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

To: Steve Fancy who wrote (8529)	9/24/1998 11:59:00 PM
From: Steve Fancy	Respond to of 22640

LatAm markets mixed, monitoring Brazil Reuters, Thursday, September 24, 1998 at 17:29 By Noriko Yamaguchi SAO PAULO, Sept 24 (Reuters) - Stocks on Latin American bourses were mixed on Thursday as investors, though mostly optimistic, were still not sure whether Brazil will ride out a global crisis after its Oct. 4 elections, brokers said. "Markets are looking for real assurance, like formal announcements both from inside and outside of Brazil," said Santiago Millan, chief economist at I.D.E.A. in New York. Stocks in the region rallied on Wednesday after markets interpreted remarks from U.S. Federal Reserve Board chairman Alan Greenspan as hinting at easier monetary policy, while international lending agencies repeated they were ready to help Brazil in case of an emergency. Local markets cheered the fact world leaders were sending the right signals for Brazil to make it through the general elections, analysts said. But investors were demanding for more hard evidence to keep the buying momentum going, brokers said. "Will there be a special session in Brazil's Congress to materialize Cardoso's promises? Will they discuss constitutional amendments (to tackle the fiscal problems), or will there be tax reforms immediately after the elections?" asked Millan. Investors were also asking for concrete details on a substantial fiscal package, since the market has lost patience with Brazil's gradual approach to its dire budget problems, he said. Stocks in Brazil slumped at the open on Thursday, mainly weighed down by profit-taking following Wednesday's 11 percent surge, then pulled back up briefly only to falter again by midday. The key blue chip Bovespa index (INDEX:$BVSP.X) fell as much as 2 percent in early trade. In the currency market, the Brazilian real strengthened against the dollar early on hopes for some dollar inflows, but quickly erased that gain as those prospects faded, dealers said. The real was at 1.1832 to the dollar by midday, little changed from Wednesday's close. Brazil's dollar-denominated C bonds <BRAZILC=RR> were also lower, down 2.25 points at 62.75 by midday in very thin trade, traders said. Meanwhile in Argentina, shares also opened slightly lower as profit-taking set in after two straight days of gains. "Yesterday's closing prices were already sellers' prices. After two consecutive days of rising, we should see more profit-taking," said trader Juan Cruz Torres Duggan at Segura brokerage. The MerVal <.MERV> opened down 0.06 percent after closing up 8.23 percent on Wednesday. Mexican shares <.MXX> were jumping around, opening 2 percent higher on optimism leftover from Wednesday, but had fallen 1.98 percent by midday. But Chile's leading IPSA <.IPSA> index was still holding out in the positive zone by midday, up 0.19 percent. Hopes for a cut in U.S. interest rates plus continued rumors that international agencies are preparing a package of financial aid for Brazil were expected to propel stock prices higher, local traders said. Copyright 1998, Reuters News Service

To: Steve Fancy who wrote (8529)	9/25/1998 12:01:00 AM
From: Steve Fancy	Respond to of 22640

