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

To: Steve Fancy who wrote (9190)	10/27/1998 2:55:00 PM
From: Steve Fancy	Respond to of 22640

Latin American Structured Finance Ratings Stable - Moody's Dow Jones Newswires NEW YORK -- Despite recent sovereign rating actions in Venezuela, Brazil, Argentina, Colombia, and Mexico, ratings for structured finance and energy-related project financings in those countries are "quite stable", Moody's Investors Service said Tuesday. The ratings on the securities highlight the benefits to investors of structural protections that establish legal, political, or economic distance from the sovereign, Moody's said in a press release. Of 28 structured and energy-related project finance securities in these countries, Moody's confirmed ratings of 14, placed four on review for possible downgrade, and downgraded 10 by only one rating category. In general, the securities fared better than their domiciles; since July of this year, Moody's downgraded Venezuela twice (Ba2 to B1 and then to B2); lowered the foreign currency rating of Brazil (B1 to B2); and placed Argentina (Ba3), Colombia (Baa3), and Mexico (Ba2) on review for possible downgrade. Each of the 24 classes or series of securities whose rating exceeds the applicable sovereign ceiling - including the 10 that were downgraded after the sovereign rating actions - benefits from "features that reduce the likelihood of the sovereign's interfering with their payment, even in the face of a crisis that prevents the government from paying its own foreign currency obligations," wrote Moody's senior analyst Diana Weaver. The benefits of these features aren't confined to achieving an initial rating that exceeds the sovereign ceiling, Weaver said. "A properly structured transaction may also give investors long-term protection against sovereign risk and volatile credit and rating conditions." In some cases, the sovereign's ability to interfere with payments is eliminated or greatly reduced due to the nature of the assets or receivables that secures the payment. These include receivables that are generated electronically outside the sovereign's jurisdiction, such as international credit card voucher payments and international telephone settlement payments, or that are generated by export sales of products that have few other markets to which they could be diverted. In other cases, the sovereign is not willing to interfere with the transaction for political or economic reasons, such as where an important treaty - say, NAFTA - applies or where diversion of the product would be costly or difficult, Moody's said. Investors may also be protected from the effects of sovereign interference, Weaver said, by various forms of credit enhancement and structural protections such as reserve or liquidity funds or rapid amortization triggers. Transactions with lesser degrees of independence from sovereign rating actions were more susceptible to rating changes. For example, Moody's placed three Mexican transactions and one Colombian transaction - Conproca SA, Fideicomiso Huites, Imexsa Export Trust No. 96-1, and Oil Purchase Company - on review for possible downgrade because they are constrained by the sovereign ceiling and so will be affected by any downward movement of Mexico's foreign currency debt rating. The original ratings on these securities do not exceed the sovereign ceiling. The ratings of three Venezuelan projects - Cerro Negro (Baa2), Petrozuata (Baa2), and PDVSA Finance (A3) - were downgraded by one rating category after the second recent downgrade of the foreign currency debt rating of the Republic of Venezuela. "The likelihood of a default on these notes remains low," said Moody's Weaver, "But their structures do not eliminate entirely the possibility of sovereign interference." She added that the increased risk of a sovereign default, from Ba2 to B2, raises the odds and the severity of a payment default on the securities. -0-

To: Steve Fancy who wrote (9190)	10/27/1998 2:57:00 PM
From: Steve Fancy	Respond to of 22640

Lucent Brazil Contract With Telefonica Seen As Big Win By MARGARITA PALATNIK Dow Jones Newswires NEW YORK -- In its first major deal in Brazil, Lucent Technologies' (LU) has won a contract to supply Spain's Telefonica SA (TEF) units in Brazil with wireless technology. The deal is seen as a big win for the U.S. supplier as it links Lucent to a dominant player in Latin American telecommunications. The deal also strengthens the entrance of a U.S. backed technology into the developing Latin American telecom sector. Lucent said Tuesday that it will build a wireless network in metropolitan Rio de Janeiro for up to one million users. Although the companies didn't release the terms of the contract, market observers place its value between $200 million and $500 million. "Rio is the largest cellular market in Brazil," said Lucent spokesman Virgilio Freire. "Telefonica handles three more companies in Brazil, and it is the largest phone operator in Latin America," Freire added. In the race to supply new Brazilian telephone companies after this year's privatization of the former state-run monopoly and the recently awarded rival cellular licenses, Lucent is going against entrenched companies such as Sweden's Ericsson (ERICY), Canada's Nortel (NT) and Japan's NEC Corp. (J.NEC). It has bet big, setting up a manufacturing facility in Campinas, in the state of Sao Paulo, with a staff of 600. Analysts think Lucent is coming in with a splash. "Strategically, (the contract) is pretty good, because Lucent hasn't been a big supplier for Telefonica," said Chris Cona, vicepresident for telecom project finance at SG (F.SGE). And there may be more contracts coming soon. A spokesman at Telefonica said that other deals may be announced for other cellular firms controlled by the Spanish firm, which include companies in the states of Bahia and Sergipe. "Telefonica has a new partner in Lucent," said Telefonica spokesman Ivan Macetti in Sao Paulo. "And it's highly likely that we'll close other deals."

