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

To: Steve Fancy who wrote (9265)	10/29/1998 1:51:00 PM
From: (No name provided)	Read Replies (1) \| Respond to of 22640

To All: The market in Barzil is down 4 plus percent and Telebras is up 1.5% or more---WHO HAS THAT KIND OF POWER? And what does this mean to us? U.S. Bucks

To: Steve Fancy who wrote (9265)	10/29/1998 2:33:00 PM
From: Steve Fancy	Read Replies (1) \| Respond to of 22640

Will the real Jeremy Smith please stand up... Brazil's Congress to decide on fate of fiscal plan Reuters, Thursday, October 29, 1998 at 03:28 By Jeremy Smith RIO DE JANEIRO, Oct 29 (Reuters) - Brazil's government will submit a $84 billion austerity plan for the next three years on Thursday to the country's notoriously unpredictable Congress, where its success or failure will ultimately be decided. The package of proposals, presented by Finance Minister Pedro Malan to the nation on Wednesday, aims to pull Brazil back from the edge of an economic abyss and calm worldwide fears that Brazil could be forced to devalue its currency, the real. But the government's main challenge now, analysts say, will be to win approval from lawmakers. The program of budget cuts, tax hikes and other measures seeks to save $23.5 billion in 1999 and even more in 2000 and 2001, paving the way for an expected $30 billion in credits from the International Monetary Fund (IMF) and other lenders. U.S. Treasury Secretary Robert Rubin welcomed Brazil's new fiscal reform program but was quick to warn that it had to be implemented "promptly and convincingly". Battered markets worldwide had waited weeks for the plan, hoping that Brazil would come to grips with its gaping budget deficit and avoid the fate of Russia and Asian nations which have been hit by disastrous currency devaluations. They fear that a full-blown crisis in Brazil, especially a devaluation, might trigger a recession in all of Latin America and hamper economic growth worldwide. Brazil's budget deficit amounts to some eight percent of its gross domestic product (GDP). Brazil, the world's eighth largest economy, has been poised on a knife-edge since Russia devalued in August. The economic contagion sparked huge dollar outflows in Brazil and forced the government to hike interest rates to a crippling 40 percent. During the presentation, Malan repeated that Brazil would not alter its foreign exchange rate policy, in an attempt to quash speculation that the plan called for a devaluation. Analysts said although the plan contained few real surprises, it still promised enough to fend off financial crisis and devaluation -- but only if the government could persuade potentially hostile lawmakers to implement it. "This is certainly enough if they were to do everything, it would be enough to stabilize the fiscal situation and bring the nominal deficit down to a sustainable level," said Peter West, chief economist at BBV Securities in London. "But it all hangs on congressional approval. They must get these measures signed and sealed by 1999." The country's unruly Congress has already proved a thorn in the side for Cardoso, re-elected earlier this month. Despite his success in taming Brazil's once chaotic economy, the president has failed to win complete approval for essential structural reforms over the last four years. And there are already signs that the government will have a fight on its hands to approve the new measures. Several senior politicians say they oppose cuts to social spending and others grimace at the size of the proposed tax increases. For example, Congress' president said he could not guarantee the approval of a higher financial transaction tax, which was nearly doubled to 0.38 percent to raise more than $6 billion next year. "(The government) wants 0.38 percent, but whether Congress will approve that or not, I can't guarantee," Sen. Antonio Carlos Magalhaes said. Opposition gains in Sunday's state gubernatorial elections have also raised doubts about how much can be saved by cutting jobs at the state level, a key part of the government's plan. While Congress may make the sacrifices, analysts are less confident that the state governments will fall into line. Last Sunday saw state gubernatorial elections where three of the most indebted states -- Rio de Janeiro, Minas Gerais and Rio Grande do Sul -- were won by opposition candidates. Governors elected on party platforms opposed to the government are to meet in Brasilia Thursday to discuss a joint reaction to the fiscal plan. Voting on the proposed measures is expected to begin later in November. Even if the new plan works, Brazil faces a grim 1999. A forecast included in the document sees the economy shrinking by one percent next year, the first time the government has admitted the possibility of a recession. Although the success of the plan will hinge heavily on the collaboration of Congress, analysts said the chilling prospect of a return to the days of soaring inflation and economic chaos suggested it would ultimately deliver, the economists said. "The people in Congress know it is imperative to get reforms though," said Jane Heap, Latin American strategist at Deutsche Bank in New York. Copyright 1998, Reuters News Service

