Brazil’s Cement-Makers Face New Cartel Suit

Sao Paulo’s Federal Prosecutors Office announced on Oct. 27 it has filed a civil action against six Brazilian cement companies for allegedly engaging in price fixing between 1987 and 2007.

The companies mentioned in the announcement include Votorantim Cimentos, InterCement Paricipacoes and Lafarge Holcim, which is in process of being acquired by steel producer Companhia Siderurgica Naciona.

The amount of damages indicated in the action include economic losses of BRL28.9 billion and collective moral damages to society of at least BRL10 billion. At this time, there is a high degree of uncertainty as to whether this legal measure will be successful, and if successful, how the amount would be divided among the companies, according to Fitch Ratings. 

The alleged damages are material relative to the cash flow of several of these companies. An adverse outcome could have negative credit implications, depending on the timing, payment structure and ultimate amount allocated to each company.

Historically, several Brazilian companies that faced large tax or legal claims had financial outcomes that resulted in obligations that were much lower than the original claim with payment periods spread out over a number of years. 

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