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

To: Steve Fancy who wrote (9036)	10/16/1998 7:12:00 AM
From: TokyoMex	Respond to of 22640

As Brazil Agonizes Over Devaluation, U.S. Makes a Move on Interest Rates By DAVID WESSEL and CRAIG TORRES Staff Reporters of THE WALL STREET JOURNAL Some day soon, Brazilian President Fernando Cardoso and his economic advisers will have to decide whether to let the value of the Brazilian currency, the real, fall sharply against the U.S. dollar. The world is watching. Brazil is seen as a firebreak in the financial conflagration that has swept through Asia and Russia. If Brazil gets it right, the worst of the crisis may be past. If it gets it wrong, the odds of world-wide financial calamity increase. Tough choice? It's exactly the kind of gut-wrenching decision that economic policy-makers are facing all over the world -- including in the U.S. Only 17 days ago, the Federal Reserve decided to lower interest rates a quarter percentage point, disappointing markets, which had hoped for a greater cut. Thursday, concerned about "unsettled conditions in financial markets," the Fed unexpectedly cut another quarter-point, sending markets soaring. The Dow Jones Industrial Average closed up 330.58 points, or 4.15%, at 8299.36. Unfortunately for Mr. Cardoso, who vows he won't devalue his nation's currency, the issue of devaluation has been the focus of an almost theological debate for decades among the economic experts who have thought the hardest about it. But when it comes to facts, neither side has a preponderance of the evidence. The case for devaluation is clear-cut: When something bad happens to demand for a country's products or assets, the smart thing is to do what companies do when demand falls -- cut the price. The easiest way for a country to do that is to reduce the value of its currency against other currencies, to "devalue." Exports are instantly cheaper to foreign consumers, sales increase, the economy perks up. Overpriced by 25% Today, Brazil's imports exceed its exports by a sum greater than 4% of its economy, and its inflation rate, though down from the early 1990s, still exceeds that of the U.S. Those measures suggest to Harvard University economists Jeffrey Sachs and Steven Radelet, among others, that the real is overpriced by about 25%. But an equally strong case can be made against devaluation: Look what happened to Thailand, Korea, Indonesia and Russia. Devaluation was followed by recession, high interest rates, widespread bankruptcies and panic. Mr. Cardoso knows that pushing down the real could lead to higher import prices and risk rekindling the devastating inflation he worked so hard to conquer. With money flowing across international borders more easily than it did a decade ago, devaluation is trickier. Rich-country investors and banks lend and invest billions in far-away markets; companies, banks and wealthy families in those far-away countries borrow heavily from abroad. When their governments reduced the value of their currencies, Thais or Koreans or Indonesians who had borrowed from abroad (in dollars) to invest or lend at home (in baht, won or rupiah) got smashed. A Thai borrower that owed $1 million to foreigners on June 30, 1997, just before the government devalued, owed the equivalent of 24.7 million baht; a month later, it owed the equivalent of 31.5 million baht. And when the borrowers are banks, as many have been, the heavier debt burden can push them into insolvency. That, in turn, makes it almost impossible for local exporters to get the credit they need to take advantage of devaluation to increase their sales abroad. In short, the pain of devaluation is worse than it was in the old days, and the benefits to exporters are elusive. Roosevelt and Nixon Devaluation isn't merely an issue for emerging-market economies. Franklin Roosevelt devalued the dollar in 1933, and the U.S. economy bounced back from the Depression -- temporarily. Richard Nixon devalued the dollar in 1971; critics say that helped produce a decade of inflation. Treasury Secretary James Baker encouraged a steep decline in the dollar's value in 1985; U.S. manufacturers cheered. Britain's Prime Minister John Major devalued the pound in 1992, and his economy soared. Much the same happened to Italy, Spain and Sweden. To emerging-market economies, devaluation may be discomforting. But the alternatives can be worse, or even nonexistent. Mexico, Korea and Thailand devalued only after spending all their foreign-currency reserves trying to support the price of their currencies, U.S. Deputy Treasury Secretary Lawrence Summers regularly reminds critics. Those countries didn't have the means to stop their currencies from falling; indeed, they might have been better off letting their currencies go sooner, he says. To avoid devaluation altogether, most economists believe, Mexico, Thailand and Korea would have been forced to raise interest rates to excruciatingly high levels, maybe even higher than their fragile financial systems and politically shaky governments could have handled. A Dirty Word In some conservative circles, however, devaluation long has been a dirty word; the idea that exchange rates ought to move like other prices is as much an abomination as the notion that the length of an inch should vary. "The last thing you want in money is flexibility. Money has to be a measure. It has to be stable," says Robert Mundell, a Columbia University economist and advocate of a return to the gold standard. Mr. Mundell, known among colleagues not only for his intellect but for a spectacular 65-room Renaissance palazzo near Siena, Italy, that he bought in 1969, inspired the original supply-siders -- including economist Arthur Laffer and former Wall Street Journal editorial writer Jude Wanniski. Adherents to the Mundell school include The Wall Street Journal's editorial page and influential congressional Republicans, which explains some of the antipathy to those they deride as "devaluationists" at the U.S. Treasury and International Monetary Fund. Their generic advice to finance ministries pondering devaluation: Don't. It simply doesn't work. Cut the value of your currency, and the resulting inflation will undo the apparent benefits. Better to persuade markets that you are serious about not devaluing, and they will back off. What has the last year of currency-market turmoil taught Mr. Mundell? "It hasn't fundamentally changed my thinking," he says. On that point, Milton Friedman, the Nobel laureate economist now at Stanford University, concurs. "I don't think we've learned anything that we didn't already know," he says. But on nearly everything else involving exchange rates, Mr. Friedman -- who has spent the past 45 years preaching the virtues of allowing exchange rates to move freely -- disagrees with Mr. Mundell, just as he did when the two were teaching at the University of Chicago in the 1960s. Bradford DeLong, an economic historian at the University of California at Berkeley, explains the debate to his students this way: To Mr. Friedman, an exchange rate is a price; therefore, it is an infringement on human freedom to peg it. To Mr. Mundell, an exchange rate is a promise; to change it is to default on a commitment. Floating Freely For better or worse, since the system of fixed exchange rates among rich countries broke down in the early 1970s, the world's major currencies have been floating