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

To: Steve Fancy who wrote (8970)	10/13/1998 8:52:00 AM
From: DMaA	Read Replies (1) \| Respond to of 22640

By MATT MURRAY and PAMELA DRUCKERMAN Staff Reporters of THE WALL STREET JOURNAL NEW YORK -- Major international banks are signaling they have little appetite for opening large credit lines to the Brazilian government, even as the International Monetary Fund and Group of Seven officials push the private sector to play a big role in rescuing the nation's teetering economy. Several bankers said in recent interviews they don't want to make loans to Brazil as part of an initial package, which is expected to be unveiled starting next week. Instead, bankers, whose institutions already have been badly stung by losses as investors have fled emerging markets this year, advocate a more cautious, "wait-and-see" approach. "There are things the banks don't want to do in the current environment because of the risks," said one U.S. banker based in Sao Paulo. "The banks are not going to band together to provide a big balance-of-payments financing that will complement a multilateral package from the official sector. I don't see that happening." By talking of such a limited role, bankers may be trying to lower market expectations of a large private-sector bailout. U.S. officials are pressing banks to play a stepped-up role in helping ailing countries. Earlier this month, Treasury Secretary Robert Rubin said the U.S. would advocate "more direct private-sector involvement at times of crisis, with the provision of private liquidity alongside official funds." He added: "Looking ahead, private sector burden-sharing is critical, not only because there will not be sufficient official money for all circumstances, but also because it is absolutely essential in inducing market discipline and lessening the so-called moral hazard issue." Some past aid packages have been criticized for bailing international banks out of bad loans, implying that banks wouldn't have to pay the full price for excessive lending. Need to Boost Reserves Brazilian officials have stressed that they probably wouldn't need to use the credit line, estimated at some $30 billion or more, now being hammered out by multilateral groups. But they say they need to back up the country's badly depleted foreign reserves to show investors that Brazil won't be pushed into devaluing its currency, the real, a move that analysts say would destabilize economies across the region. The aid package hinges in part on Brazil narrowing its massive budget deficit, which is now at more than 7% of the country's gross domestic product. To be sure, even bankers concede that should Brazil's package fail to impress investors, the private sector might be called upon to rush in with a smaller coordinated package of its own. Though no formal negotiations on such a last-ditch effort are continuing, leading representatives of U.S. banks last month agreed to back up a Brazilian bailout if need be at a meeting at the New York headquarters of J.P. Morgan & Co. Nonetheless, skittish U.S. bankers, whose institutions have the greatest exposure to Brazil, are privately arguing that their early participation could drain confidence instead of instilling it. "Brazilians don't want it to be pictured that they're in dire straits, like Asia," said one high-ranking bank official. A large role for banks in the initial stage would send that message, he said. He and other bankers said their institutions can still help Brazil shore up its currency and lure back foreign investors, after government reforms and a multilateral aid package are in place. These more modest measures might include buying bonds or loans guaranteed by multilateral institutions such as the World Bank, or buying bonds backed by revenue from the future sale of state-owned companies. Another possibility: Some bankers say they might suspend repayment on outstanding debts from existing facilities, a move that would ease Brazil's debt burden but wouldn't require the banks to risk new money. They stressed that any new lending would have to be at market rates, which have shot up in recent months. Role Is Still Undecided Bankers insist that they haven't yet been asked by Brazil's government to do more. "The situation is that the Brazilians are deciding what role they want the banks to play," said a high-ranking bank official. Said another banker: "What is happening is individual banks are bringing individual ideas to Brazil in how to access markets and how to be able to generate additional cash flow in order to bolster their reserve positions." Though that is a smaller role than has been envisioned by international officials, bankers insist they won't dictate Brazilian policy. Bankers say they are also watching to see what the aid package looks like and how financial markets react to it. But some warned that no matter what, there will be little appetite to pitch in. In a best-case scenario, the package would boost investor confidence in Brazil, and the banks' help wouldn't be needed. On the other hand, if the package fails to calm troubled markets, bankers say they won't want to step into the storm. "Banks are not going to step into a situation where you see a black hole," another U.S.-based banker said, adding: "If Brazil is able to put together a credible fiscal package that has critical support, the need for actual financing is going to be minimal."

To: Steve Fancy who wrote (8970)	10/13/1998 3:25:00 PM
From: Steve Fancy	Respond to of 22640

Brazil's Jan-July Public Deficit 7.0% GDP Vs 7.3% Jan-Jun Dow Jones Newswires BRASILIA -- Brazil's nominal public sector deficit narrowed to 7.0% of gross domestic product (GDP) in the January-July period, from 7.3% in the first half of the year, the Central Bank said Tuesday. The nominal deficit figure in July stood at 4.25 billion reals (BRR) ($1=BRR1.18), compared to BRR8.67 billion in the previous month and BRR4.35 billion in July 1997. The public sector debt rose to 38.6% of GDP in July from 38.1% in June, and, in absolute terms, rose to BRR349.44 billion from BRR346.57 billion, the Central Bank said.

