Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Rohit Nanavati who wrote (8259)	9/17/1998 11:10:00 PM
From: TokyoMex	Respond to of 22640

Damm missed it this AM ..at 64 ,, ggg,,

To: Rohit Nanavati who wrote (8259)	9/17/1998 11:11:00 PM
From: Steve Fancy	Read Replies (3) \| Respond to of 22640

Heavy Latin America debts complicate crisis recovery Reuters, Thursday, September 17, 1998 at 20:20 By Axel Bugge BUENOS AIRES, Sept 17 (Reuters) - Rocketing interest rates that are raising debt costs daily are imperilling Latin America's ability to pay its massive debt and its hopes for a quick end to the current financial storm, market analysts said on Thursday. Investors are worried that the longer the crisis lasts, the more expensive it becomes to service the debt and issue new debt to refinance old liabilities, raising the likelihood of payments failures, said analysts. Russia's debt default in August has spooked investors into thinking there could be similar problems in Latin America. Sharply higher rates demanded by investors for holding what they consider to be riskier Latin American bonds has pushed governments' interest payments much higher and made it extremely difficult to issue new foreign bonds. Short-term rates have climbed to as much as 50 percent in some countries. Interest payments in many countries represent the largest single expenditure for governments. The region's three largest economies, Brazil, Mexico and Brazil, all run budget surpluses when excluding debt payments but deficits overall. Moody's Investors Service sounded the alarm this week, warning that "the prospect for a continued closing of the international capital markets to emerging nations is likely to place particular stress on heavily indebted Latin American nations." The credit rating agency cited Mexico, Brazil and Argentina and said that between 1990 and 1997 Latin American countries issued about $200 billion in bonds, or 45 percent of all emerging market issuance for that period. Latin America has about $687 billion of debt outstanding. "The longer it (the crisis) lasts, the greater the risk of moratoria or defaults, which would preclude market access for years," Moody's said. While many analysts in the region disagree with Moody's view, they generally agree that the accumulation of bad news in emerging markets poses risks for Latin America. "The things here that make it quite difficult are Russia's default, the Malaysian capital controls, Hong Kong's stock interventions and so on," said Vladimir Werning, an economist at JP Morgan in Buenos Aires. "These are all very unorthodox solutions to domestic problems which international investors will see as worsening the risks in emerging markets." Brazil is the top concern, especially because of its huge domestic debt of $326 billion reais ($276 billion), most of it in short-term bonds. Short-term debt is more worrying to investors because it raises pressure on governments to find funds immediately to pay it off or roll it over into new debt. Ricardo Daud, head of research at Argentina's Bansud bank, suggested one option could be a "patriotic bond" like the one Argentina issued in 1995 to resolve liquidity problems following Mexico's disastrous December 1994 devaluation. Local banks agreed to take on the debt, figuring if the country did not make it through the crisis neither would they. Interest rates of 50 percent in Brazil to support the real currency has made this debt much more expensive to service, pushing the budget deficit to above 7 percent of gross domestic product, compared with one percent in Argentina. "A unilateral restructuring of domestic debt stock and some form of capital controls could not be ruled out under a worst case scenario in Brazil, and the specter of default risk would loom over Latin American assets," said Dresdner Kleinwort Benson in a research note. "We do not believe that default is in the cards, only that under a worst case scenario the risk would increase, as would bond spreads," it said. Copyright 1998, Reuters News Service