freely against each other, with occasional efforts by governments to influence their movements. Developing countries have also moved toward more flexible exchange rates. In 1975, according to the International Monetary Fund, three-quarters of the output from developing countries came from nations with fixed exchange rates; at last tally, in 1996, only 13% did. Mexico, for instance, decided after a botched devaluation in late 1994 to let the markets set the value of the peso. It didn't want to give speculators a fixed target at which to shoot or to repeat the tense internal government confrontation between those who wanted to devalue the peso and those who didn't. President Ernesto Zedillo recently called Mexico's floating exchange rate a "suitable" weapon to avoid abrupt devaluations and discourage speculation. But it hasn't been an easy ride. Since the end of June, the peso has fallen more than 10% against the dollar. Deteriorating expectations about Mexican inflation have pushed interest rates above 30%. The banking system is taking another beating, and the cost of borrowing for Mexican companies is prohibitive. Unavoidable Jolts Advocates of freely floating exchange rates have hoped that more-flexible (even if not completely flexible) rates would spare the world the big jolts that occur when fixed exchange-rate systems crack. But it hasn't worked so well. "Contrary to conventional wisdom," IMF economists Francesco Caramazza and Jahangir Aziz concluded in a study published last year, "misalignments and currency crashes are equally likely under pegged and flexible exchange rate regimes." In the 116 instances between 1975 and 1996 when currencies plunged 25% or more, half were operating with flexible exchange-rate systems. Recently, the huge amounts of money flowing across borders have further undermined the case for freely floating exchange rates, or at least greatly complicated matters. These days, exchange rates affect, and are affected by, not only trade in corn and cars, but also trade in stocks, bonds, bank deposits, loans, derivatives and so on. The ability of emerging-market families and firms to borrow from abroad, it turns out, changes the dynamics of devaluation. "Normally, depreciation is a neat, clean, nice safety valve to allow you to maintain full employment when the world economy deals you a bad hand," says Mr. DeLong, the Berkeley economist and former Clinton Treasury official. "But if you have a lot of foreign debt, you have a choice between raising interest rates to avoid depreciation or getting the exchange rate down and putting your entire banking system and most of your corporations in bankruptcy." No Surprise To some wise old men of economics, the tension between rigid exchange rates and freely flowing capital comes as no surprise. "This is something that John Maynard Keynes pointed out in 1923 when he said you can have two, and only two, of the following three things: free movement of capital, fixed exchange rates and independent monetary policy," Mr. Friedman -- no Keynesian he -- says approvingly. To Mr. Friedman, the answer is obvious: Let the currencies go and the capital flow freely. However, to Harvard's Mr. Sachs, an advocate of devaluation for Brazil and similarly situated economies, there is another solution: Let the currencies go and stop the capital from fleeing, by prodding Brazil's creditors to turn short-term loans into long-term ones. A few economies, Argentina and Hong Kong most prominently, have chosen a different combination. They allow capital to move freely and fix their exchange rates to the U.S. dollar, but emasculate their central banks. Unlike the Federal Reserve, the Argentine central bank can't cut interest rates to resist recession. So when Mexico's woes in 1994 sent shock waves through Latin America, Argentina couldn't cushion the blow: It lost several banks and allowed unemployment to reach 18%. Nonetheless, the Argentine peso is still worth exactly $1. With similar logic, Germany, France and nine other European nations are surrendering their national currencies to the euro, and their freedom to set interest rates to the new European Central Bank. Italy will no longer be able to devalue the lira (at least against its European competitors) or cut interest rates to fight recession. A Case for 'In Between'? Yet to one degree or another, the rest of the world still embraces currencies that can change value when economic conditions change, sometimes by overt government actions, other times by allowing markets to move them. It still isn't clear to those who ponder such issues if that is a good idea. As Carnegie-Mellon University economist Allan Meltzer, a Friedmanite, puts it: "The best you can say of what economic research has produced is: You can make a case for freely floating exchange rates if you're willing to live with the consequences. You can make a case for fixed exchange rates if you're willing to live with the consequences. You can't make much of a case for anything in between." Most of the world is "in between." Brazil, for example, adopted the real in 1994 as part of a successful attack on inflation. The Brazilian central bank buys and sells the real to keep its value within a publicly announced range against the U.S. dollar. It has been moving the top and bottom limits of this band downward by about 7% a year, hoping this will compensate for differences between the U.S. and Brazilian economies and avoid the need for bigger, disruptive devaluations. In the jargon of finance, this is called a "crawling peg." Brazilian officials repeatedly assert, as they did recently in a statement issued jointly with the IMF, "their firm commitment to their current exchange-rate regime." But Brazil has been losing more than $10 billion a month as nervous foreign and domestic investors move money out of the country. Frugality and Cash Infusions Mr. Cardoso, newly re-elected, hopes that government belt-tightening, changes to its costly pension system and several billion dollars from the IMF, World Bank and rich-country governments will calm global investors so Brazil can avoid devaluation. But the markets know that this will be a tough sell to Brazilian voters and politicians. Mr. Friedman thinks Mr. Cardoso is pursuing the wrong course. "A pegged exchange rate system" -- like Brazil's -- "with an independent central bank is a ticking bomb and a remedy for disaster." His ally Mr. Meltzer says, "If I were in Brazil, I'd think strongly about devaluation. Their currency is way out of line." Even Mr. Mundell, the defender of the gold standard, isn't sure that Brazil should avoid devaluation altogether. "They should now decide if they're going to have devaluation of any kind," he advises. "If they think they need one, for whatever reason, they should only do it in conjunction with setting a new rate" that they promise never to change again, an Argentine-style approach. For Brazil to devalue its currency by 10% or 20%, and then try to resume the old approach, he adds, "would be disastrous." Brazilian officials said Thursday that they anticipate announcing their new economic plan sometime after next Tuesday. The Fed's surprise interest-rate cut gave them a welcome respite Thursday. In response, the country's biggest stock market, Sao Paulo's Bovespa, soared, closing up 6.7% percent. The smaller Rio de Janeiro stock exchange closed up 4.9%. Brazilian government bonds also rose.

