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To: paul ross who wrote (18887)	9/14/1998 11:13:00 PM
From: PaulM	Read Replies (2) \| Respond to of 116762

CB's to sell 260 Tonnes of Gold in Second Half 98 biz.yahoo.com

To: paul ross who wrote (18887)	9/14/1998 11:51:00 PM
From: Alex	Respond to of 116762

ROFL. Good one paul................. Brazil on brink of devaluation By Alex Bellos in Rio de Janeiro Tuesday September 15, 1998 Brazilians are facing a return to the years of economic chaos as President Fernando Henrique Cardoso's government tries with little success to halt a flood of dollars leaving the country. As its share prices hit record lows and pressure increases to devalue its currency, the real, the world's third most populous democracy is looking ever more like the next victim of international financial turbulance. And what happens in Brazil will strongly knock on to the rest of South America, especially Mexico and Argentina. Some experts even believe that a Brazilian currency devaluation could spread chaos back to the Far East, putting new pressure on the Hong Kong dollar and possibly opening the door to a Chinese devaluation that would shake Asia. The Brazilian economy is more than twice as big as Russia's, and until early September it had six times more in foreign currency reserves - $70 billion ( œ42 billion). But talk of a devaluation has been growing because the government seems powerless to halt the flight of capital. More than $1 billion has been flowing out each day since the beginning of September. At the momen, there is $52 billion left. Last Thursday the Sao Paulo stock exchange dropped more than 15 per cent, to its lowest level since 1990. Yesterday saw a slight rise, but the trend is down. Raising the interest rate to 49.5 per cent stabilised shares but failed to steady investors' nerves: more than $1 billion left the country on Friday. It was only four years ago that Brazil escaped from hyperinflation when the Real Plan created a new currency pegged to the dollar. In one fell swoop it eliminated inflation, then running at more than 3,000 per cent a year. President Cardoso, who is seeking re-election in less than three weeks time, built his political reputation on the Real Plan, because it meant that most Brazilians could at last hold on to their money. He knows that a devaluation of the real - which is seen as overvalued by 20 to 30 per cent - will probably be followed by high inflation. He is pulling out all the stops to defend his currency. It may be beyond his control. Brazil's main problem for international investors is an unsustainable budget deficit of about 7 per cent of GDP, for all Mr Cardoso's success in stabilising the currency and bringing money into the country through ambitious privatisations. Even without a big devaluation, the measures taken to protect the currency are likely to ensure that Brazil faces a recession next year. In the industrial hub of Sao Paulo, the unemployment rate is already at its highest for more than a decade, 20 per cent. The key to cutting the budget deficit is reform of Brazil's generous pension system and public spending. But President Cardoso has never persuaded congressmen to enact reforms that would reduce their powers of patronage. Budget reform "really needs to happen now", said Joe Petry, chief economist for Latin America at Citicorp Securities in New York. "The international market has really grown impatient." The crisis is complete turn-around for Brazil, which under Mr Cardoso was a darling of developing markets. Now many analysts are comparing it to Mexico, where billions of dollars were wiped off shares in 1994 and the government was forced to dig deep into its reserves. The peso was devalued, and the deepest recession in half a century ensued for Mexicans. But others say there are crucial differences: Brazil's woes are largely due to turmoil spreading from Asia and Russia, while Mexico's crisis was mostly of its own making. Moreover, Brazil has more than twice the reserves Mexico had to defend against currency speculators. Print version reports.guardian.co.uk