To: Steve Fancy who wrote (9265)	10/29/1998 2:37:00 PM
From: Steve Fancy	Respond to of 22640

MOF says hasn't heard of G7 meet on Russia, Brazil Reuters, Thursday, October 29, 1998 at 05:41 TOKYO, Oct 29 (Reuters) - Japan's Vice Finance Minister Koji Tanami told a news conference on Thursday he had not heard of plans for a G7 meeting or a summit to discuss Russia or Brazil. He added that finance deputies were in contact with each other over Brazil's problems. Tanami also rejected calls from some business circles that the government undertake large-scale public works projects, saying that while the Finance Ministry was aware fiscal stimulus was necessary at the moment, in the long term fiscal reform was also important. He said public works projects that had an immediate effect on the economy and did not create too much of a financial burden later were preferable. On Friday, Japanese government ministries submit their requests for allocations from four trillion yen earmarked for public works spending in the government's third supplementary budget for this fiscal year, which ends in March. tokyo.newsroom@reuters.com)) Copyright 1998, Reuters News Service

To: Steve Fancy who wrote (9265)	10/29/1998 2:37:00 PM
From: Steve Fancy	Respond to of 22640

Brazil lawmakers try to soften fiscal plan -papers Reuters, Thursday, October 29, 1998 at 06:15 SAO PAULO, Oct 29 (Reuters) - Less than 24 hours after the Brazilian government announced a sweeping $84 billion austerity plan for the next three years, legislators were talking about how to soften it, local newspapers reported on Thursday. Finance Minister Pedro Malan unveiled on Wednesday the package of spending cuts and controversial tax hikes which the government hopes will shield Brazil from an economic crisis that could force a currency devaluation. But even government allies warned that the package of proposals would be subject to negotiations. "The adjustment isn't sealed," Aecio Neves, the congressional leader from President Fernando Henrique Cardoso's PSDB party, told Folha de S. Paulo newspaper. "What is sealed is the savings of 28 billion reais," he said referring to the 1999 goal of saving and raising a total 28 billion reais. Foreign leaders and the International Monetary Fund hailed the package, which the government hopes will pave the way for an expected $30 billion international line of credit, but urged lawmakers to act quickly. Edgy world markets are waiting to see if Latin America's biggest economy will manage to get its gaping fiscal deficit under control, or if it will succumb to the global financial turmoil, which could have a disasterous impact on the entire region. But at home, legislators and newly elected governors, who will see their state budgets shrink as a result of the plan, were less supportive. Governor-elect of Rio Grande do Sul state, Olivia Dutra of the left-wing Workers Party, accused the federal government of "interfering in the financial administration of states and municipalities," Folha de S. Paulo reported on Thursday. As part of the fiscal plan, the federal government would be permitted to retain control of a bigger chunk of tax revenue traditionally destined for local governments. Legislators said they could oppose a hike in the financial transactions tax, known as the CPMF, which the government wants to raise to 0.38 percent from 0.20 percent. "I personally have reservations about that proposal," the Senate president Antonio Carlos Magalhaes told local reporters. "The government thinks it isn't negotiable, but I say it is." Malan plans to meet with Senate commissions on Thursday morning to answer questions about the plan. No date has been set to begin voting though government allies in Congress said it could begin within two weeks. shasta.darlington@reuters.com)) Copyright 1998, Reuters News Service

To: Steve Fancy who wrote (9265)	10/29/1998 2:39:00 PM
From: Steve Fancy	Respond to of 22640

Brazil shrs tumble 3.21 pct on fiscal plan concern Reuters, Thursday, October 29, 1998 at 09:17 SAO PAULO, Oct 29 (Reuters) - Brazilian shares tumbled 3.21 percent in early trade Thursday on concern Congress could take its time approving the government's recently announced fiscal plan, traders said. "There are questions about how long it will take for the package to become reality," a trader at a local brokerage said. "And about how complete it will be." Sao Paulo's benchmark Bovespa (INDEX:$BVSP.X) index fell to 6,607 points, led by sharp declines in Cia Vale do Rio Doce preferred (SAO:VALE5) and Telebras preferred receipts (SAO:RCTB40). Finance Minister Pedro Malan answered senators questions Thursday about the $84 billion, three-year plan. Legislators have said they are opposed to some of the tax hikes and state spending limitations. The government has said it hopes voting on the measures to begin in the next couple of weeks. CVRD led declining shares with a 7.1 percent drop to 17 reais. The iron ore miner reported less than expected nine-month earnings. Telebras receipts also lost ground, slipping 3.53 percent, following a 5 percent drop in Telebras ADRs on Wednesday. Copyright 1998, Reuters News Service

