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

To: Steve Fancy who wrote (6847)	8/19/1998 1:25:00 PM
From: Steve Fancy	Respond to of 22640

Brazil's Central Bank Calm About Capital Outflows Dow Jones Newswires SAO PAULO -- Seeking to ease fears about the potential for financial crisis here, a top Central Bank official said Wednesday that recent dollar outflows are unrelated to financial turmoil in Russia, the Estado News agency reported. At a news conference in the southern city of Porto Alegre, Central Bank International Affairs Director Demosthenes Madureira Pinho Neto said that the recent capital outflow is mainly the result of "rule 63." The rule is a Central Bank resolution that allows commercial banks to raise money abroad to make loans to customers in the agriculture sector. A loophole in the regulations, however, allows banks to divert the proceeds into the local fixed-income market. Pinho Neto said Wednesday that he expects redemptions of $5 billion through September on these loans. Pinho Neto said that the government is completely comfortable with Brazil's level of foreign reserves, which are estimated at around $70 billion. The Central Bank official said he was unsure if reserves would fall in August, but noted that levels of around $58 billion would be comfortable for Brazil. He added, however, that he didn't expect the country to lose enough dollars for reserves to fall to that level. Pinho Neto said that the Central Bank would be willing to alter interest rates and use reserves to defend the currency, the real. "We will use these instruments if the necessity arises." At the height of Asia's financial turmoil last October, the government nearly doubled interest rates and spent around $8 billion. Responding to market rumors that surfaced this week, Pinho Neto said that the government isn't buying back Brazilian Brady bonds. He also said that the government isn't planning a bond swap - replacing Brady bonds with longer term papers as was done in a $30 billion operation last year. He said that this type of operation is only carried out when the market is calm.

To: Steve Fancy who wrote (6847)	8/19/1998 1:30:00 PM
From: Steve Fancy	Respond to of 22640

INTERVIEW-Capital to flow freely in future SoutAm Reuters, Wednesday, August 19, 1998 at 13:17 By Shasta Darlington PORTO ALEGRE, Brazil, Aug 19 (Reuters) - South America is on the road to an economic and financial integration that could permit the free flow of capital within five years, said Sebastiao Cunha, president of the Federation of Latin American Banks. "We're seeing the formation of a South American economic bloc," Cunha told Reuters during a meeting of Latin American central bank directors in Porto Alegre, the capital of Brazil's southernmost state of Rio Grande do Sul. "That will bring with it financial and political integration." Cunha said South America is likely to achieve integration within four or five years as countries coordinate banking and financial regulations. At the same time, South America's two major trading blocs, Mercosur and the Andean Pact "will merge in the short term, laying the ground work," he said. Mercosur, regarded as the world's third largest trading bloc, links the economies of Brazil, Argentina, Paraguay, Uruguay and associate members Chile and Bolivia. The Andean Pact is made up of Venezuela, Colombia, Ecuador, Peru and Bolivia. Cunha said his banking federation is already taking steps toward financial integration by preparing a document that will be presented in November outlining differences in the way each country handles core banking principles and accounting regulations. "We want to try to harmonize our banking principles through the federation and this document," Cunha said. This would ensure similar accounting methods throughout the region and would be a move toward free movement of capital in those countries further down the road, he said. The integration could fuel an already massive wave of mergers and acquisitions that has left up to a third of South American banks in the hands of multinationals, he said. "A bank that is only regional won't be able to meet the needs of its clients which are increasingly global," Cunha said. Cunha is also director of international operations for Banco Real (SAO:REAL4), Brazil's fourth largest retail bank. In July, Dutch bank ABN Amro Holding NV (AMS:AAH) paid $2.1 billion for a 40 percent voting stake in a holding company that controls Banco Real. Other international banking heavyweights like Spain's Banco Santander (MADRID:SAN) and Banco Bilbao Vizcaya (MADRID:BBV) have been at the front of a rush to set up in the region ahead of integration. "You have to be in all of these countries if you want to standout in the retail banking business, and the Spaniards have been the leaders in this," Cunha said. In Argentina, about 30 percent of the country's banks are owned by foreign multinationals, up from 17 percent just three years before, according to the president of the Association of Banking Supervision Organisms in Latin America and the Caribbean. "Everyone, not just foreign banks, have to be much more aggressive to keep their clients," Cunha said. Brazilian, Chilean and Argentine banks have expanded operations to compete against the influx of large foreign banks. Banco Real was in all but three large South American nations before ABN Amro Bank bought a stake earlier this year. Copyright 1998, Reuters News Service