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Newsletter December 2017

Legal Updates

Legal framework of credit institutions and financial companies

On the 24th of October, the 45th legislative amendment to the Decree-Law n. º 298/92, to the Legal Framework of Credit Institutions and Financial Companies (henceforth referred to as “LFCIFC”) was approved through the Law nr. 109/2017. The amendment focuses on five articles of the legislative piece, with the intention to reduce potential conflicts of interest and also reinforce the criteria of assessing the reputation.

This amendment strengthens national efforts in creating management and supervision entities in credit institutions less susceptible to third-party corruption or born out of partiality. Likewise, it seeks to prevent against the negative effects of promiscuity between credit institutions, companies and the market, on a national level.

This amendment to the LFCIFC comes at an auspicious moment during which regulatory agents are preparing for the coming year, in which new legislative pieces will be enforced and require a new analysis of competition rules in the Portuguese and European market. It is understood that fortify of the lines drawn between regulators and market agents is a way to avoid serious conflicts of interests in the future.

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Allocation of social tariff to water services

On 6th of December entered into force the Decree-Law nr. 147/2017, of 5th of December, which defined the framework for the allocation of a social tariff when providing water services.

This regime intends to protect consumers in a vulnerable economic situation, specifically, individuals with a contract for water supply services that are in a situation of economic deprivation.

Individuals eligible for this regime, for example, will be elder citizens who benefit from the solidarity allowance, or those who receive social benefits such as unemployment benefit or invalidity benefit. Each municipality can, of its own volition, set other criteria of reference to grant this social tariff, wider than the ones established by the decree-law.

The adherence to the regime by the municipalities will be voluntary. The legislative piece grants to each municipality the freedom to decide, on its own, if will grant this benefit, having the power not to do so, and under which terms, namely, if it will consist of a discount and/or in a recognition of tariff exemption.

Funding the social tariff will be a responsibility of each adherent municipality. Nevertheless, the tariff should be applied by the provider, with whom the consumer has celebrated a supply contract, and in accordance with the information provide by the municipality for the purpose.

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Business Updates

Another positive note for Portugal

Following previous evaluations from the rating agencies DRBS and Standard & Poor’s, the Portuguese debt was withdrawing from the “trash” rating, now was Fitch that decided to improve the evaluation of the long-term sovereign debt of the Portuguese Republic. Thus, two of the biggest risk rating agencies (with the exemption of Moody’s which maintains a stable outlook of the Portuguese debt) have line up their evaluation and placed Portugal in the sightline of foreign investment.

However the surprise came from the proportion of the improvement since Fitch has made a two level “upgrade”, with Portugal going directly to the quality investment grade of ‘BB+’ to ‘BBB’. With this rating, Portugal is placed better than Italy.

The decision made is justified by, mostly, the progressive and constant lowering of the Portuguese debt, the significant growth of GDP and, at last, the substantial improvement of financing conditions of companies.

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The favorable trajactory of Portugal

In the sixth post-program evaluation of Portugal, the International Monetary Fund (IMF) has reviewed the predictions this month, aligning them with the Government predictions, thus foreseeing a growth in the Portuguese economy of 2,6% in 2017 and 2,2% in 2018, highlighting the important role that exportations have in these predictions.

Concerning public deficit, the IMF also converged with governmental projections. Previously, has expected a negative balance of 1,5% in 2017 and 1,4% in 2018 and now accepts that may be 1,4% and 1,1% respectively.

Thus, the IMF expects the Portuguese economy will continue showing a positive growth and the deficit targets will be comfortably reached, recognizing the merit of the stable trajectory chosen by Portugal.

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