To: Steve Fancy who wrote (9036)	10/18/1998 1:29:00 PM
From: Steve Fancy	Respond to of 22640

Brazil shares end off 2.43 pct on Telebras options Reuters, Friday, October 16, 1998 at 19:59 SAO PAULO, Oct 16 (Reuters) - Brazilian shares closed off 2.43 percent on Friday amid volatile trading as options in the benchmark Telebras receipts (SAO:RCTB40) come due next week, traders said. "The market is riding the options war," said Roque Sut Ribeiro, a fund manager at Banco Marka. "Traders are working to keep the price below 90 reais so that nobody can exercise their options." Sao Paulo's key Bovespa (INDEX:$BVSP.X) index slumped to 6,707 points even as shares on Wall Street surged 1.4 percent. Telebras receipts tumbled 3.1 percent to 87.20 reais. Shares worth 396.7 million reais traded hands in medium volume. Brazilian stocks seesawed throughout the day and throughout the week as Bovespa index futures came due on Wednesday and Telebras ADR (NYSE:TBR) options came due Friday. "The market normally gets very volatile when options and futures are the issue," a trader at a local brokerage said. Other blue-chip stocks tracked the rise on Wall Street. Energy company Eletrobras preferred (SAO:ELET6) closed up 1.18 percent at 25.8 reais while state-owned oil company Petrobras preferred (SAO:PETR4) ended up 0.72 percent at 139 reais. Iron ore miner Cia Vale do Rio Doce preferred (SAO:VALE5) was unchanged at 17.30 reais. The Brazilian market was seen looking up next week on expectations that the government will soon announce a series of belt-tightening measures aimed at fending off the global financial crisis. "Fiscal announcements could help calm the market," one trader said. The fiscal adjustment proposal, which is slated to be drawn up by Tuesday, is also expected to pave the way for an international support package. Cardoso could announce the proposal next week or wait until after runoff gubernatorial elections in a number of key states like Sao Paulo on Oct. 25 before mentioning the likely unpopular austerity measures. shasta.darlington@reuters.com)) Copyright 1998, Reuters News Service

To: Steve Fancy who wrote (9036)	10/18/1998 1:31:00 PM
From: Steve Fancy	Respond to of 22640

Latam stocks fail to add to Fed rate cut rally Reuters, Friday, October 16, 1998 at 20:54 (Pvs Sao Paulo, updates with closing figures) By Richard Jacobsen MEXICO CITY, Oct 16 (Reuters) - Latin American stocks ended mixed on Friday after investors took profits after sharp gains following the Federal Reserve's surprise U.S. interest rate cuts. "Yesterday's rise was a bit too explosive and now we're correcting," said trader Lucio Bruno at Montelatici brokerage in Argentina. Stock markets throughout the region surged late on Thursday after the U.S. Federal Reserve cut two key interest rates. The action was seen helping shield the United States from global economic turmoil and soothing markets overseas by leading to fresh rate cuts elsewhere. On Friday, Canada's central bank tracked the Fed by cutting its key lending rate by a quarter percentage point. But investor reticence ahead of Brazil's unveiling -- perhaps as early as next week -- steps for keeping its economic crisis from worsening kept the rally in Latin American stocks short lived. ARGENTINA's MerVal <.MERV> index of most traded shares finished down 1.35 percent at 422.25 points, a 5.79 point slide. The bourse is still 38.6 percent down in the year, but it managed to climb 9.5 percent in the week. The Buenos Aires market had rocketed 8.03 percent on Thursday. MEXICAN stocks ended flat after a rocky session, weighed by profit takers lured in by Thursday's 6.6 percent rise. The leading IPC share index <.MXX> finished up 0.3 of a point at 3831. During the day the index gyrated between a low of 3791 and a high of 3902. But index gained 387 points, or 11.26 percent in the week. Traders and analysts said they had expected some market players to move to lock in profits ahead of the weekend. "The profit taking we saw during the day was logical," said Esteban Rojas, deputy director of analysis at the Arka brokerage. Mexico's peso gained ground against the dollar and local interest rates dipped on Friday in response to the U.S. rate cuts. BRAZILIAN shares closed off 2.43 percent amid volatile trading ahead of options expirations on benchmark Telebras. "The market is riding the options war," said Roque Sut Ribeiro, a fund manager at Banco Marka. Sao Paulo's key Bovespa (INDEX:$BVSP.X) index slumped 167 points to 6,707. CHILE's leading stock index trimmed earlier gains but still ended slightly higher. The IPSA <.IPSA> index of the leading 40 stocks rose 0.1 of a point, or 0.16 percent, to 66.28 points, and the broader IGPA <.IGPA> gauge gained 17.85 points, or 0.55 percent, to 3180.71. Meanwhile shares in VENEZUELA continued to drift in thin trade as investors shunned the market in the run-up to presidential elections in December, brokers said. The market's 15-share <.IBC> index slipped 0.06 percent to 3554.51, a 2.12 point drop. "Political uncertainty, which was already present, continued to dominate," said Interacciones broker Freddy Zambrano. Copyright 1998, Reuters News Service Companies or Securities discussed in this article:

To: Steve Fancy who wrote (9036)	10/18/1998 1:32:00 PM
From: Steve Fancy	Respond to of 22640

Latam hopes US rate cuts will buy economies time Reuters, Friday, October 16, 1998 at 21:12 By Axel Bugge BUENOS AIRES, Oct 16 (Reuters) - Latin America breathed easier on Friday after a surprise interest rate cut by the U.S. Federal Reserve, which analysts said could buy time for economies struggling to stave off the global financial crisis. The rate cut announced on Thursday was called a "heavenly gift" by one regional trader. The move was uplifting because of its unexpected timing, which suggested the United States may move faster in the future to ease monetary policy. The Fed cut its discount rate to 4.75 percent from 5.0 percent and its fed funds rate to 5.0 percent from 5.25 percent, announcing it outside of one of its regular scheduled policy-setting meetings. Regional policymakers have repeatedly urged the United States and other G7 nations to aggressively cut rates to ease pressures on their currencies and to prevent the spread of a global deflationary spiral, which is already gripping many Latin American economies. Economists said the soothing impact of the rate cut was good news for regional powerhouse Brazil, which is in a race against time to prevent its bloated budget deficit from making it the latest casualty of global financial turmoil. "This buys Brazil a little bit of time," said Ricardo Daud, a fund manager at Bansud bank in Buenos Aires. "For Brazil it's good because a calmer international market gives the Brazilian government more time to prepare its adjustment," said Paulo Pereira Miguel, chief economist at Brazil's Banco Boavista. Brazilian leaders are drafting a tough austerity plan, which is due out by Oct. 20. That step is expected to draw a funding package led by the International Monetary Fund to restore confidence Brazil will not devalue its currency, the real. A devaluation in Latin America's largest economy would send shockwaves through the region, probably tilting most of it into recession, economists said. Apart from supporting regional financial markets -- which surged on Thursday after the rate cut, but slipped slightly on Friday on profit-taking -- lower U.S. rates help in other ways. They should make Latin American assets more attractive because of the lower returns on U.S. assets. That could open the way for countries to return to international debt markets, which have been demanding prohibitively high rates from emerging market countries during the financial crisis that erupted with Russia's August devaluation and debt default. In turn that will help reduce the huge interest payments so many Latin American countries have on their foreign-dollar denominated debt and reduce budget-cutting pressures. Seeing the opportunity, Argentina issued $250 million in 20-year bonds on Friday, becoming the first major emerging country to issue debt in international markets since July. A Mexican official also suggested his country could return. "If things go well, I think that in six months we could place (international debt) again," said Carlos Garcia-Moreno, director of public credit at Mexico's Finance Ministry. While reducing the chances of much slower U.S. growth, the lower dollar resulting from cutting rates also is a boon to Latin America's commodities-dependent economies. It will help their dollar-denominated commodities exports because they become cheaper in other currencies. Copyright 1998, Reuters News Service

To: Steve Fancy who wrote (9036)	10/18/1998 1:33:00 PM
From: Steve Fancy	Respond to of 22640

Brazil reserves stabilizing - cenbank chief Franco Reuters, Sunday, October 18, 1998 at 12:27 SAO PAULO, Oct 18 (Reuters) - The huge dollar flight that was rapidly draining Brazil's international reserves has come to an end, the president of Brazil's Central Bank told O Estado de S. Paulo newspaper in an interview published Sunday. "We are still going to see a little loss of reserves, but nothing that worries us. That's over," Gustavo Franco said. "The trend is toward stabilization." More than $30 billion has fled Brazil through its foreign exchange markets since the beginning of August, dragging reserves down to about $45 billion from $70 billion in the same period. Investors began taking their money out of Brazil after Russia devalued its currency, concerned that Latin America's biggest economy -- which also has a bloated fiscal deficit -- could be forced into the same action. Faced with a dollar hemorrhage that averaged about $1.5 billion a day in early September, the Central Bank hiked interest rates up to almost 50 percent. The measure, combined with expectations that Brazil will soon receive an international support package, has helped slow dollar flight, but has not stopped it. Franco said, however, that virtually all of the speculative money that had pumped up reserves in the last year had already fled Brazil, so that flows should stabilize now. "There was a big outflow of hot money, another on arbitration (of debt yields), principally before interest rates were raised," Franco said. He said ongoing negotiations with the International Monetary Fund and other agencies for a support program could help deter capital flight. The IMF has said aid hinges on Brazil putting together a fiscal adjustment program. "The conclusion of understandings with the IMF will qualitatively change the panorama of international markets for emerging markets and Brazil," Franco said. He said reserves could still show almost negligible losses due to negative external circumstances. Recently re-elected President Fernando Henrique Cardoso told his economic team to put together by Oct. 20 a package of spending cuts and tax increases aimed at reining in the fiscal gap, which has topped 7 percent of gross domestic product and paving the way for the international support. A group of Brazil's economic advisors is currently in Washington, reportedly outlining the measures to the IMF. Cardoso may not announce the program, which is likely to include unpopular taxes, until after run-off gubernatorial elections on Oct. 25. Franco said he does not expect Cardoso to face huge hurdles getting the belt-tightening measures through Congress, as some analysts have suggested. "A sense of urgency naturally exists in all of society and its representatives," he said. Franco also reiterated that the fiscal adjustment will be made without any changes to the foreign exchange policy. He said Brazil does not plan to speed up the depreciation of the real against the dollar -- which is currently at about 7 percent a year -- nor does it plan a big one-time devaluation. "In doing what we must from the fiscal point of view, I do not see any reason to mess with the foreign exchange policy," he said. shasta.darlington@reuters.com)) Copyright 1998, Reuters News Service

