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

To: Steve Fancy who wrote (7369)	9/2/1998 3:26:00 PM
From: djane	Respond to of 22640

Hey, Jeffrey Applegate (Lehman guru) on CNBC just said, "Brazil is not Russia." He's been reading SI :-) Well, to be fair, he did say he had lowered his year-end estimates for the US market due to uncertainty in overseas markets.

To: Steve Fancy who wrote (7369)	9/2/1998 5:16:00 PM
From: RockyBalboa	Respond to of 22640

Hi, Steve (and others)! First, thank you for your work, It really makes it easy to get news updates in Brazil and about TBR. After reading more and more news about Brazil, is "looks" like that they do not fare well. Too many red flags. 1) Lowering interest rates while foreign capital is already fleeing Brazil. Other countries, even the U.S. do not afford lowering short term rates just to avoid a (Japanese) long term capital pullout in the light of a weak dollar. 2) Interest rates of 20.8% along with an inflation of beyond 4% seem to be unsustainable even in the mid-term. Economically, it means that the factor costs of capital used in a company are that high, that "nominal" earnings must be strong enough to serve it at that rate. Usually (ie seen in other countries) it leads to either inflation (see: eastern block, czechia), which applies to a fast growing economy, or disinvestment of capital and a shrinking economy, if, for example, there are price controls. On the other hand, (yet small) cut of the TBC rate, next to 19% are announced (others will follow?) 3) Thus a 4% GDP growth without cooking books is just hard to sustain. About the Budget proposal: Maintaining high interest rates (or being forced into) in the light of having to rollover floating debt and do much refinancing within the next year, a primary surplus of 0,87% along with debt service with at least 5% (of GDP) does not look so good. Putting it together, it simply does not add up. All that made me very cautious about my Brazil (TBR, UBB) stake, which is made up by stock and Austrian Schilling denominated Republic and Petrobras midterm debt (which has an offered yield of a whopping 15% now). Christian