Latin stocks tumble, take profits on cue from Dow Reuters, Thursday, September 24, 1998 at 18:25 By Martin Roberts MEXICO CITY, Sept 24 (Reuters) - Latin American stocks took a break from recent sharp gains on Thursday as investors grabbed a rare chance to take profits after recent market turmoil. Brokers across the region from Mexico City down to Buenos Aires waded in to sell equities on cue from Wall Street, which retreated from Wednesday's euphoric speculation on U.S. rate cuts when the New York Fed and banks bailed out a hedge fund. "Investors shaved off profits from yesterday's rises after they became nervous about a big fall in the Dow Jones index," said a trader at Banco Marka in Sao Paulo, echoing comments by stock watchers across Latin America. Brazil's leading Bovespa (INDEX:$BVSP.X) stock index shed 5.99 percent to end at 6844, retracing some of a 10.98-percent gain on Wednesday. Wednesday's gains were driven by widespread interpretation that a call by U.S. Fed Chairman Alan Greenspan for action to halt contagion from troubled world markets was in fact a hint the Federal Open Market Committee would cut rates at its Sept. 29 meeting. Dealers differed over whether Thursday's retreat signalled just a temporary pause in Latin America's slow recovery from the depths of a crisis two weeks ago when brokers feared an emerging market storm would trigger a devaluation in Brazil. "With this, I think Asian and European markets would start lower tomorrow, meaning it was safer to take profits today," said one trader in Brazil. An Argentine fund manager was likewise cautious over the possible repercussions from the $3.75 billion bailout of Long-Term capital Management L.P., which prompted a drop of 1.87 percent on the Dow Jones to 8001.99. "It's pretty ugly news because the market doesn't believe it is the only troubled fund," said Horacio Bonavia, an asset manager at Portfolio Investment brokerage. The MerVal <.MERV> index of most active shares traded in Buenos Aires declined 3.89 percent at 383.59 points, shedding some of Wednesday's 8.23 percent rise. Mexican analysts said profit-taking was inevitable, pointing to the fact that the local bourse's leading IPC index <.MXX>, was still 29.2 percent up on it's Sept. 10 crisis level, even after Thursday's slide. The IPC closed off 5.43 percent at 3690.48 points on Thursday, climbing down from a 9.08-percent rise he day before. Francisco Blanco, research director at Arka brokerage, said the fall was entirely due to: "normal profit-taking after all that it had gone up." "The Bolsa has risen a great deal and you always expect profit-taking in these cases," a desk trader said. Mexican traders noted that talk of pessimism over Wall Street receded when the Dow Jones rebounded in late trade and pared losses across Latin America. Chilean stocks marched downwards in step with their Latin counterparts, and the .IPSA index <.IPSA> of leading shares in Santiago shaved 2.89 percent to end at 63.86 points, ceding part of Wednesday's 8.61-percent increase. "(The fall in Chilean stocks) was due to (the decline in) the United States and the hedge fund. It caused concern that there could be bankruptcies in other funds," a Santiago trader said. "This does not affect Chile directly, but it was an excuse to take profits," he added. Venezuelan stocks bucked the regional trend and the IBC <.IBC> 15-share index ended up 1.8 percent at 3426.35 points, although dealers said profit-taking triggered by Wall Street did eat into an earlier advance. mexicocity.newsroom@reuters.com)) Copyright 1998, Reuters News Service

To: Steve Fancy who wrote (8529)	9/25/1998 12:02:00 AM
From: Steve Fancy	Respond to of 22640

Brazil to sell rest of Gerasul (SAO:GRSU3) Sept 9 Reuters, Thursday, September 24, 1998 at 18:37 RIO DE JANEIRO, Sept 24 (Reuters) - Brazil plans to sell its remaining 9 percent stake in energy generator Gerasul in a single block auction Sept. 9, the National Development Bank (BNDES) said Thursday. Belgium's Tractebel (BRU:TREB.T) bought a controlling 42 percent stake in the state utility last week for the minimum price requested of 945.7 million reais. The BNDES said the minimum price for the 33 billion ordinary shares and 16 billion preferential shares of Centrais Geradoras do Sul on offer had been set at 95.7 million reais. Rules of the auction will be published next week. With the operation, all of the federal government's participation will have been sold except for a 5.6 percent tranche being offered to employees, the BNDES said in a statement. tracey.ober@reuters.com)) Copyright 1998, Reuters News Service

To: Steve Fancy who wrote (8529)	9/25/1998 12:03:00 AM
From: Steve Fancy	Respond to of 22640

