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Fibria Rallies After Joining Vale in Brazil Tax Settlement

Fibria Celulose SA, Brazil’s largest pulpmaker by market value, rose after joining a federal program to refinance a 587 million reais ($252 million) tax bill and agreeing to sell land to trim debt.

Brazil’s biggest exporters had been fighting a combined 75 billion reais in tax claims on profit of their foreign subsidiaries, according to the country’s tax agency. Vale SA, the world’s largest iron-ore producer, climbed for a third straight day as it said this week that its board decided to join the government’s tax settlement program.

The shares of Fibria climbed 1.2 percent to 27.79 reais at the close of trading in Sao Paulo, the biggest gain since Nov. 18. The stock pared its monthly decline to 4.3 percent. The Ibovespa equity benchmark added 1.2 percent today. Vale rose 1.5 percent to 32.79 reais.

Fibria’s decision to join the tax settlement program, known as Refis, addresses concern related to foreign subsidiaries’ liabilities, Lucas Ferreira, Rodolfo Angele and Mandeep Singh Manihani, analysts at JPMorgan Chase & Co., wrote in a research note to clients. While Fibria agreed to pay its taxes, the company “will continue its fight in courts and any outcome now should be upside risk to Fibria’s base case,” the analysts wrote.

The company said in a regulatory filing after the market closed yesterday that it was granted discounted interest and penalties. The pulp producer also announced the sale of land in the state of Sao Paulo for 24 million reais to Votorantim Cimentos SA, according to the filing.

The sale of land to Votorantim “will help to increase the available resources of the company, which will prioritize the payment of debt with higher financial costs,” Fibria said in an e-mailed response to questions from Bloomberg News.

Vale agreed this week to pay 5.97 billion reais at the end of this month and 16.4 billion reais in 179 monthly installments, plus interest.

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