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

To: Steve Fancy who wrote (9236)	10/28/1998 12:43:00 PM
From: Steve Fancy	Respond to of 22640

Brazil austerity plan fails to lift Latam debt Reuters, Wednesday, October 28, 1998 at 11:52 By Hugh Bronstein NEW YORK, Oct 28 (Reuters) - Brazil's deficit reduction plan outlined Wednesday morning failed to lift emerging market debt from its recent slump and U.S. analysts said prices may stay down until the the struggling nation starts implementing the reforms. "This market is going to be highly skeptical of any program that does not deliver on Day One but assumes things will be delivered somewhere down the line," said Paul Masco, chief emerging markets debt trader at Salomon Smith Barney Inc. The government plans to shrink its budget deficit by 28 billion reais by cutting spending and boosting taxes and pension contributions in 1999. "This is typical of every Brazilian package that has ever been put together," Masco said. "You're always waiting for the real reform and the real spending cuts to occur and it doesn't always happen." About a year ago Brazil's government announced a similar but smaller austerity package. But analysts said that program was derailed by the temptation of the government to spend during an election year. "That's what got Brazil into the current crisis," said Denis Parisien, Latin American strategist at Dresdner Kleinwort Benson. But this time around Brazil has imported credibility by getting a commitment from the International Monetary Fund for a bailout of roughly $30 billion, he said. As a condition of that deal the IMF will monitor progress. Brazil is the largest economy in Latin America, a region hit hard by the risk aversion that followed Russia's debt default in August. The focus has now switched to politics as the government tries to execute the austerity plan. On Sunday Mario Covas, an ally of Brazil's President Fernando Henrique Cardoso, won reelection in the key state of Sao Paulo, bolstering the president's influence over the country's unpredictable Congress. But the victory of opposition candidates in Brazil's three other big states -- Rio de Janeiro, Minas Gerais and Rio Grande do Sul -- might complicate the president's attempts to recruit local governments in Brazil's fiscal drive. "Based on the way the governorships went, getting the current Congress to agree to these reforms is going to be difficult," Masco said. But if Cardoso does make progress in Congress early next month, emerging debt prices may bounce back, said Siobhan Manning, Latin American debt strategist at PaineWebber. "Cardoso has to come out strong, so he's first going to target some of the toughest measures, the amendments to Social Security," Manning said. "If he is able to get them approved next week or the week after, it will set a positive tone." Carl Ross, who heads Latin American sovereign research at Bear Stearns & Co., said he is concerned about one of the proposed measures that would increase the amount that financial institutions pay into Brazil's Social Security system. "It's probably fair, but it's problematic for banks that will have to cough up more money to the government for every employee they have," Ross said. "With the economy going into recession and interest rates high, Brazilian banks are already under a lot of pressure." The government expects gross domestic product to decline one percent next year while Ross said that drop could easily reach two or three percent. Copyright 1998, Reuters News Service

To: Steve Fancy who wrote (9236)	10/28/1998 12:44:00 PM
From: Steve Fancy	Respond to of 22640

Brazil shrs jump 3.69 pct on fiscal plan optimism Reuters, Wednesday, October 28, 1998 at 11:39 SAO PAULO, Oct 28 (Reuters) - Brazilian shares jumped 3.69 percent in afternoon trade on Wednesday on optimism over the fiscal plan outlined by the government, traders said, which is expected to pave the way for an international loan. "The package was quite strong and points the government in the right direction," a trader at Unibanco in Sao Paulo said. "The second part, the international support, could come soon." Sao Paulo's key Bovespa (INDEX:$BVSP.X) index surged to 7,122 points, also boosted by government intervention in the market, traders said. "The government wants Brazil to look good today," one trader said. Finance Minister Pedro Malan presented the details of the three-year plan Wednesday morning. The government hopes to save and raise 28 billion reais in the first year in a bid to rein in the bloated budget deficit. "The plan didn't disappoint, though it didn't surprise either," the Unibanco trader said. "But as a whole, it's solid." Petrobras preferred (SAO:PETR4) led gainers with a rise of over 11 percent, in part on relief that an import tax on oil and gas was not included in the fiscal measures, traders said. Copyright 1998, Reuters News Service

To: Steve Fancy who wrote (9236)	10/28/1998 12:46:00 PM
From: Steve Fancy	Respond to of 22640