To: Steve Fancy who wrote (9036)	10/18/1998 1:37:00 PM
From: Steve Fancy	Respond to of 22640

Portugal's Belmiro Bullish On Brazil After Cardoso Mtg Dow Jones Newswires OPORTO, Portugal -- One of Portugal's business leaders and a major investor in Brazil said Saturday he remains "extremely confident" President Fernando Henrique Cardoso will take the steps necessary to fend off economic crisis. "Our position is that in the long term President Cardoso will introduce a set of constitutional changes that will stabilize the economy," Belmiro de Azevedo, CEO of Sonae Investimentos SGPS (E.SIV) told reporters after meeting with Cardoso. "(Cardoso's) intention is to use the mandate that he has to proceed with structural changes that are important to increase Brazil's credibility so that long-term capital can consolidate," Azevedo added. "Short-term speculators won't have the conditions to attack the economy." Cardoso is in Oporto for the eighth annual Ibero-American summit here this weekend, which will bring together 21 Latin American, Portuguese and Spanish heads of state. Azevedo's Sonae has investments of some 600 million Brazilian reals in that country, mostly in the retail and services sector, and accounts for more than 5,000 jobs. Later this year the company will inaugurate a new wood-processing factory in Brazil. After buying a German company that specializes in wood derivatives like agglomerates and building materials earlier this month, Sonae will be one of the world's biggest companies in the sector, Azevedo said. Azevedo said he would like to see investments of over 1.0 billion reals in Brazil by the year 2002. "Sonae hasn't reduced its investments in Brazil; on the contrary, in fact it has increased them," Azevedo said. "Sonae is one of the Portuguese companies most interested in continuing to invest further." Azevedo said that Cardoso was curious to know how Sonae's international partners viewed the Brazilian crisis "He is concerned about the perspective from outside, and that is good," Azevedo said. "I gave him my perspective, which is very optimistic." -By Erik T. Burns; 351-1-343-2517; eburns@ap.org

To: Steve Fancy who wrote (9036)	10/18/1998 1:52:00 PM
From: Steve Fancy	Read Replies (1) \| Respond to of 22640

Why Was There No Dancing in the Streets After Cardoso's Election Triumph? By John Fitzpatrick, Celtic Comunicações. Why was President Fernando Henrique Cardoso's election triumph such an anti climax? On the evening of October 4 one felt as one had on the evening of the World Cup final when France unceremoniously drubbed the champions, Brazil, and won the Cup. Just as there were no street parades after Brazil's pathetic performance on the football field there were no public celebrations and jubilation after the election results were known, despite the fact that Cardoso won convincingly in the first round with 53% of the vote and his only serious rival, Lula, trailed with around 32%. Why was this? Was it because Brazilians have never reelected a president until Cardoso changed the constitution, and so there was not the same feeling of change which usually prevails? Was it because of the infantile squabbles by the PT over the exit polls which pointed to a larger margin of victory of around 56%? Was it because of the uncertainty in some of the state governorship elections such as São Paulo, Rio de Janeiro and Minas Gerais? Was it because of the impending fiscal package, with possible tax increases, and the continuing mess on all the world's financial markets? Or was it just because people simply voted for Cardoso not because they admire him or expect anything new from him but to thank him for killing inflation and trust he will continue to do so? In one way this feeling of anti-climax is good because it shows Brazilians are becoming as mature and blasé about democracy as people in more developed countries. In another way it is a pity because Cardoso really needs his mandate to be backed more enthusiastically by the people. During his first four years he has had to kowtow to the self-interested political parties which make up his unimpressive governing alliance. As even his own PSDB has proved awkward, Cardoso has had to rely heavily on the PFL of Antonio Carlos Magalhães to get him out of difficulties. Senate leader Magalhães has been loyal but his support does not come for nothing. Cardoso has had to offer a kind of half support for the PPB's Paulo Maluf who now looks as though he will beat the PSDB governor, Mario Covas, in São Paulo. Cardoso has put the hands of the lower house in Michel Temer of the PMDB who has been unable to reconcile the party's virulently anti-Cardoso faction. At the time of writing Temer is promising to have a final vote on social security reform in November although the tax reform, which was supposed to have been dealt with this year, will be tackled next year. Well, none of this comes as a surprise to anyone and we face another four years of thwarted reforms and delays. There is no space here to discuss the congressional results but it is interesting to note that of the 513 deputies, 238, or 46%, are new. However, they are likely to be just new wine in old bottles and there is no great influx of new blood ready to support the President. Having said that, the governing alliance will continue and the Senate is still in "safe" hands. So for the next four years we can look forward to much of the same snail's pace progress we have seen during Cardoso's first term of office. How Cardoso handles the forthcoming fiscal package will be crucial. No doubt there will be howls of protests from all the usual interest groups and the special pleading from the "good guys" who claim to have done all they can. The opposition, inside and outside the government, will try to block them and use them as an excuse to continue blocking the reforms. Cardoso can quite legitimately appeal over the heads of the Congress to the people who elected him so convincingly. However, whether, the intellectual, ex-sociology professor inside Cardoso can give way to a more outgoing political leader is another matter. October 15, 1998 John Fitzpatrick is a political commentator and founder of Celtic ComunicaÇÕes Ltda., SÃo Paulo, which specializes in editorial and translation services. Tel/fax (5511) 280 5233, E-mail johnfitz@mandic.com.br

To: Steve Fancy who wrote (9036)	10/18/1998 1:54:00 PM
From: Steve Fancy	Read Replies (3) \| Respond to of 22640