Brazil's Cardoso bets on austerity despite poll Reuters, Thursday, September 24, 1998 at 19:12 By John Miller SAO PAULO, Sept 24 (Reuters) - Brazilian President Fernando Henrique Cardoso, with one eye on the Oct. 4 elections and another on a looming economic crisis, is betting correctly that he can win another term in office despite his tough new talk of austerity measures, political analysts said on Thursday. Analysts said Cardoso knows he enjoys a big enough lead in the public opinion polls that he can afford losing some backers by suggesting some unpopular steps, like possible tax hikes. "Just over a week before the election the president comes out and talks about raising taxes and taking other measures that will bring blood, sweat and tears," said Ricardo Pedreira, a political consultant in the capital of Brasilia. "Cardoso decided to do this precisely because he is so far ahead in the polls. It will not jeopardize his victory," Pedreira said. A survey released this week showed that 47 percent of voters favor Cardoso, giving him a 14 percentage points lead over his half dozen challengers combined. Cardoso needs to draw more votes than all of them put together on Oct. 4 to avoid a runoff election. His top challenger is left-wing leader Luiz Inacio Lula da Silva. For the first time since investors began retreating from Brazil more than a month ago on devaluation fears, Cardoso announced on Wednesday that he was committed to slashing a huge budget deficit, even if it meant raising taxes. The pledge came on top of promises to speed through constitutional reforms, which will permit the firing of public workers and mend a $20 billion deficit in the pension system. Cardoso's strong standing in the polls reflects a confidence among Brazilians that he is best placed to sort out the country's current economic crisis, analysts said. His belt-tightening speech drew praise from U.S. Treasury officials and the International Monetary Fund, which said it stood ready to lend money to keep Latin America's largest economy afloat. Brazil's economic survival is seen crucial at the IMF and among U.S. policymakers. They fear a devaluation could set off a regional recession that would eventually strike the U.S. economy. "Brazil's economic situation is obviously very important to the United States," U.S. Treasury Secretary Robert Rubin said on Thursday. "We are very supportive with respect to the policies that President Cardoso announced and very supportive more generally with respect to Brazil." Economists and political analysts said though Cardoso's budget talk was welcomed abroad and by local markets, it will probably cost him a few percentage points in the polls and in the ultimate vote. A recent spike in interest rates to 50 percent will almost certainly throw Brazil into recession next year. The economy grew by just 1.5 percent this year. Even so, analysts said, Cardoso made the right call by sacrificing some of his huge lead in exchange for sending a positive signal to the IMF and other global lending agencies, which Brazil will likely be calling after the election. "It's better to win the election by a smaller margin and let people know that tough times are ahead rather than having to come up with a big surprise after the election and create a perception that voters have been betrayed," said Carlos Kawall, Citibank's chief economist in Brazil. A recent wave of capital flight, in wake of the increase in interest rates, has drained some $20 billion this month from hard currency reserves, which now stand at about $48 billion. Reserves are Brazil's best weapon against devaluation and money borrowed from the IMF and others would go toward shoring up the local currency, the real. A strong real is the backbone of Cardoso's four-year inflation-busting drive, which has brought price growth down to about 2 percent a year from nearly 3,000 percent when he was elected in 1994. Copyright 1998, Reuters News Service

To: Steve Fancy who wrote (8529)	9/25/1998 12:05:00 AM
From: Steve Fancy	Respond to of 22640

