Use of precatory in debt payment and privatization depends on regulation

Creditors, lawyers and investors are waiting for a definition from the federal government on the rules that will allow the use of precatories and some other types of credits for the payment of debts with the Union and the purchase of state assets. Among the concerns is the option for a rule that restricts the use of these credits, as occurs in some programs created by states and municipalities.

These alternatives for those who have money to receive from the Union are provided for in one of the two constitutional amendments originated from the PEC dos Precatórios, a proposal by the Jair Bolsonaro government (PL) also known as PEC do Calote.

Amendments enacted by Congress in 2021 changed the spending cap rule and ended the annual payment of all court debts issued through July of the previous year.

Among the options given to creditors are accepting a 40% discount on the amount to try to receive the money in advance or using one of five scenarios provided for in the text.

As soon as the government regulates the compensation, it will be possible to use net and certain credits, own or acquired from third parties, recognized by the federative entity or by a final and unappealable court decision to settle debts in installments or registered in active debt.

The owner of the credit will also be able to buy public properties, shares sold in privatization processes or rights made available for assignment.

The paper can also be used to pay public service concessions and other types of concessions.

Compensation hypotheses apply to the Union, states and municipalities, but each administration must establish its own rules. In all cases, the precatory and the debt to be compensated must belong to the same federative entity.

Although the text of the amendment says that the new rules have “self-applicability” in the case of the Union, people who work in this market are waiting for guidance or regulation from the federal government so that it is possible to make this matching of accounts between assets and liabilities, says Pedro Siqueira, partner at Bichara Advogados.

“In theory, it would not even need a law or ordinance regulating this. Many people are seeing this device, are wanting to use it, but are afraid because they do not know how it will be done. It lacks clarity and security”, he says.

At least two states have already announced programs based on the amendment. Rio de Janeiro passed a law providing for the possibility of using these credits including assignment for payment of tax debts, but the rule has not yet been regulated.

Rio Grande do Sul contacted creditors who have a precatory issued to assess the interest in receiving the money at a 40% discount.

Constitutional amendments that postpone payment of precatories and allow compensation are nothing new, but they have always dealt with precatories of regional governments. A 2009 amendment led governors and mayors to propose this type of accounting meeting.

States and municipalities also maintain compensation programs based on Constitutional Amendment No. 94, of 2016. It allowed the use of precatory to settle debts of any nature registered until March 25, 2015 in the active debt.

In all cases, each entity was given the freedom to define its own rules. There are differences in relation to discounts on fines and interest on debts to be offset, for example. Some legislation also limited the use of the precatory to a percentage of the debt, requiring cash payment of the remainder.

Eduardo Gouvêa, president of the National OAB Precatórios Commission for the triennium 2019-2022, cites programs in the state of São Paulo as examples of those that had reduced adherence because of obstacles. Rio de Janeiro, on the other hand, had some success in the actions promoted in 2010 and 2012, which liquidated 30% of the precatorios stock at the time and demanded payment in cash of only 3% of the total debt.

“We already know more or less the recipe that works, but there are several ways to make it go wrong. One of them is to create a lot of restrictions, obstacles to adhering to the programs. listen to all the parties involved”, says Gouvêa.

He cites the need for a quick and standardized process of adhesion, in order to attract small debtors and states that the great incentive that the government can give is the discount of fines and interest on the debt, as it does with Refis.

Samir Nemer, a partner at FurtadoNemer Advogados, recalls that the precatory is a Brazilian invention, which allows the State to defer payment to its creditors, while companies and individuals are obliged to keep their obligations up to date.

For him, the application of compensation at the federal level can help many of these taxpayers to bring their accounts up to date in a time of crisis.

“When you make it possible to pay these debts with a precatory, everyone wins, the government and the entrepreneur who is on the margins of the market, experiencing difficulties. economy. In the medium term, it increases the collection with the economy being heated up.”

Eduardo Gouvêa, from the OAB Nacional, foresees a reactivation of the private market for precatories, with demand pushing up the value of papers and companies taking advantage of the discount to reduce the cost of concession and privatization operations. He also assesses that there will be no loss of revenue.

“It doesn’t lose revenue. What the government fails to pay [em precatório] It’s much more than I would get. This was the case with Rio. That’s what will happen to the Union if it does a well-done program.”

Pedro Siqueira, a partner at Bichara Advogados, also says that there is no waiver, but the compensation of a liability with an asset, and that he says that this is a cheap way for public entities to foster the economy in a time of crisis.

There are no projections on the potential of these offsets, but this is a market with billions in values.

The Annual Map of Precatórios of the CNJ (National Council of Justice) shows that there is almost R$ 200 billion pending payment in all spheres of government. The Union default promoted by the PEC will add to this balance at least BRL 45 billion in 2022.

The Union’s active debt totals R$ 2.7 trillion, with 5 million CPFs and CNPJs. They are about R$ 1 trillion with ratings A and B, grades given to debts with greater chances of receiving. The annual recovery rate is approximately 1% of inventory.

The two constitutional amendments (113 and 114/2021) are being questioned in the Federal Supreme Court (STF) by the OAB and associations of magistrates and servers. Rapporteur of the action, Minister Rosa Weber at the end of February requested information from the Chamber of Deputies, the Federal Senate and the President of the Republic on the subject.

Alternatives to use precatories after PEC do Calote

The creditor may use its own court documents* or acquired from third parties to:

• pay off debts in installments or debts registered in active debt;
• purchase of public properties available for sale;
• payment of public service grants and other types of concession;
• acquisition of equity interest available for sale (privatization);
• purchase of rights from the federative entity**

The compensation is valid for the Union, states and municipalities. Each entity must establish its own rules. The amendment provides for “self-applicability” of the device for the Union

In all cases, the precatory and the debt must be from the same federative entity

BRL 200 billion

National stock of precatories until 2020

BRL 45 billion

Amount that the Union must not pay in 2022

BRL 2.7 trillion

Union active debt

BRL 31.7 billion

Active debt recovery in 2021

*The amendment deals with net and certain credits recognized by the federative entity or by a final court decision.

**In the case of the Federal Government, including anticipation of amounts to be received as excess oil in oil sharing contracts

Sources: Constitutional Amendment No. 113/2021, National Council of Justice and Attorney General’s Office of the National Treasury.