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To: Joanna Tsang who wrote (3458)	10/29/1998 8:58:00 AM
From: chirodoc	Respond to of 6021

joanna-you mentioned brazil-read this if interested Marc Chandler: Special Brazil's Reform Package Does Bare Minimum By Marc Chandler Special to TheStreet.com 10/28/98 5:03 PM ET The pieces are falling into place. Brazil's political situation has been clarified. This has allowed President Cardoso to unveil his fiscal-reform program. This, in turn, will set the stage for an IMF-led, albeit multilateral, assistance program. Even so, the political climate in Brazil has taken a turn to the left. Cardoso's ally, Mario Covas, won the governor race in Sao Paulo, but his allies lost in a couple of other key governor races, including those in Rio de Janeiro and Rio Grande de Sol. Overall, the left opposition increased their governor seats from three to six. The long-rumored fiscal-reform package has been announced. It delivers the bare minimum needed to satisfy the still-anxious market and appears to be influenced by the shift in Brazil's political climate. Cardoso and his team have unveiled a three-year framework that aims at bringing its assets and liabilities into closer balance. The government now intends to reduce its deficit by 28 billion Brazilian reals next year. This will produce a primary budget surplus (that is the budget balance minus interest-rate payments) of 2.6% of GDP. A combination of spending cuts and new revenue measures (taxes) will be enacted. The key is pension reform and civil-service reform. The taxes the government is proposing are not likely to be embraced by industry. The taxes include a capital-gains tax on real-estate transaction, a wealth tax and new corporate and green taxes. Cardoso's success depends to a large extent on the cooperation of the state and local governments. And the electoral results give reason to be optimistic. However, a deep recession next year would strain the fragile cooperative spirit. Contrary to market rumors, Brazilian officials did not indicate a change in the currency regime. Even though the Brazilian real devalues a little more than 7% a year, it has become overvalued. That is to say that 7% annual depreciation tends not to be sufficient to offset the inflation differential between Brazil and the U.S. Some estimates suggest that the real is overvalued by as much as 20%. Cardoso and his central banker Franco were among the chief architects of the real plan, which sought to break the back of the intolerable inflation spiral. The plan worked insofar as the back of inflation is under control and manufacturers and other producers have increased their competitiveness. However, the defense of the strong real has been costly. Interest rates were hiked, which aggravates Brazil's budget deficit and, in turn, weighs on the real. The high interest rates are already slowing down the economy. The defense of the real also cost Brazil almost $35 billion in reserves since the end of July. However, changing the currency regime now in the midst of a crisis of sorts is a dangerous game, as East Asia and Russia could attest. Cardoso and Franco are loath to alter the currency regime. They have made that abundantly clear. However, after the crisis dies down, many continue to expect that, if not a change in the regime, at least a somewhat faster pace of depreciation is likely to be tolerated. Brazilian officials promise to preserve the purchasing power of the real. This would seem to allow for a faster depreciation, closer to the inflation differential. Those arguing for a maxi-devaluation do not seem to appreciate that such a strategy would jeopardize Brazil's ability to import capital to finance its current account deficit. Next year's external financing requirement is estimated at about US$8.5 billion a month. Also, drawing on recent experience, the odds of a successful controlled devaluation are not very encouraging. The market has sometimes demanded even a larger devaluation and/or a greater risk premium in the form of higher interest rates. The current account deficit is reduced, but primarily because domestic activity slows and imports fall. Many of the details of Brazil's package have been leaked in recent days. Consequently, the market was not surprised and hence the mild reaction. The next step is for the international assistance package. Here too it is important that officials do not disappoint the market. An economic equivalent of the Powell military doctrine of using overwhelming strength requires additional bilateral commitments, including but not limited to the U.S. Officials seem eager to make it work in Brazil. The international effort is beginning to look like an evolution of the scheme used for Mexico in 1994 and 1995, with some efforts to get the private sector more involved.

To: Joanna Tsang who wrote (3458)	10/29/1998 9:17:00 PM
From: Brendon Woirhaye	Respond to of 6021

>> I wouldn't worry too much about integration either. First of all, there's McAfee Office. Yes, it looks cheesy and it's not that professional looking a product, but it's a product, people already PAID for it (most important)...and...they got on the market first, a very critical strategic move to being a dominant player. It depends on what the reviewers will look for. Integration of utilities or numbers of utilities. The Norton product (which hit the market a month before MO, BTW - MO wasn't first) has only 4 utilities but went for the integration route. > Now speaking as a QA Engr., I agree with you that integration probably has no been tested thoroughly. Sooner or later, NETA will have to account for their product's quality. But that's their marketing's job...and my experience being othere is that half the stuff that's shipped out there SHOULDN'T be out in the market. I hear you there. The marketing department can't advertise its way out of shoddy quality though. The poor quality is what sunk CYBR, NETA is going to have to fix it fast if they are going to win in the Utilities space. ps: I was in at 29, out at 39.