ADR REPORT - Telebras (NYSE:TBR) stronger after plan Reuters, Wednesday, October 28, 1998 at 12:02 By Ian Simpson NEW YORK, Oct. 28 (Reuters) - Brazil's Telebras SA (NYSE:TELB4) strengthened Wednesday after the Latin American country unveiled a $23.5 billion austerity package aimed at shoring up its economy. Traders said volumes overall were light and investors had decided Brazil's package, released Wednesday, held little that markets had not already known. The package contains tax hikes, spending cuts and other measures. It is aimed at pulling the world's No. 8 economy back from the brink of collapse and protect it from financial turmoil that has ravaged emerging economies worldwide. The program also will set the stage for a possible $30 billion financial package from the International Monetary Fund and other lenders. "The Brazil package turned out to be a non-event," a trader said. Jason Myers, with Latin American sales at Paribas, said approval by Congress was a key concern about the package. "You have to be a little bit cautious," he said. Telebras, a bellwether Latin American ADR, was up 1-15/16 to 76-7/16 and was among volume leaders on the New York Stock Exchange. Telebras was up along with the overall Brazilian market, with Sao Paulo's Bovespa index (INDEX:$BVSP.X) rising 3.48 percent. Brazil's Unibanco Group (SAO:UBB) (NYSE:UBB) was off 3/16 to 16-1/4. Venezuela's CANTV (VEN:TDV.D) (NYSE:VNT) was off 14/16 to 14-15/16 and was among volume leaders on the New York Stock Exchange. CANTV said late Tuesday it expected its third-quarter and full-year results to be about 30 percent below previous management guidelines. Canada's Northern Telecommunications Ltd. (TSE:NTL) (NYSE:NT) rose 9/16 to 39-1/16 after beating analysts' estimates of its third-quarter earnings Tuesday. The shares were among volume leaders on the New York Stock Exchange. The Bank of New York index of 439 leading ADRs <.BKADR> was off 0.94 percent and the Nasdaq ADR index <.IXA> eased 1.56 percent. ADRs allow U.S. trade of foreign shares. Copyright 1998, Reuters News Service

To: Steve Fancy who wrote (9236)	10/28/1998 12:47:00 PM
From: Steve Fancy	Respond to of 22640

Brazil to resume IMF talks in few days - official Reuters, Wednesday, October 28, 1998 at 12:15 SAO PAULO, Oct 28 (Reuters) - Brazil should resume in the next few days talks with the International Monetary Fund aimed at securing an international line of credit, a Finance Ministry official said on Wednesday. "We are expecting in the next few days, very soon, to resume talks with the Fund...to reach an understanding between Brazil and the international financial community," said Pedro Parente, executive secretary of the Finance Ministry. The IMF and Brazil agreed to fiscal targets earlier this month that could pave the way for credit estimated at up to $30 billion by the market. The money could help Brazil defend its currency from a devaluation after the Russia crisis sparked a wave of capital flight. "Now that the country has defined its strategy for dealing with the crisis, its fiscal stability program, it has the conditions to deepen discussions with the international financial community," Parente said. Finance Minister Pedro Malan presented the details of a three-year fiscal plan Wednesday morning. Copyright 1998, Reuters News Service

To: Steve Fancy who wrote (9236)	10/28/1998 12:48:00 PM
From: Steve Fancy	Read Replies (16) \| Respond to of 22640

BRAZIL FISCAL PLAN - The key points Reuters, Wednesday, October 28, 1998 at 12:26 RIO DE JANEIRO, Oct 28 (Reuters) - The following are key points of Brazil's three-year fiscal austerity plan, which was unveiled Wednesday and is expected to save and raise a total of some 100 billion reais ($84 billion) by 2001. BUDGET CUTS * In 1999, federal government plans 8.67 billion reais in spending cuts. * In 2000, 8.84 billion reais in federal cuts. * In 2001, 9.02 billion reais in federal cuts. TAX INCREASES * Financial transactions tax (CPMF) raised from 0.2 percent to 0.38 percent in 1999 and to 0.3 percent in 2000 and 2001. * Pension contribution paid by companies (Cofins) raised to 3 percent of revenue from 2 percent; banks and financial institutions now required to pay Cofins as well. * Tax increases expected to raise 13.3 billion reais in 1999, 11.4 billion in 2000 and 11.96 billion in 2001. IMMEDIATE SOCIAL SECURITY DEFICIT REDUCTION * Retired civil servants required to pay minimum 11 percent pension contribution currently levied on working civil servants. * Civil servants earning over 1,200 reais per month will be charged an additional 9 percent of their salary for five years. * Measures expected to reduce social security deficit by 2.55 billion reais in 1999, 4.3 billion reais in 2000 and 4.43 billion reais in 2001. STRUCTURAL REFORMS * Profound reforms of pension and tax system needing Congressional approval and expected to save 3.53 billion reais in 1999, 9.21 billion in 2000 and 12.58 billion in 2001. FORECASTS * Brazil with this fiscal austerity plan expects to save and raise 28 billion reais in 1999, 33.7 billion in 2000 and 38 billion in 2001. * The public sector should show primary surpluses of 2.6 percent of GDP in 1999, 2.8 percent in 2000 and 3 percent in 2001. These figures exclude debt servicing. * The plan forecasts the economy should grow 0.5 percent in 1998. It also expects Brazil's economy will shrink 1.0 percent in 1999, and then start to grow again with a 3.0 percent expansion in 2000 and a 4.0 percent increase in 2001. * The government expects the social security deficit for civil servants to reach 34 billion reais in 1998. * The government expects the key overnight interest rate, known as the SELIC, to fall from the current 42.4 percent to around 22 percent by mid-1999, to 17 percent by mid-2000 and to below 15 percent by mid-2001. $ = 1.19 real x 2120, tracey.ober@reuters.com)) Copyright 1998, Reuters News Service