Closing figures for the Baby Bras Preferred shares on the Bovespa for: 10/16/1998 ******* The 12 Baby Bra preferred shares should add up to the US ADR closing price Company Type Symbol OPEN HIGH LOW CLOSE CHG TRADES $ VOLUME ======= ==== ====== ===== ===== ===== ===== ===== ====== ============ EMBRATEL PAR PN * EBTP4 18.99 19.00 17.00 18.00 - 5.26% 159 319,000,000 TELE CL SUL PN * TCSL4 1.13 1.25 1.13 1.18 + 4.42% 174 1,257,300,000 TELE CTR OES PN * TCOC4 0.78 0.80 0.76 0.78 + 1.29% 81 406,600,000 TELE CTR SUL PN * TCSP4 12.50 12.50 11.00 12.20 - 2.40% 93 212,300,000 TELE LEST CL PN * TLCP4 0.37 0.42 0.37 0.42 + 5.00% 81 436,500,000 TELE NORD CL PN * TNEP4 0.58 0.61 0.57 0.60 + 3.44% 113 665,100,000 TELE NORT CL PN * TNCP4 0.24 0.25 0.21 0.24 = 0.00% 96 718,000,000 TELE NORT LE PN * TNLP4 13.50 14.10 13.50 13.75 + 1.85% 142 265,700,000 TELE SUDESTE PN * TSEP4 3.80 4.00 3.20 3.20 -15.78% 144 563,400,000 TELEMIG PART PN * TMCP4 0.72 0.80 0.71 0.75 + 4.16% 95 476,400,000 TELESP CL PA PN * TSPP4 7.80 8.10 6.80 6.80 -12.82% 132 319,300,000 TELESP PART PN * TLPP4 28.53 31.00 28.53 30.00 = 0.00% 173 346,700,000 ------ R$ 87.92 R$ 87.92 / 1.1886 = US$ 73.97 Closing figures for the Baby Bras Common shares on the Bovespa for: 10/16/1998 These shares trade only in Brazil (Control or Voting shares), will not match up to US ADR Company Type Symbol OPEN HIGH LOW CLOSE CHG TRADES $ VOLUME ======= ==== ====== ===== ===== ===== ===== ===== ====== ============ EMBRATEL PAR ON * EBTP3 9.99 9.99 8.30 8.70 -10.30% 42 55,300,000 TELE CL SUL ON * TCSL3 0.60 0.60 0.57 0.57 - 6.55% 37 155,100,000 TELE CTR OES ON * TCOC3 0.60 0.60 0.59 0.59 - 1.66% 27 154,200,000 TELE CTR SUL ON * TCSP3 6.40 6.40 6.10 6.20 - 4.61% 48 93,000,000 TELE LEST CL ON * TLCP3 0.22 0.25 0.21 0.25 +13.63% 38 377,400,000 TELE NORD CL ON * TNEP3 0.34 0.34 0.31 0.31 -11.42% 29 138,300,000 TELE NORT CL ON * TNCP3 0.15 0.15 0.15 0.15 = 0.00% 20 44,200,000 TELE NORT LE ON * TNLP3 5.40 5.70 5.00 5.40 - 5.26% 73 179,500,000 TELE SUDESTE ON * TSEP3 2.00 2.04 1.70 2.00 = 0.00% 26 90,500,000 TELEMIG PART ON * TMCP3 0.52 0.53 0.51 0.53 + 3.92% 42 162,700,000 TELESP CL PA ON * TSPP3 3.75 4.00 3.75 3.85 - 3.75% 38 285,900,000 TELESP PART ON * TLPP3 18.00 23.00 18.00 21.00 +16.66% 59 188,500,000 Closing figures for Telebras receipts on the Bovespa for: 10/16/1998 These symbols are kind of the US TBH equivalent without the crazy premium. I believe the first two are the normal receipts, don't know about rest...anyone? Company Type Symbol OPEN HIGH LOW CLOSE CHG TRADES $ VOLUME ======= ==== ====== ===== ===== ===== ===== ===== ====== ============ TELEBR RCTB RON* RCTB30 49.99 50.00 47.50 48.00 - 4.95% 179 159,500,000 TELEBR RCTB RPN* RCTB40 88.50 90.50 85.30 87.20 - 3.10% 843 1,695,800,000 RCTB RPN* RCTBJ41E 80.00 80.00 80.00 80.00 0.00% 1 200,000 RCTB RPN* RCTBJ23 0.02 0.02 0.01 0.01 -80.00% 34 271,000,000 RCTB RPN* RCTBJ24 0.01 0.01 0.01 0.01 -50.00% 11 66,400,000 RCTB RPN* RCTBJ25 0.01 0.01 0.01 0.01 = 0.00% 2 7,000,000 RCTB RPN* RCTBJ26 0.00 0.00 0.00 0.00 / 0.00% 0 0 RCTB RPN* RCTBJ41 9.00 10.60 6.00 7.20 -30.09% 624 1,043,000,000 RCTB RPN* RCTBJ42 1.60 2.20 0.20 0.30 -87.50% 2151 4,673,000,000 RCTB RPN* RCTBJ43 0.15 0.23 0.02 0.03 -90.00% 343 1,461,800,000 RCTB RPN* RCTBJ52 19.00 19.90 16.00 16.20 -16.92% 12 25,000,000 RCTB RPN* RCTBL18 