Although some discussion has arisen in the Senate on this matter, particularly thanks to the presentation of the Chairwoman of the Financial Market Commission, analysis of the effect this prohibition could have has been scarce.

For the time being, it is striking that this provision was included – and approved in the first constitutional stage – in a bill that proposes “measures aimed at reactivation, competitiveness and productivity in multiple sectors,” including the reactivation of construction, given the contrary effect that could result from its application.

The scope of this rule, if finally approved, raises several questions and should already give rise to some concern.

First, given the use of the expression “under no circumstances,” the question arises as to whether, should this reform go forward, all forms of interest capitalization would be absolutely prohibited. In that sense, would even the legal capitalization of interest unpaid as of an operation’s maturity date be unlawful?

The absolute terms of the rule might suggest that it would indeed be unlawful. However, since the prohibition on capitalizing interest would be built around the verb “to stipulate” – which consists of agreeing, arranging, or entering into something – it should be interpreted that the prohibition would apply only to an agreement of will between two persons, leaving intact the capitalization that occurs by operation of law, as is the case with interest in arrears as of an operation’s maturity date.

Second, a question arises as to the scope of the penalty for stipulating interest on interest. Under the proposed rule, interest capitalized in violation of the prohibition would be unenforceable against the debtor and would have no effect. In that case, would the unenforceability penalty affect the total amount of the capitalized interest, or only the interest arising from it?

Third, there is also the question of whether the rule approved in the first constitutional stage would apply exclusively to money credit operations, a concept that includes loans and other forms of financing, or whether it would also extend to other debts, such as outstanding purchase price balances.

Although Law 18.010 primarily governs money credit operations, a judicial interpretation cannot be ruled out to the effect that, given the use of the expression “under no circumstances,” the prohibition on anatocismo would be total and absolute.

Finally, the key question arises: would the prohibition on stipulating interest on interest prevent parties from agreeing to a financing operation with compound interest? In other words, is compound interest equivalent to an agreement for interest on interest?