A Gartner Group estimate predicts that the Millennium Bug repair costs may reach U.S.$600 billion world wide. As for Brazil, the necessary repair costs may reach U.S.$12 billion.

Gartner also estimate that in Brazil alone, indemnity suits may vary from U.S.$20-140 billion.

Due to the trade barriers that protected the economy for many years, mainframes were the only computers whose import was allowed by the Brazilian government. Mainframes did not have a national equivalent and were brought in as companies looked for improved technology at a time of expanding activities.

Some companies have since changed their old computers for modern devices that are able to work with four digits when representing year information programs. However, probably less that 20 per cent of Brazilian companies are currently repairing their computer systems. This is a very low ratio, considering that the country is the sixth ranking computer user in the world.

Public organisations are most affected by the lack of resources for replacing equipment and ability to pay programmers fees at market levels. Moreover, there is an excessive amount of information in existing programs that needs to be revised.

In this context, banks have been pioneers in dealing with the bug problem and the banking sector is ahead of other economy sectors in this matter simply because it cannot exist without computers. Moreover, fulfilment of the majority of its transactions depend (or used to depend) on old and unsuitable mainframes.

Furthermore, in general the banking system carries out cheque clearing at midnight. This means that any operation failure may generate huge losses. By way of exemple, the Bank of Brazil, one of the major banks in the country is equipping all of its 5, 101 agencies with diesel generators since it feels that the year 2000 will start with an enormous power cut.

In Brazil, the mobilisation of the banking sector to adjust computer systems is not just a matter of necessity. The process is encouraged by the Central Bank of Brazil which is responsible for banking operations in the country and has already set out rules on the subject. The Brazilian Federal Securities Commission has also drawn up directives in order to avoid future problems.

Specifically in Resolution 2.453 of December 18, 1997 the Central Bank stated that in view of the new millennium, that a financial or other institution which is authorised to operate under its rules must provide for the adaptation of their electronic information systems by December 31, 1998. They must report on their adjustment measures in bi-annual management reports. In addition the above institutions audited reports for December 1997, June l999 and December 1998 must include an independent auditor´s opinion on the recent systems adaptation.

Furthermore, in Circulars 2.803 and 2.806 of February 1998, the Central Bank stated that by December 12, 1998 such institutions must present a detailed statement on the systems adjustment. This information must integrate the management report and the independent audit opinion and indicate that any damage or loss suffered by third parties in relation to the processing of the dates by these institutions must be fully reimbursed by them.

In Circular-Letter 2.805 July 16,1998, the Central Bank also stated that such institutions were required to answer a questionnaire on all steps taken to date.

Institutions failing to supply such information on time, in the terms requested by the Central Bank, are subject to a fine of up to U.S.$300,000 or 6 per cent of the institutions´ net worth (see Resolution 2.194, August 31, 1995 of the National Monetary Council).

The Central Bank itself is expending approximately U.S.$10 billion in order to adapt the SISBACEN, its on-line infomation computer system. Communique 5.885, of November 1997 stated that, from April 30, 1998 onwards, the information sent to the Central Bank by magnetic means or transmitted by teleprocess will be accepted only if sent in accordance with the new standard, with four digits to represent the dates.

In accordance with the Brazilian Federal Securities Commission Normative Instruction 276 of May 8,1998; the stock and commodities exchanges, clearing and compensation companies, institutions issuing certificates and, carrying out securities custody and book keeping operations, and investment fund managers, subject to the Brazilian Federal Securities Commission´s jurisdiction, as well as certain capital redemption companies, must adjust their automated electronic systems by December 31, 1998 so as to guarantee the exact processing of the dates after 1999. In relation to the certain capital redemption companies, this deadline may extend to June 30,1999.

The above companies and institutions must also publish information on the status of the adjustments made with an estimate of the related costs subject to review by independent auditors.