10.50 10.80 9.00 9.00 - 2.17% 32 79,000,000 RCTB RPN* RCTBL28 22.70 22.70 22.70 22.70 + 3.18% 1 10,000,000 RCTB RPN* RCTBL3 6.50 6.50 5.00 5.10 -15.00% 115 278,000,000 RCTB RPN* RCTBL30 16.50 16.85 14.20 14.20 - 2.73% 12 71,000,000 RCTB RPN* RCTBL4 3.10 3.30 2.40 2.50 -16.66% 67 192,000,000 RCTB RPN* RCTBL5 1.20 1.20 1.20 1.20 -20.00% 1 1,000,000 RCTB RPN* RCTBL6 0.00 0.00 0.00 0.00 / 0.00% 0 0 RCTB RPN* RCTBV95 13.04 13.04 13.04 13.04 + 0.30% 1 1,000,000 RCTB RPN* RCTBX22 7.45 7.45 7.45 7.45 -25.79% 1 1,000,000 TELEBR RCTB RON* RCTB30F 49.00 50.00 47.40 47.60 - 5.74% 49 912,505 TELEBR RCTB RPN* RCTB40F 89.00 90.38 86.00 88.20 - 1.98% 66 1,292,216 Closing figures for other Baby Bra related symbols on the Bovespa for: 10/16/1998 Have no idea what these are...options? Anyone know or want to help figure it out? Company Type Symbol OPEN HIGH LOW CLOSE CHG TRADES $ VOLUME ======= ==== ====== ===== ===== ===== ===== ===== ====== ============ TELE CL SUL ON * TCSL3T 0.62 0.62 0.61 0.61 0.00% 2 53,800,000 TELE CL SUL ON * TCSL3T 0.63 0.64 0.63 0.64 0.00% 2 30,000,000 EMBRATEL PAR ON * EBTP3F 9.70 10.00 8.75 8.75 - 9.79% 4 146,555 EMBRATEL PAR PN * EBTP4F 17.53 17.53 17.00 17.00 -10.52% 3 150,000 TELE CL SUL ON * TCSL3F 0.60 0.60 0.60 0.60 - 1.63% 1 2,078 TELE CL SUL PN * TCSL4F 1.16 1.16 1.16 1.16 + 2.65% 1 70,000 TELE CTR OES ON * TCOC3F 0.57 0.57 0.57 0.57 - 5.00% 1 26,422 TELE CTR OES PN * TCOC4F 0.77 0.77 0.77 0.77 = 0.00% 1 50,000 TELE CTR SUL ON * TCSP3F 6.40 6.40 6.10 6.10 - 6.15% 2 114,000 TELE CTR SUL PN * TCSP4F 13.00 13.00 12.00 12.00 - 4.00% 2 50,000 TELE LEST CL ON * TLCP3F 0.20 0.20 0.20 0.20 - 9.09% 2 52,844 TELE LEST CL PN * TLCP4F 0.00 0.00 0.00 0.00 / 0.00% 0 0 TELE NORD CL ON * TNEP3F 0.31 0.31 0.30 0.30 -14.28% 3 108,475 TELE NORD CL PN * TNEP4F 0.60 0.60 0.60 0.60 + 3.44% 1 35,000 TELE NORT CL ON * TNCP3F 0.10 0.15 0.10 0.15 = 0.00% 2 41,400 TELE NORT CL PN * TNCP4F 0.22 0.23 0.21 0.23 - 4.16% 5 140,000 TELE NORT LE ON * TNLP3F 5.60 5.60 5.15 5.15 - 9.64% 6 161,940 TELE NORT LE PN * TNLP4F 13.00 13.70 13.00 13.50 = 0.00% 3 90,000 TELE SUDESTE ON * TSEP3F 1.98 1.98 1.69 1.69 -15.50% 4 99,900 TELE SUDESTE PN * TSEP4F 3.40 3.40 3.40 3.40 -10.52% 1 40,000 TELEMIG PART ON * TMCP3F 0.50 0.52 0.50 0.52 + 1.96% 3 48,362 TELEMIG PART PN * TMCP4F 0.75 0.80 0.75 0.80 +11.11% 3 77,836 TELESP CL PA ON * TSPP3F 3.80 3.80 3.51 3.70 - 7.50% 6 123,072 TELESP CL PA PN * TSPP4F 7.50 7.50 7.21 7.21 - 7.56% 4 73,000 TELESP PART ON * TLPP3F 19.48 20.00 19.48 20.00 +11.11% 3 90,931 TELESP PART PN * TLPP4F 29.50 29.50 29.50 29.50 - 1.66% 3 90,000 Closing figures for other Telebras related symbols on the Bovespa: 10/16/1998 These symbols are for the 52 individual companies, no match to anything, provided FWIW. Company Type Symbol OPEN HIGH LOW CLOSE CHG TRADES $ VOLUME ======= ==== ====== ===== ===== ===== ===== ===== ====== ============ TELEBAHIA ON * TEBA3 0.00 0.00 0.00 0.00 / 0.00% 0 0 TELEBAHIA PNA* TEBA5 22.50 22.80 21.02 22.80 + 1.42% 24 29,740,000 TELEBAHIA CL ON * TBAC3 0.00 0.00 0.00 0.00 / 0.00% 0 0 TELEBAHIA CL PNB* TBAC6 16.00 16.00 16.00 16.00 = 0.00% 1 500,000 TELEBAHIA CL PNC* TBAC7 0.00 0.00 0.00 0.00 / 0.00% 0 0 TELEBRAS ON * TELB3 0.09 0.11 0.08 0.10 +11.11% 71 877,600,000 TELEBRAS PN * TELB4 0.17 0.18 0.17 0.17 = 0.00% 86 514,800,000 TELEBRASI CL ON * TBRC3 0.00 0.00 