To: Steve Fancy who wrote (8970)	10/13/1998 3:26:00 PM
From: Steve Fancy	Respond to of 22640

Brazil's Money Supply Up 7.4% In August To BRR35.41 Bln Dow Jones Newswires BRASILIA -- Brazil's money supply stood at 35.41 billion reals (BRR) ($1=BRL1.18) at the end of August, up 7.4% from BRR32.99 billion at the end of July, the Central Bank said Tuesday. The narrow money supply - money in circulation plus bank reserves (M0) - averaged BRL33.94 billion during August, up 1.4% from the daily average of BRL33.48 billion during July, according to a written statement by the Central Bank. In the last 12 months, the average money supply showed an accumulated increase of 36%.

To: Steve Fancy who wrote (8970)	10/13/1998 3:28:00 PM
From: Steve Fancy	Respond to of 22640

Brazil's Congressional Majority Smaller, But More Reliable By WILLIAM VANVOLSEM Dow Jones Newswires BRASILIA -- With his majority slightly reduced in both houses of Brazil's unruly Congress, the next four years won't be a bed of roses for re-elected President Fernando Henrique Cardoso, analysts say. Final results of the Oct. 4 Congressional elections released late Friday showed that Cardoso's six-party majority base dropped to 380 seats from 396 in the 513-member Chamber of Deputies. In the 91-member Senate the damage was less, with Cardoso allies losing one seat, leaving them with 68 total. But analysts say the numbers belie the fact that many unsteady government-allied legislators - who haven't hesitated to vote against Cardoso initiatives in the past - have been unseated and replaced by more reliable members. "Despite a loss of a dozen or so pro-government deputies, the scenario in the newly-elected lower house seems to favor Cardoso, who has gained a more solid base of true allies," said Antonio de Queiroz, director of DIAP, a union-sponsored parliamentary statistical study center. Cardoso has vowed to push through structural reforms with the utmost urgency since the global financial crisis continues to batter Brazil. Over $25 billion in foreign reserves were sucked out of the country since Russia defaulted at the end of August while the public deficit has reached an alarming 7.0% of gross domestic product. Cardoso needs a three-fifths majority in both houses to get through constitutional changes and the past four years have shown that mustering this support - a minimum of 308 votes in the volatile lower house - is far from easy. The elections were held simultaneously with presidential polls in which Cardoso garnered just over 53% of the vote, thereby scoring an outright win for a second term in office. The new Congress will be sworn in early next year, meaning Cardoso will have to muddle through the rest of the 1998 legislature with his old and often unreliable alliance. The government is determined to finalize at least two key reform bills this year and introduce a new Tax Reform Bill before Christmas. Cardoso also said he will announce tough fiscal measures before Oct. 20, a condition for a possible international aid package which has been rumored to total between $25 billion and $40 billion. "All this hinges a lot on the performance of the outgoing legislature and this might be a hurdle...the next two months might be the toughest to crack for Cardoso," said political analyst Paulo Kramer of the consulting firm Kramer e Ornelas, in an interview with Correio Braziliense on Sunday. "Many of the 'rebel' deputies who have not been re-elected, but still hold their seats until the end of the year, will show even less enthusiasm to support the government," Kramer said. "They have nothing more to lose or to gain. Cardoso will have to negotiate harder than ever." For DIAP's Queiroz the next six months will be an ordeal for Cardoso. "He will still need all the support of his allied parties he can get," he said. Kramer added that despite the few changes in party representations, "it feels as if the composition of Congress hasn't altered at all". The 21 elected deputies who don't consider themselves either pro- or anti-government are an additional unknown, analysts say. Official polling figures show that Cardoso's own Social Democracy Party (PSDB) increased its representation in the Chamber to 99 from 95 deputies. However, his three main allied parties all suffered losses, with the Liberal Front Party (PFL) falling to 107 from 110, the Democratic Movement Party (PMDB) to 81 from 88 and the Progressive Party (PPB) to 60 from 77. Most of the "rebels" who complicated Cardoso's life in the lower house on key reforms, are defeated PMDB and PPB deputies. A smaller but important Cardoso ally, the Brazilian Labor Party (PTB), jumped to 30 from 23 deputies. The pro-Cardoso Social Democrat Party (PSD) retained its three seats. The total official opposition bloc increased its representation in the lower house by 11 seats to 124 from 113, with defeated presidential candidate Luiz Inacio Lula da Silva's Worker's Party (PT) alone jumping to 58 from 50. Last week Lula promised "relentless opposition" to all government reform proposals. Smaller extremist fringe parties increased their number of deputies to nine from the current four. A surprising result was noted in the Senate elections, where the PMDB, with 27 seats, overtook the PFL, with 20 seats, as the largest party in the upper house. This weakens the position of Senate and Congress head Antonio Carlos Magalhaes, undisputed PFL boss and one of Cardoso's most powerful allies and negotiators. If Magalhaes wants to hold his position, he will be forced to negotiate conditions with the PMDB. Cardoso's PSDB increased its number of Senators to 16 from 14 while the opposition PT rose to seven from five. -By William Vanvolsem; 5561-244-3095;wvanvolsem@ap.org

