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Globopar and the Virgins | Material Events


Source: Blog da Cidadania

Between 2001 and 2002,  Globo Comunicações e Participações Ltda. (Globopar) organized a financial scheme to acquire the transmission rights to the World Cup of 2002. The federal tax authority found the scheme to be fraudulent and criminal. The company was punished  with heavy fines and other penalties.

Globopar had acquired a company in the Virgin Islands that was dissolved just one year later. The funds traced to this company by the tax authority were used by the Marinho family holding company to pay for the transmission rights.

The tax authority brought charges against the company, finding that the transaction had resulted in the evasion of the Income Tax for Corporations [IRPJ] and demanding the payment of the principal, together with adjustment for inflation and a fine. In all, the company was presented with a bill for some R$ 600 million.

All of this took place at a time when news of Globo’s financial problems were widely reported in Brazil and around the world.

In October 2002,  Globopar, a shareholder and operator of the NET cable TV network — an asset it would later sell to the Mexican group Telmex — announced it would renegotiate the deadlines for settling the debt generated by its participation in NET.

At the time, market experts viewed the manuever as a sort of  [“blank  settlement”] by Globo.

I am not sure what that phrase means.

Is it an analogy with the phrase “a blank check”? Meaning it could write its own ticket with creditors? Remind me to bring it up in the forums.

The announcement of its financial difficulties coincided with the first day of trading after the election of  Luiz Inácio Lula da Silva.

The Devil and Zé Dirceu

That some month, in an interview with TV Cultura’s Roda Viva, PT president Zé Dirceu discussed the financial situation of media companies, including the print medium.

In that interview, Dirceu said that although the situation of the national media was “worrisome” and deserved “a cautious analysis” by the incoming government – which he would soon join as presidential chief of staff  — there were no plans to use BNDES to bail out Globo or any other electronic or print media company that had accrued dollar-denominated debt during the PHC administration.

No Free Lunch

Here is the precise reason why the Lula government was viewed as “unacceptable” by the major media groups: It was for refusing to help  Globo, Folha, Veja, Estadão … to emerge from the hole that FHC had led them into when, in the first month of his second administration, he unleashed a devaluation of the real — something that  he promised during the 1998 campaign that he would never do.

It seems difficult to understand why those media companies are so protective of a politician who had left  them in the bind just described.  The answer is simple:  if  José Serra had defefated Lula in 2002,  BNDES would have been much more generous to Globo.

BNDES is the Brazilian National Social and Economic Development Bank.

This means that the Marinho family business empire and its maneuvering to climb out of the hole — maneuvers that included tax fraud, it seems — would not have been pressured by the tax authority had the PT not been elected and then abandoned the barons of the media to their respective fates.

Daslu and Daspu

One of the first major scandals of the first Lula administration was a huge tax evasion case against the super-boutique Daslu — described by allies as an act of political revenge by left-wing zealots, but as far as I can see, the books were well and thoroughly cooked.

Governor Alckmin’s daughter worked for the company at the time.

She interceded with her father’s secretary of the treasury to try and obtain an exception to accounting rules for the company.

This according to a public admission by the secretary himself.

Eliane Tranchesi, owner of the boutique, died in prison in February of 2012.

The incident led to the creation of Daspu — a fashion label and militant feminist group run for and by Rio prostitutes.

Below, an O Globo article published October 29, 2002, about its own financial difficulties.

It reads more like a Material Event than a news story.

“Globo Comunicações e Participações S.A. (Globopar) announced yesterday that it will reassess its capital structure due to the devaluation of the real and the deteriorization  of economic conditions in Brazil.

Globopar, controlled by the Marinho family, has equity states in cable and satellite TV, television programming, book and magazine publishing, printing and Internet  The operations of TV Globo, a subsidiary of Infoglobo — which publishes O GLOBO, Extra’ and the Diário de S.Paulo) — and the Globo Radio system are directly controlled by the family and managed independently of Globopar.

In this reassessment process, Globopar and some of its subsidiaries are reviewing their business plans with an eye to improving cash generation. At the same time,  Globopar and some of its subsidiaries, a partir de hoje, would reorganize the flow of payments on its financial obligations.  Globopar expects to provide more  information about the process over the next 90 days.

TV Globo guarantor for some of the holdings of  Globopar, which has lately commenced talks with some of its creditors. Globopar has hired Goldman Sachs & Co. and Houlihan Lokey Howard & Zukin Capital to handle the revaluation and the attraction of investors. Debevoise & Plimpton and Barbosa, Müssnich e Aragão are provided legal counsel to Globopar. Unibanco will advise Globopar with respect to the Brazilian market.

Marinho family members invested more than  US$ 170 million in the company and its subsidiaries in the last six months. Along with strong financial support  from its shareholders, the continuing devaluation of the real and the significant reduction in credit for Brazilian companies have affected the dolllar-denominated debt of Globopar. Furthermore, the time required for return on investments in the pay TV sector has been longer than expected.

Despite the efforts of the company and its shareholders to manage Globopar’s debt through significant injections of capital, the deterioration of the macroeconomic climate makes clear the need to reevaluate the debt repayment schedule of  Globopar. We are working to review our business plans and take meaures to reduce costs and increase cash flow.  These efforts will provide a basis for the conversations we expect to hold with our creditors,” said Ronnie Moreira, President of Globopar.

TV Globo should not be affected negatvely by the process underway at Globopar.  Roberto Irineu Marinho, president of TV Globo, says the  performance of TV Globo remains solid, despite the current difficult economic conditions. TV Globo programming continues to enjoy the highest ratings and the company continues to review its operations in order to improve its cash flow, maintaining its position as a market leader based on the quality of its domestic programming.

Like Big Brother Brasil, as hosted by “journalist” Pedro Biale? An abomination!