World Bank casts doubt on Latin America-wide fund Reuters, Thursday, September 24, 1998 at 19:49 By Adam Entous WASHINGTON, Sept 24 (Reuters) - The World Bank said on Thursday it was prepared to speed loans to Brazil and other crisis-hit Latin American economies, rather than rush into a proposed emergency fund for the region. "We are standing ready to help and we're absolutely committed to being there for them to support reform," World Bank Vice President Mark Malloch Brown told a news conference releasing the bank's 1998 annual report. "We nevertheless at the moment are looking at the needs of these individual countries, on timetables that they will determine based on them coming to us and asking for assistance, rather than, you know, on any grand global scheme." But Malloch Brown said he could not rule out a special fund for Latin America if economic conditions demanded in future. Brazil, hit by contagion from crises in Asia and Russia, has already raised interest rates and announced plans to cut spending to support its currency, the real. But there is growing speculation that lending agencies -- led by the International Monetary Fund -- could step in with a multibillion-dollar bailout package for Brazil, similar to those arranged for Russia and three Asian states. Brazilian President Fernando Henrique Cardoso said on Wednesday that the Group of Seven major industrialized nations should give money to the IMF for a "contingency fund" to help the region through a global emerging market crisis. Malloch Brown played down this scenario. Rather than focusing on problems facing Latin America as a whole, he said the World Bank wanted to develop reform programs with individual countries hit by the crisis. "At the moment, the discussion is on a case-by-case basis," he said after the news conference. But he added: "It depends on how the crisis moves." "You could plausibly lay out a scenario where it becomes truly a regional crisis which needs a regional approach, but at the moment we're looking at it on a country basis." A senior IMF official said the idea of a "contingency fund" for Latin America was not fund's central focus. Malloch Brown said World Bank experts were holding loan talks with Brazil and other countries in the region. "There are contacts and discussions with the Brazilians. Your economy is under a lot of stress at the moment," Malloch Brown said. But he added: "There cannot be any (Brazil) package negotiated until there is a formal request for one. That request has not come forward." "So, yes, we are discussing with them. Yes, we have made it clear that we stand ready to help whenever they ask. But we are not negotiating a package at this point." The IMF said on Wednesday that it had intensified its dialogue with Brazil so that financial help could be arranged quickly if the government needed the cash. In its 1998 annual report, prepared before the latest bout of contagion, the World Bank projected economic growth in Latin America and the Caribbean to fall to 2.9 percent during 1998, from around 5 percent in 1997. World Bank lending in Latin America and the Caribbean increased to $6 billion during fiscal year 1998 from $4.6 billion in 1997, with an emphasis on financial sector reform. Copyright 1998, Reuters News Service

To: Steve Fancy who wrote (8529)	9/25/1998 12:07:00 AM
From: Steve Fancy	Respond to of 22640

Japan's Ex-Im Bank mulls $900 mln loan for Brazil Reuters, Thursday, September 24, 1998 at 22:11 SAO PAULO, Sept 24 (Reuters) - Japan's Export Import (ExIm) Bank said on Thursday that it was mulling a loan worth $900 million to help the development of small- and medium-size companies in Brazil. The loan, which is likely to be divided into two $450 million tranches, will be a matcher for a $1.1 billion loan announced by the Inter American Development Bank (IADB) on Wednesday. At the time, the IADB said the ExIm Bank was expected to contribute $1.1 billion, but an ExIm Bank official in Rio de Janeiro said the bank was only considering to give $900 million at the moment. "Tokyo may also consider an increase, but that will take more time," he said. The loan, which may also involve money from Brazil's National Development Bank (BNDES), is not related to a contingency fund widely rumored to be put together by international lending agencies and the world's rich countries to help Brazil ride out an emerging market financial crisis. "We have had two similar development loans in the past -- in 1992 and 1996 each totaling about $300 million to $400 million. It is by coincidence that the loans come at a critical time like this," he said. Meanwhile, the bank would consider any kind of emergency fund for Brazil together with other international lending agencies if the situation required one, but the bank has not yet received any request. "We see Brazil as the linchpin for Latin America. If the economy should falter, it would bring other countries in the region down together," he said. noriko.yamaguchi@reuters.com)) Copyright 1998, Reuters News Service

To: Steve Fancy who wrote (8529)	9/25/1998 12:09:00 AM
From: Steve Fancy	Read Replies (1) \| Respond to of 22640