To: Steve Fancy who wrote (8970)	10/13/1998 3:31:00 PM
From: Steve Fancy	Respond to of 22640

REPEAT:Brazil Govt Cancels Tues Fiscal Control Committee Mtg Dow Jones Newswires SAO PAULO -- The Brazilian Finance Ministry has cancelled the weekly Tuesday meeting of the recently-created Fiscal Control Committee, or CCF. A ministry spokesman said Tuesday that the decision was made because a number of the group's members are busy working on the austerity measures expected to be unveiled by the government next week. President Fernando Henrique Cardoso said in a nationally- televised address last week that his team of economic advisors would present a multi-year fiscal adjustment plan for his review by Oct. 20. The Estado news agency reported Tuesday that the government's economic team met Monday, which was a national holiday, to discuss possible measures. Finance Minister Pedro Malan met with President Cardoso early Tuesday. The CCF is an inter-ministerial group charged with supervising the 4 billion-real ($1=BRR1.18) budget cuts announced last month by Cardoso after market turmoil sent investors fleeing and pushed Brazil's reserves below $50 billion from $70 billion earlier in the year. -By Stephen Wisnefski; (55-11) 813-1988; swisnefski@ap.org

To: Steve Fancy who wrote (8970)	10/13/1998 3:33:00 PM
From: Steve Fancy	Respond to of 22640

Brazilian reserves "stable" at $46-47 bln - report Reuters, Tuesday, October 13, 1998 at 15:07 BRASILIA, Oct 13 (Reuters) - Brazil's foreign reserves have been drained of virtually all short-term speculative capital and have now stabilized at a "lower but better" $46 or $47 billion, a Central Bank director was quoted as saying Tuesday. Demosthenes Madureira Pinho Neto, director of international affairs, told daily O Globo that some dollar outflows from Brazil would continue for the time being, but that the movement would not represent capital flight. "The country will keep on losing resources over the next months," Pinho Neto told the newspaper. Copyright 1998, Reuters News Service

To: Steve Fancy who wrote (8970)	10/13/1998 3:33:00 PM
From: Steve Fancy	Respond to of 22640

INSTANT VIEW-Brazil nominal budget deficit narrows Reuters, Tuesday, October 13, 1998 at 10:36 SAO PAULO, Oct 13 (Reuters) - The following are views from economists after Brazil's Central Bank said Tuesday that the country's nominal public sector deficit narrowed to 7.02 percent of gross domestic product in the period between January and July, versus 7.27 percent in the January to June period. DALTON GARDIMAN, ECONOMIST AT DEUTSCHE MORGAN GRENFELL "The number was below expectations, but still high enough to not be able to celebrate. The fact is that the deficit continues above 7 percent of GDP and should end the year at this level." "The tendency is for it to rise and depending on how the money from the privatization of Telebras is accounted for, it should peak in August or September and after that the deficit should stabilize with interest rates stabilizing also." "But the talk now is about what is coming and everything will depend on the measures that are announced in the next few days." DANY RAPPAPORT, ECONOMIST AT BANCO SANTANDER "The number was within our expectations since the Treasury is posting a surplus, but we should still be cautious because it is still a very high number." "Our expectation is that the deficit will end the year at 7.3 percent of GDP. Interest rates and pension payments continue weighing heavily." "Everything depends on interest rates. They are at unsustainable levels so they'll have to come down, but it's a question of when." CARLOS KAWALL, CHIEF ECONOMIST, CITIBANK IN SAO PAULO "It is a positive sign that there was no additional deterioration in the nominal deficit, although the figures came in line with our expectations. It must be that spending in states and municipalities were contained to a certain extent." "From here on, all depends on whether the government lowers market interest rates following the announcement of fiscal adjustment steps and an aid accord with the International Monetary Fund." "If interest rates fall to about 25 percent at the end of the year (from a current 41 percent), we will be able to finish 1998 with a nominal deficit of about 7.2 percent of GDP, but if not, it will stand at about 7.7 percent or 7.8 percent." Copyright 1998, Reuters News Service