To: Steve Fancy who wrote (9265)	10/29/1998 2:40:00 PM
From: Steve Fancy	Respond to of 22640

RESEARCH ALERT-Brazil cellular operators started Reuters, Thursday, October 29, 1998 at 09:49 SAO PAULO, Oct 29 (Reuters) - Morgan Stanley Dean Witter said Thursday it initiated coverage of eight new Brazilian cellular telephone companies which resulted from the July split and privatization of Telebras. Telesp Celular (SAO:TSPP4) is the top pick of analysts Luiz Carvalho, Vera Rossi and Josh Milberg, who assigned the Sao Paulo operator an "outperform" rating. "The stock is the region's most attractive because it is liquid, it offers a high expected growth rate, has solid financials, and is controlled by an experienced management team led by Portugal Telecom, a successful wireless operator in Europe," the analysts said in a statement. Morgan Stanley also assigned outperform ratings to Tele Sudeste Celular (SAO:TSEP4), which operates in Rio de Janeiro and Espirito Santo, and Tele Sul Celular (SAO:TCSL4), in Parana and Santa Catarina states. The analysts highlighted Sudeste Celular's experienced controlling shareholder, Telefonica Internacional SA (MADRID:TEF), and its attractive concession area. Sul Celular has the best concession among the six smaller cap cellular companies and will benefit from the good management team controlled by Telecom Italia (MILAN:TIT), the analysts said. Morgan Stanley gave neutral ratings to the other five companies, Telemig Celular (SAO:TMCP4), Tele Leste (SAO:TLCP4), Tele Centro Oeste (SAO:TCOC4), Tele Nordeste (SAO:TNEP4) and Tele Norte (SAO:TNCP4). The eight cellular companies have been trading in Brazil for about five weeks, while the NYSE ADR listing should take place in another two to three weeks, Morgan Stanley said. Copyright 1998, Reuters News Service

To: Steve Fancy who wrote (9265)	10/29/1998 2:41:00 PM
From: Steve Fancy	Respond to of 22640

Brazil delays sale of "mirror" telephone licenses Reuters, Thursday, October 29, 1998 at 12:57 SAO PAULO, Oct 29 (Reuters) - Brazil pushed back the sale of "mirror" telephone licenses a month and a half until Jan. 15, a spokesman for the Anatel telephone regulation agency said Thursday. "The delay was due to the global crisis, to give time for the situation to mature," the spokesman said. Brazil had initially planned to sell the four telephone concessions which will compete with former units of Telebras in fixed-line and long distance service on Dec. 2. The government delayed the sale at the bequest of potential buyers, who would be faced with steep investment requirements of two billion reais in the first year of operations. "The request was made by the international community, by the interested groups who wanted more time," he said. The government also moved back the deadline for handing in proposals to Dec. 11 from Nov. 3. In July, the 12 holding companies carved out of Telebras were sold for about $19 billion to investors. The buyers of the "mirror" licenses plan to develop parallel networks to compete with the three fixed-line companies and Embratel (SAO:EBTP4), the long distance operator. Unlike the sale of Telebras' units, which went to the highest bidders, groups seeking to buy the concessions will be judged mainly on their proposals for installing new lines. Although the mirror companies will have to start from scratch, they will not be subject to the strict expansion targets the new buyers of Telebras have to observe. In the past, the government said it expects to bring in around $5 billion with the concession sales. shasta.darlington@reuters.com)) Copyright 1998, Reuters News Service

To: Steve Fancy who wrote (9265)	10/29/1998 2:42:00 PM
From: Steve Fancy	Respond to of 22640

