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

To: Jay8088 who wrote (7647)	9/8/1998 1:20:00 PM
From: Steve Fancy	Respond to of 22640

Brazil Bovespa (INDEX:$BVSP.X) up 3.78 pct on fiscal steps Reuters, Tuesday, September 08, 1998 at 09:43 SAO PAULO, Sept 8 (Reuters) - Brazil's key Bovespa index surged 3.78 percent in the first 10 minutes of trading on expectations of new fiscal measures and optimism over U.S. markets, traders said. "Fiscal measures would help the Bolsa and calm interest rate futures," said a trader at Banco Patente said. "Today's move is a reflection of expectations of a cut in interest rates in the United States," he added. The Bovespa jumped to 6,058 in the first few minutes of trading. The government said it will announce Tuesday measures to cut the country's budget deficit. The steps were expected after the Central Bank effectively raised interest rates 50 percent late Friday, boosting debt payments. Stocks were also boosted by expectations of a cut in interest rates in the United States, which would make emerging market debt instruments and U.S. equities more attractive. The Dow Jones Industrial Average is often used as a benchmark for Latin American markets during times of crisis. Copyright 1998, Reuters News Service

To: Jay8088 who wrote (7647)	9/8/1998 1:21:00 PM
From: Steve Fancy	Respond to of 22640

Brazil shrs slump as market ponders fiscal program Reuters, Tuesday, September 08, 1998 at 12:18 SAO PAULO, Sept 8 (Reuters) - Brazilian stocks were slumping in midday trade as investors decided to take more time and analyze possible impact from the government's fiscal program announced on Tuesday, brokers said. The 57-share Bovespa index (INDEX:$BVSP.X) came off its earlier highs and was trading at 5,919 points, up 1.41 percent from its previous close. The index spiked 5 percent earlier on expectations of the fiscal measures and optimism over Asian and U.S. stock markets. Meanwhile, the local currency real was up 0.09 percent at 1.1770 to the dollar by midday. The real had opened at 1.1775 to the dollar. Forex dealers said the strengthening in the real reflected optimism in the fiscal measures, but the rise was still within expectations. "Dealers still think dollars are leaving the country," said one forex trader. By Friday last week, a total net $6.74 billion had left Brazil's commercial and floating foreign exchange markets so far in September. Stock investors were also attentive to the dollar outflows. "Despite today's measures, we don't expect a sudden wave of improvement because of the dollar outflows," one trader said. The government said it has decided to cut the federal budgets for 1998 and 1999 in a bid to reduce the public sector budget deficit. Spending on social programs and infrastructure in 1998 will be cut by four billion reais to achieve a primary surplus of five billion reais, the Finance Ministry said. "The market is going to react poorly; it is reacting poorly," said Roberto Padovani, an economist at Banco Tendencia. "Brazil has to reduce public spending much more." Benchmark issue Telebras preferred (SAO:TELB4) was unchanged at 72 reais by midday after jumping 7 percent earlier. Copyright 1998, Reuters News Service

To: Jay8088 who wrote (7647)	9/8/1998 1:22:00 PM
From: Steve Fancy	Respond to of 22640

Brazil to send fiscal plan to Congress by Nov 15 Reuters, Tuesday, September 08, 1998 at 12:18 BRASILIA, Sept 8 (Reuters) - Brazil's government plans to send a Fiscal Adjustment Program aimed at cutting the fiscal deficit between 1999 and 2001 to Congress by November 15, Finance Minister Pedro Malan said Tuesday. Malan said the government hopes to reduce the country's dependence on foreign savings and raise domestic savings in order to reduce the fiscal deficit. "We are not only assuming firm commitments but giving the government the legal means so that these targets can be met," said Malan. More immediately, the government also said it is going to cut the federal budgets for 1998 and 1999 in a bid to reduce the country's public sector budget deficit, seen as one of Brazil's most pressing economic problems now. Spending on social programs and infrastructure in 1998 will be cut by four billion reais to achieve a primary surplus -- not including debt costs -- of five billion reais, the ministry said in a statement. Malan said that the government also hopes to substitute an increase in domestic savings for some of Brazil's hefty foreign savings. "We have to reduce the relative weight of foreign savings of total Brazilian savings and increase the weight of domestic savings," Malan said. Brazil relies heavily on flows of foreign dollars to help cover its budget deficit, currently estimated at 7 percent of gross domestic product in annual terms. The Fiscal Adjustment Program will contain measures aimed at "stabilizing" the relationship between the fiscal deficit and GDP, Malan said. Copyright 1998, Reuters News Service

To: Jay8088 who wrote (7647)	9/8/1998 1:23:00 PM
From: Steve Fancy	Respond to of 22640

