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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: Sully- who wrote (5188)	8/26/2002 4:09:11 PM
From: Cactus Jack	Respond to of 89467

wstera, Good points. jpg

To: Sully- who wrote (5188)	8/26/2002 4:23:56 PM
From: Jim Willie CB	Read Replies (2) \| Respond to of 89467

Brazil's Fraga, Malan to Ask Banks to Maintain Credit (Update2) By Charles Penty New York, Aug. 26 (Bloomberg) -- Brazil's top fiscal and monetary officials will try at a meeting today to persuade Citigroup Inc., J.P. Morgan Chase & Co. and rivals to maintain credit lines to South America's biggest economy. International banks, which had about $66 billion at risk in Brazil as of March, have reduced lending to the country amid concern a new president may fail to rein in spending and prompt a default on some 1 trillion reais ($319 billion) of debt. That may force some Brazilian exporters to cut production because they can't get credit, slowing Brazil's recovery from its first recession since 1999. Any sign from international banks that they'll renew loans to Brazil may spark gains in the nation's currency and benchmark bond, which last week had its best performance in two months. ``People are expecting a positive reaction from bankers after the meeting on Monday,'' said Marco Sudano, who helps manage 19 billion reais at the asset management unit of Uniao de Bancos Brasileiros SA in Sao Paulo. ``I don't think we should expect the banks would increase credit lines to Brazil, but they are likely to at least commit to keep the credit lines in the same level as it is now.'' Brazil's central bank President Arminio Fraga and Finance Minister Pedro Malan will meet bank representatives at the New York Federal Reserve this morning. Malan said they would present the government's view of Brazil's economic prospects and of the reaction in world markets to the nation's debt crisis this year, during which bonds, the currency and the benchmark stock index have all declined by about a quarter. As part of a rescue plan, Brazil's central bank last week said it will make available $2 billion for new loans to exporters, while the country's state development bank will channel a further $2 billion, including funds from the Inter-American Development Bank, for trade finance. The World Bank is lending $250 million to two Brazilian banks, Banco Itau SA and Uniao de Bancos Brasileiros, to finance exports. Brazil's 14 1/2 percent bond maturing in 2009 jumped 1.5 cents on the dollar to 67 -- a two-week high -- to yield 24.28 percent in European trading at 8:07 a.m. New York time. U.K. markets are closed today for a holiday. Confidence ``We will show our confidence in dealing with the turbulence of the present moment,'' Malan told reporters at a press conference Friday. Bankers are wary of investing in South America following Argentina's default on $95 billion of bonds late last year. The Brazilian officials probably will try to convince bankers that extending trade credit lines to exporters that earn in dollars isn't risky, bankers said. ``There might be some easing on the export side but risk aversion for other types of lending is high,'' said Ernesto Meyer, director of structured lending at BNP Paribas SA's Brazilian unit in Sao Paulo. ``The usual pattern for the U.S. banks is to withdraw when there's trouble and come back strongly when things improve.'' BNP Paribas will attend the meeting in New York, he said. Lending Cut Citigroup cut loans and other commitments in Brazil by 18 percent in the second quarter because of concern the government might default on its debts. The largest financial services company reported $9.3 billion in outstanding cross-border claims for Brazil -- or assets such as loans financed by deposits outside the country -- on June 30, compared with $11.4 billion on March 31, according to the bank's quarterly filing with the Securities and Exchange Commission. Wachovia Corp., the fourth-largest U.S. bank, while doing some new business in Brazil, expects to reduce by half this year the $720 million in trade financing it has extended to the nation's banks, Chief Financial Officer Robert Kelly said in an interview earlier this month. A commitment from banks to increase lending to Brazil is unlikely, said Michael Stead, who manages $600 million of assets, including FleetBoston Financial Corp. and other bank shares, for the Wells Fargo SIFE Specialized Financial Services Fund in San Francisco. ``As a bank investor, I wouldn't expect them to extend any new money until they see who wins the elections,'' said Stead. ``My own view is that there'll be no new credit until they know who's won.'' A poll last week showed ruling coalition candidate Jose Serra gaining on his two rivals, boosting hope he can come from behind to win October's presidential race. Free television advertising that began Tuesday may boost Serra's poll standing next week. Not Arm-Twisting Bank of America will ``monitor'' Monday's meeting but has no plans to change its stance on lending to Brazil, said Eloise Hale, a spokeswoman for the third-biggest U.S. bank. The bank reduced the amount it has at stake in Brazil by 20 percent to $1.99 billion during the first six months of the year, according to a filing with the Securities and Exchange Commission. ``This is not about arm-twisting,'' said Daniel Gleizer, head of capital markets at the Brazilian unit of Dresdner Bank AG and a former head of the central bank's international relations department. ``Nobody is trying to convince banks to do what they don't want to do.'' According to the Bank for International Settlements, foreign banks have $65.9 billion in loans to Brazil at risk. On Friday, the benchmark 8 percent bond maturing in 2014 rose 0.98 cent on the dollar to 58.76, to yield 20.51 percent. The currency rose 1 percent to 3.1080 per dollar. The 8 percent bond gained 8.3 percent during the week, its best performance since rising 10.3 percent in the week ending June 28.