To: Steve Fancy who wrote (9190)	10/27/1998 2:58:00 PM
From: Steve Fancy	Read Replies (2) \| Respond to of 22640

Brazil's Fiscal Plan Expected To Slow Growth In 1999 By ADRIANA ARAI Dow Jones Newswires SAO PAULO -- Brazil's fiscal adjustment measures aren't out yet, but economists already picture a gloomy scenario for the country next year. Analysts anticipate a contraction in gross domestic product that varies from 1% to 2%, in light of belt-tightening measures built into the multi-year fiscal plan President Fernando Henrique Cardoso will outline Tuesday at 2200 GMT. "A slowdown is growth is the cost of the fiscal adjustment plan, but it's much less painful than what happened in Asia," said BankBoston chief economist Jose Antonio Pena, citing a staggering GDP contraction of about 18% in Indonesia expected by economists for this year. "The fiscal adjustment measures are needed to make the country less vulnerable to the crisis", he added. Pena projects that GDP will fall between 1.5% and 2% next year. Last year, Brazil's GDP growth rate was 3.7%, but the rate dipped 0.1% in first quarter 1998 reflecting a hike in interest rates last October in the wake of Asia's financial crisis. GDP rose 1.4% in the second quarter, but a deepening world financial turmoil has halted the recovery. Pena said that GDP will shrink unless there's a combination of an improved international scenario and a rapid implementation of the fiscal measures. "But that's highly unlikely," Pena believes. The retrenchment program is designed to generate a budget primary surplus (without debt servicing) as great as 2.6% of GDP in 1999 or BRR24 billion (BRR)($1=BRR1.19), by cutting public spending and raising taxes. The measures are seen as the last step before Brazil formally requests a multi-lateral financial aid package led by the International Monetary Fund, valued at up to $30 billion. Analysts agree that Brazil's economic activity will be hardest hit in the first quarter of 1999. The four variables affecting growth - consumer spending, investment, government spending and foreign trade - will all suffer from the government's fiscal plan and high domestic interest rates, analysts said. In an effort to stem capital outflows following Russia's default on its domestic debt and devaluation of its currency, the Brazilian Central Bank more than doubled a key interest rate to 49.75% in September. "GDP is likely to tumble 3% in the first quarter, then slowly resume growth again in tandem with a rise in investor confidence in the country," Lloyds Bank chief economist Odair Abate said. "Unless investor sentiment improves, interest rates will remain high and dollars should continue leaving the country." He predicts that GDP will slump 1% in 1999, noting, however, that his projections are based on information on the plan leaked to the press in recent days. "Everything may change depending on what is going to be officially announced and how markets will react to it," he said. Regardless of the government's fiscal plans, the first-quarter recession will be aggravated by high inventory levels from already slowing economic activity, experts say. "The typical early-year lull in industrial output will be much stronger in 1999," noted economist Aricio Xavier de Oliveira of local consultancy MCM Consultores. "And the industrial sector sets the pace for the whole economy." As a result of the economic sluggishness, many companies have postponed investments planned for 1999, even in booming infrastructure sectors, like telecommunications, that have benefited from privatization. "Finance comes from abroad and foreign companies and banks will wait until the crisis is almost fully gone to resume investments in Brazil", said Alceu Landi, KPMG president in Brazil. "And, this time, foreign investors won't be satisfied with promises. They'll wait to make sure government spending is under control." Brazil's public sector borrowing requirements ended September at 7% of GDP. The Central Bank hasn't released annualized figures since July, but analysts say the deficit in the 12 months ended in September neared the 8% mark. -By Adriana Arai; 5511-813-1988; aarai@ap.org