Brazil forex market loses $6.741 bln thru Sept 4 Reuters, Tuesday, September 08, 1998 at 12:18 SAO PAULO, Sept 8 (Reuters) - A whopping $6.741 billion fled Brazil's foreign exchange markets in the first four days of September, more than half dollar leakage during the entire month of August, dealers said on Tuesday. On Friday, dollar losses from the commercial and floating foreign exchange markets totaled $2.925 billion, the biggest one-day outflow since the Asia crisis sparked a dollar exodus last October. In August a total $12.001 billion left the forex markets. The commercial forex market registered outflows of $1.127 billion on Friday according to the Central Bank while dealers put net outflow from the floating forex market at $1.798 billion. Copyright 1998, Reuters News Service

To: Jay8088 who wrote (7647)	9/8/1998 1:24:00 PM
From: Steve Fancy	Respond to of 22640

Brazil announces cuts to 1998, 1998 budgets Reuters, Tuesday, September 08, 1998 at 12:51 BRASILIA, Sept 8 (Reuters) - The Brazilian government has decided to cut the federal budgets for 1998 and 1999 in a bid to reduce the country's public sector budget deficit, the Finance Ministry said Tuesday. Spending on social programs and infrastructure in 1998 will be cut by 4 billion reais to achieve a primary surplus -- not including debt costs -- of 5 billion reais, the ministry said in a statement. In 1999, spending will be limited to 80 percent of levels included in a draft version of the budget for next year with a view to posting a primary surplus of 8 billion reais, the statement said. The surplus targets were not expressed in terms of gross domestic product. Finance Minister Pedro Malan was due to make a statement on the measures. The announcement came after Brazilian markets were battered by fallout from Russia's financial crisis and widespread concerns about emerging markets around the world. Brazil relies heavily on flows of foreign dollars to help cover its budget deficit, currently estimated at 7 percent of gross domestic product in annual terms. brasilia.newsroom@reuters.com)) Copyright 1998, Reuters News Service

To: Jay8088 who wrote (7647)	9/8/1998 1:26:00 PM
From: Steve Fancy	Respond to of 22640

Brazil's Malan Meets Cardoso To Discuss Crisis Dow Jones Newswires BRASILIA -- Finance Minister Pedro Malan was meeting President Fernando Henrique Cardoso late Monday night to discuss the current financial crisis, an official Finance Ministry spokesman said Monday night. He said the visit was not an official meeting and no other member of the Brazilian government's economic team is accompanying him at the presidential residence, or Alvorada Palace. The spokesman said no statement will be issued after Malan's visit. "The purpose of the visit is only to report to the President on last week's meeting between Latin American finance minsters and International Monetary Fund officials in Washington on the international market turmoil," he told Dow Jones Newswires. Earlier Monday - a public holiday - Cardoso denied at a press conference after an Independence Day ceremony that the government is preparing an emergency fiscal or economic package in response to the crisis. -By William Vanvolsem; (5561) 244 3095; wvanvolsem@ap.org The meeting between Cardoso and Malan ended just after 2330 GMT after they were joined by other top officials of the Finance and Planning Ministries. Participants identified as entering the presidential residence were, among others, the Finance Ministry's executive secretary Pedro Parente and Planning Minister Paulo Paiva, accompanied by advisors. Nor Malan nor the others made any comments when leaving the Alvorada Palace just before 2400 GMT. -By William Vanvolsem; (5561) 244 3095; wvanvolsem@ap.org

To: Jay8088 who wrote (7647)	9/8/1998 1:29:00 PM
From: Steve Fancy	Read Replies (1) \| Respond to of 22640