Brazil sells hybrid bonds at 42.87 percent yield Reuters, Thursday, October 29, 1998 at 13:17 SAO PAULO, Oct 29 (Reuters) - Brazil's Central Bank sold 4.5 billion reais of 147-day Central Bank Bonds on Thursday amid rising yields on domestic debt. The Central Bank said it sold the 147-day debt, known as BBC-As, with a maximum annual pre-fixed yield of 42.87 percent, valid for the next 14 working days. On Oct. 22, the pre-fixed yield on BBC-As was 41.70 percent. After that period, the securities will yield a post-fixed or floating interest rate pegged to the overnight Selic interest rate announced daily by the Central Bank. The hybrid bonds were announced in September and were designed to prepare markets to start operating with pre-fixed bonds again. The government began selling post-fixed letters in June in response to heightened market unease amid financial turmoil in Russia and Asia, and now more than half of the stock of domestic debt is post-fixed. On Friday, some 4.3 billion reais in the LBC pre-fixed bonds are coming due. Copyright 1998, Reuters News Service

To: Steve Fancy who wrote (9265)	10/29/1998 2:44:00 PM
From: Steve Fancy	Respond to of 22640

Brazil may have worst behind it, Fed's Kelley says Reuters, Thursday, October 29, 1998 at 13:53 HOUSTON, Oct 29 (Reuters) - Federal Reserve Governor Edward Kelley said on Thursday Brazil was still facing a difficult path getting over its economic crisis but speculated the worst may be over for the Latin American country. "I think that Brazil has every chance of getting through this perilous period that they're in...I am confident that that country is not going to implode," he told reporters after giving a speech on the Year 2000 computer problem. Asked if the threat of a devaluation of Brazil's currency had receded, he replied: "I have no notion that it's all over with and in the past, but I would hope that perhaps the most worrisome part may be getting behind us now." Brazil on Wednesday unveiled a three-year $84 billion austerity plan aimed at getting its ailing economy back on track and laying the foundations for a widely expected multi-billion dollar international assistance package. 898-8383, washington.economic.newsroom@reuters.com)) Copyright 1998, Reuters News Service

To: Steve Fancy who wrote (9265)	10/29/1998 2:46:00 PM
From: Steve Fancy	Respond to of 22640

Portugal Telecom To Release 9-Mos Earnings In Mid-November Dow Jones Newswires LISBON -- Telecommunications company Portugal Telecom SA (PT) said Thursday it has delayed the release of its nine-month earnings until mid-November while it examines the consolidation effects of recent acquisitions in Brazil. "There is no specific date set yet for the release, but most probably it will happen in the second week of November," a PT spokeswoman said. PT had previously indicated it would release its nine-month statement Oct. 30. The company is also expected to unveil its strategic plan for its Brazilian investments by midmonth, analysts said. In July, PT bought controlling stakes in Telesp Fixa and Telesp Celular, a fixed-line operator and a cellular provider in Brazil's Sao Paulo state, in the government's privatization of Telebras SA (TBR) in July. PT's investments were valued at more than 500 billion escudos (PTE) ($1=PTE168.92), and were financed in part through the purchase of Brazilian government bonds denominated in U.S. dollars. Analysts said they expect PT to show a small contribution to total revenue from the Brazilian companies, though probably no profit yet. Consensus estimates from Lisbon brokers sees PT posting a nine-month profit of PTE61 billion to PTE65 billion, on revenue of PTE440 billion to PTE465 billion. Several analysts said, however, that they would probably revise those forecasts over the coming week, taking a more careful look at the effect of the Brazilian companies on PT's balance sheet. The company did not disclose nine-month earnings in 1997. -By Erik T. Burns; 351-1-319-1863; eburns@ap.org

To: Steve Fancy who wrote (9265)	10/29/1998 2:47:00 PM
From: Steve Fancy	Respond to of 22640

IMF, Brazil Seen Finalizing Letter Of Intent Next Wk-Report Dow Jones Newswires SAO PAULO -- The International Monetary Fund expects to conclude negotiations with Brazilian officials next week on a letter of intent to provide funds for the country, the Estado news agency reported a high-placed source at the IMF as saying Thursday. The report said that the IMF won't wait for Brazil's Congress to fully approve the fiscal stability program unveiled Wednesday before agreeing to the terms of an aid package. The IMF's board of directors is expected to finalize the credit line - expected to total around $30 billion - two weeks after the letter of intent is released. IMF officials weren't immediately available for comment. As reported, the Brazilian government has proposed a broad multi-year austerity plan aimed at saving 28 billion reals (BRR) ($1=BRR1.19) in 1999 alone. The plan, which includes a number of controversial tax increases that require Congressional approval, is considered a necessary pre-requisite for an international credit line. The Estado report also said that Brazil will send a delegation to Washington next weekend to continue negotiations with the IMF. Two weeks ago, a team led by Finance Ministry executive secretary Pedro Parente spent four days in Washington meeting with IMF officials. Last Friday, IMF Deputy Managing Director Stanley Fischer was in Rio de Janeiro to meet with Finance Minister Pedro Malan and Central Bank president Gustavo Franco. A Finance Ministry spokeswoman said Thursday that she couldn't confirm if meetings are scheduled for the weekend, or who would be going.

