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

To: Steve Fancy who wrote (9092)	10/21/1998 8:53:00 PM
From: CuttotheCore	Read Replies (4) \| Respond to of 22640

Back in the time before diminished wealth, on or about July 2, with tbr closing at a then bemoaned 111 1/2, blue crossed green on tbr's stocastics chart at the 80th percentile on the way to our last run above the green line, ending on July 24 when blue dropped below green, forecasting our demise but ignored by those of us who should have known better and foretelling (in retrospect) the beginning of that end. Today, commemorating that forgotten event, blue edged above green, foretelling..............................................

To: Steve Fancy who wrote (9092)	10/21/1998 9:55:00 PM
From: Fred Levine	Respond to of 22640

To all-- From Morgan Stanley Brazil and the IMF: We Have A Deal Ernest W. Brown (New York) Brazil and the IMF issued a joint statement which basically says the IMF and Brazil agree on a level of fiscal effort over a period of three years and are continuing to work out the details of the program. The announcement made today by the Brazilians and the IMF is in line with our expectations in terms of specificity and timing. As we expected, crucial details remain unknown which could either cause this package to be better than we've expected or cause it to fall short of our expectations. Nevertheless, the announcement provides important confirmation that the dialogue between Brazil and the IMF is progressing towards specific targets for a fiscal effort and financial support levels, which is good news indeed. These details, in our opinion, are unlikely to be announced before the October 25 second-round election day in Brazil. The most important new word in the communiqué is "multi-year" which means that Brazil has agreed to IMF monitoring of its fiscal program for an extended period of time, not just one year as some market pessimists have been assuming. A set of targets for the so-called "primary surplus" -- the fiscal balance excluding interest costs -- was laid out for three years (1999, 2000, and 2001). This is very important news and means that substantial IMF aid can be "front-loaded," i.e., made available at the start of the program. The primary balance sought will be 2.6% in 1999, 2.8% in 2000, and 3.0% in 2001. This is roughly in line with our expectations and should be feasible for the Cardoso government. Regular readers of our research over the past month know that we have expected a fiscal effort totaling 2% of GDP from Brazil. The measures being proposed, if undertaken, seem likely to permit the overall fiscal balance to fall below 5% of GDP by end-2001, in rough terms. No official word on the details of the fiscal program have been released as yet. Press reports from Brazil, separate from today's Washington announcement, say the government is pushing for an overall fiscal effort of 3% of GDP (or R$28 billion) for 1999 which would include R$8 billion in spending cuts and R$7.5 billion in new tax collections. This is just about equivalent to the 2% fiscal effort that we thought that we were likely to see. The "usual suspects" of possible measures include: higher social security taxes for civil servants, higher taxes on gasoline and financial services, most of which require legislation. The amount of financial support forthcoming from the international lenders is expected to be US$30 billion, although today's announcement made no mention of amount or source of funding. The make-up of the funding is crucial, in our view. The overall support package will be more politically acceptable in Brazil the greater the degree to which it is seen as "multilateral", i.e., supported by a wide range of lenders. This would likely include, we think, the World Bank, the Interamerican Development Bank, Brazil's U.S. and European allies as well as the IMF.