Financial strategies for minimizing corporate income taxes under Brazil's new global tax system

In 1996, Brazil adopted a worldwide income tax system for corporations. This system represents a fundamental change in how the Brazílian government treats multinational transactions and the tax minimizing strategies relevant to businesses. In this article, we describe the conceptual basis for worldwide tax systems and the problem of double taxation that they create. Responses to double taxation by both the governments and the priva te sector are considered. Namely, the imperfect mechanisms developed by Brazil and other countries for mitigating double taxation are analyzed. We ultimately focus on the strategies that companies utilize in order not only to avoid double texetion, but also to take advantage of tax havens.

International transfer pricing restrictions: impact on corporate financial policy

Transfer pricing is a pervasive issue that presents significant tax savings potential concerning international enterprises. The authors discuss company incentives to manage transfer prices in an article appearing in the preceding issue of this journal. In response to these incentives, governments have increasingly enacted and enforced domestic restrictions on transfer prices. In this article, contemporary norms restricting transfer pricing are analyzed. The OEGO and US pricing standards are assessed and Brazil's recent application of these standards is considered. Transfer pricing methods are described and evidence of their use is presented. We conclude by describing an intercompany transfer pricing policy intended to facilitate internaI financiaI management and minimize externaI tax threats.

ANTECEDENTS AND CONSEQUENCES OF HOUSEHOLD FINANCIAL MANAGEMENT IN BRAZILIAN LOWER-MIDDLE-CLASS

Through two complementary and exploratory studies – one qualitative and one quantitative – this research aims to understand the ways in which lower-middle-class families in Brazil manage their household finances. The study proposes an integrated framework that brings together various previously disconnected theoretical fragments. Based on a survey with a sample of 165 lower-middle-class female consumers of a retail company in São Paulo, we explored and tested, via a quantitative study, how antecedents such as personal characteristics affect the financial management process, as well as its consequences, either negatively as defaults or positively as savings. The model calibration and analysis were derived from a series of regression analyses. The results revealed the mediator role that financial management plays in the relationship between personal characteristics and defaults and savings. Compared to previous studies with consumers of more affluent countries, we identified peculiar findings among Brazilian lower-middle-class consumers: inadequate attention to control, weak or no focus on short- or long-range planning, widespread absence of budget surplus, and influence of critical events on episodes of default.

CROSS-COUNTRY STUDY ON THE DETERMINANTS OF BANK FINANCIAL DISTRESS

ABSTRACTBank failures affect owners, employees, and customers, possibly causing large-scale economic distress. Thus, banks must evaluate operational risks and develop early warning systems. This study investigates bank failures in the Organization for Economic Co-operation and Development, the North America Free Trade Area (NAFTA), the Association of Southeast Asian Nations, the European Union, newly industrialized countries, the G20, and the G8. We use financial ratios to analyze and explore the appropriateness of prediction models. Results show that capital ratios, interest income compared to interest expenses, non-interest income compared to non-interest expenses, return on equity, and provisions for loan losses have significantly negative correlations with bank failure. However, loan ratios, non-performing loans, and fixed assets all have significantly positive correlations with bank failure. In addition, the accuracy of the logistic model for banks from NAFTA countries provides the best prediction accuracy regarding bank failure.

CORPORATE SOCIAL RESPONSIBILITY AND FINANCIAL PERFORMANCE: THE SPANISH CASE

ABSTRACT The enormous interest aroused by corporate social responsibility both in the academic and the business worlds forms the background for this study. Its objective is to analyze the relationship between corporate social responsibility and financial performance in view of the debate in the literature on the subject. The study focuses on a sample of Spanish companies taken from the IBEX 35 stock market index, using panel data methodology, which offers advantages in comparison to methodologies used in other studies. We analyzed the period from 2003 to 2010. Our findings suggest that there is no obvious relationship between corporate social responsibility and financial results, at least in the case of Spain.

Stressful working conditions and poor self-rated health among financial services employees

OBJECTIVE: To assess the association between exposure to adverse psychosocial working conditions and poor self-rated health among bank employees. METHODS: A cross-sectional study including a sample of 2,054 employees of a government bank was conducted in 2008. Self-rated health was assessed by a single question: "In general, would you say your health is (...)." Exposure to adverse psychosocial working conditions was evaluated by the effort-reward imbalance model and the demand-control model. Information on other independent variables was obtained through a self-administered semi-structured questionnaire. A multiple logistic regression analysis was performed and odds ratio calculated to assess independent associations between adverse psychosocial working conditions and poor self-rated health. RESULTS: The overall prevalence of poor self-rated health was 9%, with no significant gender difference. Exposure to high demand and low control environment at work was associated with poor self-rated health. Employees with high effort-reward imbalance and overcommitment also reported poor self-rated health, with a dose-response relationship. Social support at work was inversely related to poor self-rated health, with a dose-response relationship. CONCLUSIONS: Exposure to adverse psychosocial work factors assessed based on the effort-reward imbalance model and the demand-control model is independently associated with poor self-rated health among the workers studied.