Brazil's Govt Faces Crucial Week For Restoring Confidence By MARY MILLIKEN Dow Jones Newswires SAO PAULO -- Caught between a rock and a hard place one month before elections, Brazilian President Fernando Henrique Cardoso is under immense pressure this week to restore investor confidence in the economy and stem the startling outflow of capital. Following the tightening in credit announced last Friday, market participants are expecting austerity measures on the fiscal side and additional moves to keep capital inside Brazil. Local media reported that a fiscal package will be announced Tuesday, after the Independence Day holiday Monday. Cardoso repeatedly denied this possibility. Despite the grim deterioration in the domestic scenario, market watchers still expect the government to avoid a devaluation of the real before the Oct. 4 elections. "The most costly option before the elections is a devaluation, which would be seen as the failure of the Real Plan," said Alvaro Piris, a Latin American economist at BBV Latininvest in London. According to the chief foreign exchange dealer at one Sao Paulo bank, a devaluation would mean "admitting that the policies up to now haven't been correct." "I don't think they are going to fiddle with the currency," he added. Cardoso is well ahead of his main opponent, leftist candidate Luiz Inacio Lula da Silva, in the polls, and the numbers show he would be re-elected in the first round of voting. But if currency stability - the cornerstone of Cardoso's four-year-old economic stabilization plan, the Real Plan - falls away, the president will lose credibility not only with voters but also with the international investment community that has played a key role in the economic development of Brazil. Last week served up a string of devastating blows to Cardoso's economic team, headed by Finance Minister Pedro Malan and Central Bank President Gustavo Franco. On Thursday, Moody's Investor Service simultaneously downgraded Brazil's and Venezuela's foreign currency sovereign ceilings to B2 from B1. On Friday, Moody's followed up by downgrading the financial strength ratings of the three largest private banks, Banco Bradesco SA, Banco Itau SA and Uniao de Bancos Brasileiros SA to C from C+. Moody's justified its downgrades by saying that the "increased international volatility of global capital markets has heightened Brazil's vulnerability to sudden changes in investors' confidence." Both government officials and domestic market participants criticized Moody's downgrade, which puts Brazil on par with Nicaragua. Despite a widespread perception of unfair treatment by Moody's, capital streamed out of Brazil at an alarming pace and the stock market engaged in moments of panic selling. "It came at a very inopportune moment," said Silvio Camargo, an institutional equities sales executive at Sao Paulo's Banco Fator. The Sao Paulo Stock Exchange's Bovespa Index fell by an accumulated 14.7% Thursday and Friday. At one point late Friday, the index was down by nearly 14% before closing with a 6.1% loss. On the foreign exchange side, Brazil posted an estimated net dollar outflow of $2 billion on Friday, putting the accumulated outflow at $6 billion in one week. Foreign exchange sources estimated that the Central Bank spent some $2 billion on Friday alone on the spot and future currency markets to keep the real steady. The foreign exchange dealers also noted that much of the outflow came from profit remittances by multinational companies as confidence in currency stability deteriorated. In an interview published in the Sunday edition of O Estado de Sao Paulo, the Central Bank's Monetary Policy Director Francisco Lopes said that reserves had fallen below $60 billion, perhaps to $59 billion, from $70.21 billion at end-July. While Malan and Franco wrapped up their participation in a two-day meeting with Latin American colleagues and the International Monetary Fund in Washington, the Central Bank announced late Friday a move to tighten credit on the local market and stem the outflow of funds. As of Tuesday and until the end of the month, the Central Bank has suspended funding to banks at the basic rediscount rate, or TBC, of 19%. Banks will only be able to tap Central Bank funds at 29.75%, the ceiling rate known as the Tban. The monetary authority alleged that banks were borrowing heavily at 19% to buy the high-yield Brazilian Brady bonds after weeks of falling prices due to the Russian financial crisis. Lopes said this temporary measure - which he termed "monetary contraction policy" rather than an increase in rates - will push market rates closer to the Tban. "As this defensive action by the Brazilian government changes the expectations about Brazil, the Real Plan and macroeconomic policy, and we begin to gain rather than lose reserves, the interest rate will automatically fall towards the TBC," Lopes said in the Estado interview. Market watchers say that, in theory, the higher rates mean higher debt servicing costs and a widening in the public deficit, already at a worrisome 7% of gross domestic product. That reasoning is what is leading the market to expect a fiscal tightening these days. "Some kind of fiscal measure would be appropriate," said BBV's Piris. But analysts point out that any measures are likely to aim more at boosting credibility in the government's willingness to tackle the deficit rather than actually making an impact in the public accounts. "Before an election, it's almost impossible to see a significant fiscal measure," said Piris. The respected weekly magazine Veja quoted an anonymous government source as saying that the fiscal package would outline measures to reduce the deficit over the next three years, without providing further details. Fator's Camargo said a good solution for Brazil would be a mix of fiscal austerity policies and the support of multilateral organizations for possible debt financing difficulties in Latin America. Growing expectations of a reduction in U.S. interest rates should also help relieve some of the tension on Brazil. While market watchers remain optimistic that Brazil will weather the storm and avoid the dreaded devaluation, the markets will continue in the throes of uncertainty before the Oct. 4 elections. "We are going to have 30 very bad, nervous days," said Camargo. -By Mary Milliken; 55-11-813-1988; mmilliken@ap.org

To: Jay8088 who wrote (7647)	9/8/1998 1:32:00 PM
From: Steve Fancy	Respond to of 22640

