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Strategies & Market Trends : Telebras (TBH) & Brazil -- Ignore unavailable to you. Want to Upgrade?

To: Art Baeckel who wrote (21188)	7/31/2000 12:52:57 PM
From: Steve Fancy	Read Replies (2) \| Respond to of 22640

Brazil markets brace for storm as Congress resumes Reuters, 07/31/2000 10:32 By Katherine Baldwin SAO PAULO, July 31 (Reuters) - Brazilian markets braced on Monday for potential storms ahead this week as a simmering political scandal and an imminent ruling over allegedly fiddled funds threatened to tarnish the country's gleaming finances. Lawmakers and justice officials return to work on Tuesday after a winter recess with a potentially explosive agenda that could rattle investors' nerves despite Brazil's lauded economic recovery. Congress will ponder whether to dig deeper in a multimillion-dollar embezzlement scandal that could taint the government. And the Supreme Court is expected to decide on a case that could put a dent as big as $40 billion in the government's finances. "In the near term, the political scandal will hang over the market, especially effecting local investors," said Scott Piper, portfolio manager at Deltec Asset Management Corp. Political jitters could give investors an excuse to deal a further blow to the Bovespa index (INDEX:$BVSP.X), which took a 5.2-percent hit last week to end the week at 16,486, bullied by a stock sell-off in the United States. The index is off 3.6 percent this year and has to play catch up if it's to break the 20,000 mark by year-end, as some strategists have forecast. While potential hikes in U.S. interest rates will likely steal the show in the near-term, equity investors will be keen to see if legislators approve this week the creation of a congressional committee to probe the siphoning of up to $100 million in public funds from a courthouse construction project. Former chief-of-staff Eduardo Jorge is expected to give evidence on the graft case this week and investors may guard against revelations that could implicate President Fernando Henrique Cardoso's government, analysts said. Legislators say the chances of a Congressional committee being installed are remote, according to local media. But investors have already shown that the case is on their radar screens. Brazilian stocks took a dive earlier this month as details of the scandal emerged. WORKERS FUND COULD DENT FINANCES Adding another worry line to investors' brows is an imminent Supreme Court ruling that could force the government to dig deep to repay Brazilian workers up to 70 billion reais ($40 billion). The delayed case charges that the government shortchanged contributors to a mandatory national workers' fund, FGTS, during the turbulent years of 1987 to 1991 while juggling soaring inflation indices and dwindling finances. The Supreme Court could start considering the case already on Tuesday. "This is a story that comes and goes in investors' minds but it could creep up on them," Piper said. "It's another excuse to become more defensive." He added that the FGTS case was potentially more damaging than the courthouse scandal. Concern over the FGTS case rocked markets back in April and Central Bank Governor Arminio Fraga sought to quell concerns among New York analysts. Although the Supreme Court's initial ruling involves just three of 60,000 suits that have been filed, it could set the ball rolling for all FGTS account holders to seek compensation, landing the government with a hefty bill. "The market is going to be waiting for the government to define the actual size of this skeleton in the cupboard, and explain how it could be paid," said Antonio Machado, senior trader at Opportunity brokerage in Rio de Janeiro. A ruling against the government could be a setback in efforts to streamline fiscal accounts. Brazil said last week it had met International Monetary Fund fiscal targets ahead of time and with money to spare. Indeed, the two cases could leave the government with some serious damage control and overshadow Brazil's recently acclaimed performance in getting the economy back on its feet and inflation under control after the 1999 currency collapse. katherine.baldwin@reuters.com)) Copyright 2000, Reuters News Service