Estimated Financial Impact of Trypanosoma vivax on the Brazilian Pantanal and Bolivian Lowlands

The financial impact of the first outbreak of Trypanosoma vivax in the Brazilian Pantanal wetland is estimated. Results are extended to include outbreaks in the Bolivian lowlands providing a notion of the potential influence of the disease and an analytical basis. More than 11 million head of cattle, valued at more than US$3 billion are found in the Brazilian Pantanal and Bolivian lowlands. The total estimated cost of the 1995 outbreak of T. vivax is the sum of the present values of mortality, abortion, and productivity losses and treatment costs, or about 4% of total brood cow value on affected ranches. Had the outbreak gone untreated, the estimated losses would have exceeded 17% of total brood cow value.

Are sustainable companies less risky and more profitable?

The purpose of this study was to determine whether there were significant differences in accounting indicators when comparing sustainable enterprises to other similar companies that are not considered as sustainable. The Corporate Sustainability Index of BM (São Paulo Stock, Commodities and Futures Exchange) was the criterion selected to break down the samples into sustainable and non-sustainable enterprises. The accounting indicators were separated into two kinds: risk (dividend payout, percentage growth of assets, financial leverage, current liquidity, asset size, variability of earnings, and accounting beta) and return (ROA, ROE, asset turnover, and net margin). We individually analyzed the companies in the energy sector, followed by those in the banking sector, as well as the entire ISE portfolio as of 2008/2009, including all the sectors. Mann-Whitney tests were performed in order to verify the difference of the means between the groups (ISE and non-ISE). The results, considering the method chosen and the time span covered by the study, indicate that there are no differences between sustainable companies and the others, when they are assessed by the accounting indicators used here.

Analysis of multi-scale systemic risk in Brazil's financial market

This work analyzes whether the relationship between risk and returns predicted by the Capital Asset Pricing Model (CAPM) is valid in the Brazilian stock market. The analysis is based on discrete wavelet decomposition on different time scales. This technique allows to analyze the relationship between different time horizons, since the short-term ones (2 to 4 days) up to the long-term ones (64 to 128 days). The results indicate that there is a negative or null relationship between systemic risk and returns for Brazil from 2004 to 2007. As the average excess return of a market portfolio in relation to a risk-free asset during that period was positive, it would be expected this relationship to be positive. That is, higher systematic risk should result in higher excess returns, which did not occur. Therefore, during that period, appropriate compensation for systemic risk was not observed in the Brazilian market. The scales that proved to be most significant to the risk-return relation were the first three, which corresponded to short-term time horizons. When treating differently, year-by-year, and consequently separating positive and negative premiums, some relevance is found, during some years, in the risk/return relation predicted by the CAPM. However, this pattern did not persist throughout the years. Therefore, there is not any evidence strong enough confirming that the asset pricing follows the model.

U.S. subprime financial crisis contagion on BRIC and European Union stock markets

ABSTRACTThe Copula Theory was used to analyze contagion among the BRIC (Brazil, Russia, India and China) and European Union stock markets with the U.S. Equity Market. The market indexes used for the period between January 01, 2005 and February 27, 2010 are: MXBRIC (BRIC), MXEU (European Union) and MXUS (United States). This article evaluated the adequacy of the main copulas found in the financial literature using log-likelihood, Akaike information and Bayesian information criteria. This article provides a groundbreaking study in the area of contagion due to the use of conditional copulas, allowing to calculate the correlation increase between indexes with non-parametric approach. The conditional Symmetrized Joe-Clayton copula was the one that fitted better to the considered pairs of returns. Results indicate evidence of contagion effect in both markets, European Union and BRIC members, with a 5% significance level. Furthermore, there is also evidence that the contagion of U.S. financial crisis was more pronounced in the European Union than in the BRIC markets, with a 5% significance level. Therefore, stock portfolios formed by equities from the BRIC countries were able to offer greater protection during the subprime crisis. The results are aligned with recent papers that present an increase in correlation between stock markets, especially in bear markets.