Emerging Mkts ADRs:U.S. Rally Lifts Latin American Equities Dow Jones Newswires NEW YORK -- Emerging market shares trading as American depositary receipts started stronger across the board Tuesday, boosted by higher world markets and hopes of an interest-rate cut in the U.S. On Friday, U.S. Federal Reserve chairman Alan Greenspan indicated in a speech that the Fed is more concerned about a world market crisis than about domestic inflation, feeding hopes that the agency's monetary policy committee will cut interest rates the next time it meets, on Sept. 29. U.S. investors, encouraged by the prospect of a rate cut, sent the Dow Jones Industrial Average up 291.37 points to 7932.22 at 1435 GMT. "The U.S. rally is pulling all ADRs," a trader said. But he went on to caution the rise could be short-lived. "It's a technical rally, with some short covering, but very little legitimate buying. I have the feeling that people are still selling on strength." Brazilian ADRs, the worst performers Friday, were mostly higher. At 1500 GMT, Telebras rose 4.2% to $63 3/16 amid heavy volume exchanged, while Telebras HOLDRs advanced 2.8% to $64 3/16. Unibanco was recovering from the sharp losses suffered by many financial stocks Friday. At 1500 GMT the bank was up 7.7% to $12 1/4. Other Latin American ADRs were also climbing Tuesday. Among the region's bellwethers, Argentine oil and gas company YPF rose 4.6% to $22 3/4 at 1510 GMT, while Mexico's Telmex advanced 5.8% to $38 13/16, and Venezuela's CANTV was up 6.2% to $11 3/4. Asian ADRs were up across the board. "The yen has been stronger for the past two weeks, so people are more optimistic on prospects for Asia," a trader said. China and Hong Kong ADRs are outperforming other Asian issues, on the back of recently implemented measures designed to curb short-selling in the respective local markets, dealers said. "The measures have made it more difficult to continue to short, and are forcing to cover those shorts," a trader said. "They have added calm to the market." China Telecom rose 10.4% to $30 9/16, while Hong Kong Telecom advanced 8% to $20. -By Margarita Palatnik; 201-938-2226; margarita.palatnik@cor.dowjones.com

To: Jay8088 who wrote (7647)	9/8/1998 1:34:00 PM
From: Steve Fancy	Read Replies (2) \| Respond to of 22640

Brazil's Govt Tightens Controls On Spending - Malan Dow Jones Newswires BRASILIA -- The Brazilian government unveiled Tuesday a series of fiscal measures, including tighter controls on spending and budget cutbacks, to reduce the public deficit and bolster the economy during the global financial crisis. Finance Minister Pedro Malan announced in a news conference the creation of a commission of fiscal control and management as well as a cut in 1998 spending of 4 billion reals (BRL) ($1=BRL1.17), equal to around 4% of total expenditure. Malan said the government put an "immediate brake" on overspending by decreeing that ministries may not exceed 80% of their 1998 budgets before Oct. 31. The government is also developing a three-year deficit reduction plan which it will send to Congress by Nov. 15. He denied that the measures constituted a fiscal "package" - a term used by the media over the weekend in anticipation of austerity measures. The government, less than one month away from elections, has repeatedly avoided the term. Brazil's public deficit now accounts for 7% of gross domestic product (GDP). The measures presented by Malan will be published in the Official Gazette on Tuesday in one decree and one provisional measure. The markets had been expecting some sort of fiscal austerity measures after the government announced Friday a tightening in credit which will lead to higher rates on domestic debt and therefore higher debt servicing costs. "This is the appropriate macroeconomic answer given the adverse climate," Malan said. "But I recognize that there is not only one response." In terms of the 1999 budget, which was sent to Congress last week, the government hasn't made any specific cutbacks. But the government is empowered to limit spending in the future to ensure a primary budgetary surplus of BRL8.7 billion in 1999, up from a surplus of BRL5 billion for 1998. The primary surplus is current revenue minus current expenditures. Brazil's government still doesn't make forecasts for the nominal balance, which includes debt servicing payments, equal to some 6% of GDP. But the measures announced Tuesday include a plan to develop nominal balance goals and the mechanisms to ensure they are met. Malan also said the current international turbulence forces Brazil to make progress on its structural reforms. He cited industrial restructuring and the reform of the government and its institutions as the three key structural changes needed. "We aren't going to give up in our determination to continue this process," Malan said. He also called for a greater involvement by Congress in dealing with the fallout of the financial crisis. At the same news conference, which was televised live, Planning Minister Paulo Paiva said Brazil will halve its public deficit in the next few years. He said the government's decision to draw up a three-year fiscal plan for 1999-2001. The new fiscal commission, which will be in charge of overseeing the budget for the next three years, will meet for the first time next week, Paiva said. -By Mary Milliken; (55-11) 813-1988; mmilliken@ap.org