0.00 0.00 / 0.00% 0 0 TELEBRASI CL PNB* TBRC6 0.00 0.00 0.00 0.00 / 0.00% 0 0 TELEBRASILIA ON * TBRS3 0.00 0.00 0.00 0.00 / 0.00% 0 0 TELEBRASILIA PN * TBRS4 84.00 84.00 84.00 84.00 - 1.17% 3 120,000 TELEMIG ON * TMGR3 21.00 21.00 21.00 21.00 = 0.00% 2 20,000 TELEMIG PNB* TMGR6 35.00 37.40 35.00 37.40 - 0.26% 6 1,300,000 TELEMIG PND* TMGR8 0.00 0.00 0.00 0.00 / 0.00% 0 0 TELEMIG CL PNE* TMGC11 0.00 0.00 0.00 0.00 / 0.00% 0 0 TELEMIG CL ON * TMGC3 10.00 10.00 10.00 10.00 = 0.00% 1 10,000 TELEMIG CL PNC* TMGC7 11.80 12.40 11.80 12.00 + 5.35% 20 50,270,000 TELEPAR ON * TEPR3 104.48 104.48 100.00 102.99 - 4.63% 7 733,000 TELEPAR PN * TEPR4 185.00 192.00 185.00 192.00 + 2.12% 34 4,158,000 TELEPAR CL ON * TPRC3 32.00 32.99 30.00 32.50 - 4.38% 19 1,314,000 TELEPAR CL PNB* TPRC6 52.00 52.00 49.00 51.00 - 1.92% 16 1,631,000 TELERJ ON * TERJ3 20.00 21.00 20.00 21.00 + 4.94% 5 710,000 TELERJ PN * TERJ4 32.18 33.80 32.00 32.00 - 1.53% 144 35,380,000 TELERJ CL ON * TRJC3 17.60 18.00 17.50 18.00 + 2.27% 3 30,000 TELERJ CL PNB* TRJC6 30.00 31.80 29.00 29.60 - 2.63% 83 40,860,000 TELESP ON * TLSP3 125.00 127.00 125.00 127.00 + 0.78% 49 34,370,000 TELESP PN * TLSP4 193.00 201.00 190.00 196.00 + 1.03% 609 195,580,000 TELESP CL ON * TSPC3 25.00 25.00 24.00 24.50 - 3.84% 15 1,240,000 TELESP CL PNB* TSPC6 50.00 51.48 47.00 48.20 - 7.30% 162 86,840,000 TELEPAR CL PNB* TPRC6T 53.27 53.27 53.27 53.27 0.00% 1 70,000 TELESP ON * TLSP3T 129.71 129.72 129.71 129.72 0.00% 2 20,000 TELEBAHIA ON * TEBA3F 14.00 14.00 14.00 14.00 -26.31% 2 2,188 TELEBAHIA PNA* TEBA5F 20.01 20.01 20.00 20.01 -10.98% 3 16,781 TELEBAHIA PNB* TEBA6F 0.00 0.00 0.00 0.00 / 0.00% 0 0 TELEBAHIA CL ON * TBAC3F 0.00 0.00 0.00 0.00 / 0.00% 0 0 TELEBAHIA CL PNB* TBAC6F 0.00 0.00 0.00 0.00 / 0.00% 0 0 TELEBAHIA CL PNC* TBAC7F 0.00 0.00 0.00 0.00 / 0.00% 0 0 TELEBRAS ON * TELB3F 0.09 0.09 0.08 0.09 = 0.00% 11 209,536 TELEBRAS PN * TELB4F 0.17 0.18 0.17 0.18 + 5.88% 7 222,452 TELEBRASI CL ON * TBRC3F 0.00 0.00 0.00 0.00 / 0.00% 0 0 TELEBRASI CL PNB* TBRC6F 44.00 44.00 41.01 41.01 - 6.79% 2 4,314 TELEBRASILIA ON * TBRS3F 0.00 0.00 0.00 0.00 / 0.00% 0 0 TELEBRASILIA PN * TBRS4F 83.01 84.10 83.01 84.10 + 2.56% 6 13,455 TELEMIG ON * TMGR3F 17.80 20.00 17.80 18.00 -14.28% 6 6,275 TELEMIG PNA* TMGR5F 0.00 0.00 0.00 0.00 / 0.00% 0 0 TELEMIG PNB* TMGR6F 20.00 31.03 20.00 31.03 -17.25% 9 7,257 TELEMIG PND* TMGR8F 0.00 0.00 0.00 0.00 / 0.00% 0 0 TELEMIG CL ON * TMGC3F 9.06 9.06 9.06 9.06 - 9.40% 2 2,317 TELEMIG CL PNB* TMGC6F 0.00 0.00 0.00 0.00 / 0.00% 0 0 TELEMIG CL PNC* TMGC7F 10.99 11.00 10.02 10.10 -11.32% 4 9,787 TELEPAR ON * TEPR3F 0.00 0.00 0.00 0.00 / 0.00% 0 0 TELEPAR PN * TEPR4F 185.00 187.00 184.00 187.00 - 0.53% 9 2,212 TELEPAR CL ON * TPRC3F 32.50 32.50 30.00 30.00 -11.73% 2 720 TELEPAR CL PNB* TPRC6F 48.00 49.00 48.00 48.00 - 7.69% 4 829 TELERJ ON * TERJ3F 20.00 21.00 20.00 20.10 + 0.44% 7 15,518 TELERJ PN * TERJ4F 31.12 32.50 31.12 31.52 - 3.01% 14 51,437 TELERJ CL ON * TRJC3F 16.61 17.00 16.61 16.62 - 5.56% 3 8,584 TELERJ CL PNB* TRJC6F 30.00 30.80 28.50 28.51 - 6.21% 19 51,413 TELESP ON * TLSP3F 125.00 126.50 123.02 126.50 + 0.38% 19 65,430 TELESP PN * TLSP4F 188.01 200.00 188.01 192.01 - 1.02% 57 236,114 TELESP CL ON * TSPC3F 25.00 25.01 23.01 23.51 - 7.73% 18 69,649 TELESP CL PNB* TSPC6F 49.51 50.50 48.00 48.51 - 6.71% 31 116,106