Brazil's Cardoso Gets Support Pledge From Germany's Kohl Dow Jones Newswires BRASILIA -- German Chancellor Helmut Kohl has pledged his support to Brazilian President Fernando Henrique Cardoso to overcome the South American giant's delicate financial situation, a Brazilian government spokesman said Thursday. Kohl sent a letter to Cardoso Wednesday affirming that "Germany will continue to collaborate actively to help Brazil and other Latin American countries withstand the current problems," spokesman Sergio Amaral said in his daily briefing. Kohl encouraged Cardoso to use "confidence-inspiring economic policy" as well as domestic reforms to restore faith in the financial markets, Amaral said. The German leader praised Cardoso for taking important measures to reduce the country's ballooning deficit. On Wednesday, Cardoso told the nation that the financial turmoil has made fiscal austerity "more urgent" and promised to cut public spending if he is re-elected in the Oct. 4 elections.

To: Steve Fancy who wrote (8529)	9/25/1998 12:10:00 AM
From: Steve Fancy	Read Replies (2) \| Respond to of 22640

Brazil Puts The Brakes On Dash To Economic Chaos Dow Jones Newswires SAO PAULO (AP)--Brazil's pledge to adopt fiscal austerity measures in an effort to break its headlong dash to economic chaos has received high marks overseas, but greeted with skepticism at home. On Wednesday, President Fernando Henrique Cardoso said his government planned to tackle the economy's main Achilles heel - a budget deficit equal to 7.3% of gross domestic product (GDP) - and hinted that taxes would be increased. U.S. Treasury Secretary Robert Rubin praised Cardoso's speech, saying it "highlighted fiscal adjustment and reform as Brazil's national economic priority." Enrique Iglesias, president of the Interamerican Development Bank said the speech was "an excellent message to the international financial community". But many businessmen fear that any increase in taxes would only make matters worse. "The country already has the highest tax burden in the world, responding for 32% of GDP," said Antonio Ermirio de Moraes, owner of the Votorantim Group, Brazil's largest business conglomerate. "A tax increase would only help the underground economy grow." Synesio Batista da Costa, president of the Brazilian Toy Manufacturers' Association is convinced taxes will be increased, leading to a sharp drop in consumer sales, "especially during the Christmas season." The president's remarks, widely seen not only as an effort to reassure international investors, but also to prepare Brazilians for belt-tightening economic measures, also heightened fears of recession and unemployment. "In the first quarter of 1999, there will either be recession or economic stagnation," said economist Paulo Nogueira Batista of the Getulio Vargas Foundation, Brazil's leading business administration school. "And as a result, unemployment will grow." Brazil's unemployment rate is around 8%, its highest level since Cardoso took office four years ago. And next year, "the joblessness rate could hit double digit figures - the worst in all of Brazil's history," said Sergio Mendonca of DIEESE, a labor union-funded socioeconomic research center. Like other emerging markets, Brazil has been buffeted by the turmoil in world financial markets with a loss of investor confidence and a strong outflow of capital. The country's foreign reserves have fallen below $50 billion from the $70 billion posted at the end of July. To prevent a collapse of Brazil's currency, the real, and stem capital flight, the government on Sept. 10 raised interest rates from 29.75% to 49.75%. Although slowed down, the outflow continues. On Wednesday $531 million left the country, bringing the total for the month to $16.79 billion. Protecting the real with high interest rates is a double-edged sword, economists point out. On one hand they curtail capital flight, but on the other they aggravate the deficit. According to press reports, government securities account for nearly 85% of Brazil's public debt of $296 billion. Although the austerity measures announced by Cardoso are potentially unpopular, they are not expected to hurt his bid for a second term in office. A survey published earlier this week showed that Cardoso would easily win the Oct. 4 elections with 47% of the vote. His nearest challenger, Luiz Inacio Lula da Silva, of the leftist Workers Party, has 24% of the vote. Cardoso's remarks coupled with signals that the United States may lower its interest rates buoyed the Sao Paulo Stock Market, Latin America's largest, which closed almost 11% on Wednesday. On Thursday the stock market's Bovespa index closed down 6%, mainly because of profit taking and the poor performance of the Dow Jones Index.