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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: Monty Lenard who wrote (29802)	10/1/1998 9:17:00 PM
From: Brad Bolen	Read Replies (1) \| Respond to of 94695

So, anybody want to be long this weekend? B. Thursday October 1, 8:58 pm Eastern Time Brazil to see crisis before recovery- U.S. analyst By Hugh Bronstein NEW YORK, Oct 1 (Reuters) - Before recovering from its economic ills, Brazil will suffer through a deep crisis brought on by the financial reforms expected to be introduced after this weekend's presidential election, a leading U.S. economist said Thursday. The tax increases and public spending cuts that must come if Brazil is to receive help from international lenders will drive the country into a deep recession, according to Rudi Dornbusch, Professor of Economics and International Management at the Massachusetts Institute of Technology. ''In the end, (Brazil) is going to get a mess of debt default and exchange collapse,'' Dornbusch said. ''It's going to be a catastrophe for the region.'' The professor made his comments in a panel discussion at The Wall Street Journal's Conference on the Americas. He spoke together with a more optimistic Domingo Cavallo, Argentine congressman and the nation's former economic minister who recently launched a bid to run for president next year. Cavallo believes that when Brazilian president, Fernando Henrique Cardoso is re-elected Sunday, as is widely anticipated, the economic reforms he must introduce will help restore confidence in the country, rather than push it into a debilitating recession, as Dornbusch suggested. The country, which is laboring under a budget deficit of roughly eight percent of gross domestic product, must undergo a drastic fiscal adjustment along with social security and labor reform, Cavallo said. ''They should also speed up the process of privatization and deregulation including Petrobras as a company to privatize,'' Cavallo said, referring to Brazil's state oil company. ''This would generate revenue to reduce domestic debt. And deregulation combined with privatization will push productivity up all across the economy.'' Brazil's oil industry is slowly being opened up to competition, but none of Petrobras has been privatized so far. Ideally, Cardoso would like to come out with reforms next week. But analysts say that is complicated by a series of gubernatorial elections that could drag on until late October. Governors in Brazil have a lot of influence on their states' congressional representatives. Analysts said Cardoso will bank on his allies winning gubernatorial elections in Brazil's three largest states -- Sao Paulo, Rio de Janeiro and Minas Gerais -- so they can help him push reforms through Congress. Though Dornbusch's near-term outlook is pessimistic, he said Brazil's long-term future could be quite robust once the painful lessons of the next few years are absorbed. ''The more crisis we get the more governments will have to understand they need total radical reform, pulling out all the stops,'' he said. ''Until that comes (to Brazil) we could not have confidence,'' Dornbusch said. ''When it comes, we should go totally crazy about Brazil because it will have the most wonderful assets on God's earth.''