

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• Brazil

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There are 2 types of Precatorio -

• The Food Precatorios
• Are those given rise in actions proposed with
  basis in the contract of employment between the
  administration and his servants, like holidays
  compensations, long paid leaves, benefits and
  compensations for death or disability. Also they
  are those referring to illicit act committed by
  servant (objective responsibility of the State)
  who turns in personal damage.

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• The not feed Precatorios
• Are relative to expropriation, declared areas of
  public usefulness or of environmental protection,
  breach of contracts and accidents with vehicles
  of the state without personal damages, between
  others.

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The problem with the Justice

• When the Government is one of the parties
  involved in a installed procurement and looses an
  action in court, recognising that the adversarial
  part has a right, he takes too long to compensate
  the winner part by paying their debts on time .

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The Debt

• The State of Sao Paulo at present is paying his
  debts of precatorios from 1998, while, the town
  hall still pays the creditors of 2001. The State
  has a debt today around R 13 billions ( 7
  billion dollars) and the town hall of R 8
  billions ( 4 billion dollars). We wonder how
  long it is going to take to pay these debts
  considering the percentage fixed over the income
  of the forecast.

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Over View

• Justice in Brazil, in spite of the fact of being
  slow, it is also invalid because the winner part
  actually does not take concretely what is his or
  hers, the money owned by the Government.
• The Federal Constitution determines the payment
  of the precatorios in the next year to which it
  was dispatched. Not paying on time, the Estate is
  disrespecting the Federal Constitution witch he
  was supposed to protect.

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Solutions

• The president of the STF (Supreme Tribunal
  Federal Court) already came proposing the
  creation of a fund to resolve the problem of the
  debt that is at the edge of the R 60 billions (
  30 billion dollars).
• The fund, in beginning, would be composed by a
  percentage of the liquid income of the States.
  But percentage was still not defined. It might
  reach 3 of the liquid income of each state. The
  proposal is still in discussion.

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The Parallel Market and The Human Rights

• The parallel market exists because of the delay
  in the payment of the Precatorios debts. What
  happens is that people are buying these
  certificates paying a value very below the real
  one. The servants are usually old and sometimes
  sick people who needs the money right now to use
  it for a disease threatment or to buy something
  they are really needing.
• This market is a crime against the human rights.
  It is done without ethics and without
  regulations. A black market resulted from the
  politics of the disregard of the Government by
  the civil servants.

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The Capital Market

• To solve the questions above some entrepreneurs
  are creating investment banks focusing on the
  market of selling and buying any kind of
  precatorios. There are already some foreign
  groups interested in these kind of investments.
• The crisis we are living now has even increased
  the search for those papers as an alternative way
  to the fact that the stock market was bought in
  decrease.

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• Ana Flavia M. Sandoval
• London School of English
• February, 2009