Production costs and fruit yield profitability in the initial harvest of custard apple trees

The aim of this study was to estimate the production cost and economic indicators associated with the production and sales of fruits from 20 custard apple progenies during the initial five harvests, in order to identify the harvest season from which custard apple exploitation becomes profitable, as well as the most promising progenies from an economic point of view. The fruit yield data upon which the present work was based were obtained during the period from 2001 to 2005, in an experiment that evaluated 20 custard apple half-sibling progenies, under sprinkler irrigation. The progenies were evaluated in a random block design with five replicates and plots consisting of four plants each. The exploitation of custard apple progenies only showed to be a profitable agribusiness after the fourth year. Before that, only A3 and A4 progenies in the second year, and P3 and P11 in the third year provided profitable incomes. Considering the methodological assumptions imposed concerning the time period analysis and the prices as of July 2007, the most important profitability indicators (operating profit, return index and equilibrium price) evidenced that the A4 progeny is the most recommended, although other progenies are also highlighted, such as FJ1 and FJ2. As already discussed, the progenies showing the highest average yields of five harvests are not always the most economically recommendable ones.

Fruit production in Chile: bright past, uncertain future

In 2007 (the last agricultural census), Chile had 308, 445 ha of fruit orchards: an increase of almost 32% from the previous census (1997). The most important species were table grapes (20%), avocados (13%) and apples (12%). Some 22% of the fruit crops growing area corresponded to juvenile orchards; within the species with higher proportion of juvenile orchards were prunes (42%) and blueberries (56%). Most orchards are located between latitude 27º18` S (Copiapó) and 40º36´S (Puerto Varas). The industry is driven by the export component which accounts for more than 50% of the fruits produced. In the crop season 2009-2010, approximately 254 million boxes (around 2.5 million tons) were exported, representing over US$ 3.5 million. Processed and fresh fruits represented 8.2 and 26.7% of the total forest and agricultural Chilean exports in 2008, respectively. The main markets for this fruits were USA/Canada (42%) and Europe (32%). The fruit grower receives, on average, 12-16% of the total price of the fruit in its final destination. Each year the fruit industry employs 450.000 people directly, of which 1/3 are permanent. Even though the fruit industry employs the highest proportion of the agricultural labor and the growing area has increased in the last 20 years, the proportion of agricultural employment has decreased from 19.5% in 1989 to 10.8% in 2008. It might also be noted that Chile invests only 0.7% of the GDP in research. In the last 40 years, the fruit industry has been a motor for the Chilean economic development, but the lower rates of currency exchange, the rising costs of energy (oil, electricity), and the increasing scarcity of hand labor have drastically reduced the profitability and are putting at risk the viability of a large proportion of the fruit orchards in Chile. It is estimated that this season around 65% of the orchards will have a negative economic balance in their operations. Higher investment in research, improvements in fruit quality and various orchard management practices, as well as higher financial support from the Government are needed for the long term viability of the fruit industry in Chile.

CITRICULTURE ECONOMIC AND FINANCIAL EVALUATION UNDER CONDITIONS OF UNCERTAINTY

ABSTRACT The citriculture consists in several environmental risks, as weather changes and pests, and also consists in considerable financial risk, mainly due to the period ofreturn on the initial investment. This study was motivated by the need to assess the risks of a business activity such as citriculture. Our objective was to build a stochastic simulation model to achieve the economic and financial analysis of an orange producer in the Midwest region of the state of Sao Paulo, under conditions of uncertainty. The parameters used were the Net Present Value (NPV), the Modified Internal Rate of Return(MIRR), and the Discounted Payback. To evaluate the risk conditions we built a probabilistic model of pseudorandom numbers generated with Monte Carlo method. The results showed that the activity analyzed provides a risk of 42.8% to reach a NPV negative; however, the yield assessed by MIRR was 7.7%, higher than the yield from the reapplication of the positive cash flows. The financial investment pays itself after the fourteenth year of activity.

Technical and economic indicators of the yellow passion fruit tree irrigated with underground water supply

The research aimed to quantify technical and economic indicators of yellow passion fruit tree irrigated with fractions of irrigation with underground source of water, to generate information that helps farmers in decision making on the implementation of investment in irrigated fruit growing (yellow passion fruit). For this purpose, we used the passion fruit crop irrigated with Microjet type irrigation system, with conducting system in simple espaliers. The treatments consisted of five hours of application of the depth of water required by the crop with irrigation frequency of two days. The results showed that the highest yield (16660kg ha-1) was obtained with the fractionation of irrigation twice a day (50% to 7h and 50% to 21h30), which provided an increase in productivity of 54%, demonstrating the financial viability and being highly profitable to the interest rate of 2% per year, with low sensitivity of financial risk to real interest rates above the prevailing market.