To: Steve Fancy who wrote (9265)	10/29/1998 2:51:00 PM
From: Steve Fancy	Respond to of 22640

IMF backs Brazil's fiscal package - The International Monetary Fund (IMF) had a positive reaction to the fiscal measures the government announced yesterday, but conditioned the accord currently being negotiated with Brazil to the market's response. "We are in the middle of a real credibility battle", Finance Ministry executive secretary, Pedro Parente, said. According to Parente, the accord still has to be negotiated with the G-7, IDB, World Bank and private international banks with interests in Brazil. Parente predicts that, despite all difficulties, the pact with the IMF will be concluded within a month. The international financial community and the capital market received the announcement of the fiscal package with a mixture of caution and skepticism. Brazilian bonds were up again in the secondary market, but authorities and market traders have made clear that the evaluation of the Brazilian economy future depends on the legislators' willingness to support the program. (O Estado de S. Paulo/ Jornal da Tarde/ Folha de S.Paulo/ Gazeta Mercantil/ Jornal do Brasil/ O Globo/ Correio Braziliense) Fipe maintains deflation estimate for 1998 - Fipe Consumer Price Index (CPI) coordinator, Heron do Carmo, believes that the fiscal package announced yesterday by the government should have no impact on life cost indicators. Heron estimates that the CPMF (check tax) hike should increase the products cost, but since there is no demand, companies will have no room to pass higher prices on. Thus, Fipe has maintained the projected deflation, probably at 0.5%, for this year. In addition, Fipe-IPC should accumulate negative results up until mid-1999. (O Estado de S. Paulo) Public debt interest rates expenditures above R$70bn - The savings proposed by the government with the fiscal adjustment for 1999 will be sufficient to pay roughly one third the interest rates charged on the public debt. According to official projections, the public sector will save R$23.7bn of its revenues for the payment of interest rates. Considering that interest rates should stand at 20% a year and the public debt is currently at R$400bn, expenditures with the payment of interest rates should be above R$70bn. The public debt is seen to reach 41.9% of GDP this year, 44.9% in 1999, and slightly decline by the year 2000. (Folha de S.Paulo) Gov't considering to expand job insurance - The fiscal package includes a proposal to expand the job insurance conceded to people unemployed for a period above 12 months. The government's idea is to reduce the impact of the projected growing unemployment. As the economic activity is seen to slow down in 1999, the trend is that the unemployment rate reaches over 10%. Job insurance is currently paid during a period ranging from three to five months. (O Estado de S. Paulo) Covas says adjustment is four years late - São Paulo state re-elected governor, Mário Covas (PSDB), affirmed yesterday that the fiscal adjustment announced yesterday by the government is four years late. "The government is way too late. No fiscal adjustment was implemented in four years of administration. That problem should have been solved gradually", he said. "Had that operation been carried out before, maybe it would have been less painful". (O Estado de S. Paulo/ Folha de S.Paulo) (By Sergio Caldas)

To: Steve Fancy who wrote (9265)	10/29/1998 2:52:00 PM
From: Steve Fancy	Respond to of 22640

B. Stearns fears 'severe devaluation risks' São Paulo, 29 - Commenting on Brazil's fiscal adjustment program in its Latin America Watch report, the investment banking and securities and trading brokerage firm, Bear Stearns, said the institution expects President Fernando Henrique Cardoso to succeed, but recognizes "severe devaluation risks as the economy contracts under the weight of high interest rates (currently at nearly 50% yearly), tax increases, and a discretionary monetary policy". David Malpass and Jennifer Woolman, author's of the bank's report, wrote that Brazil faces a prolonged fight to preserve its currency, the real, and the economic program. "As the recession deepens, the markets will test Cardoso's resolve, watching to see when and how he confronts congress, the states, and the devaluations." The authors of the report went further explaining why the domestic financial markets are reacting negatively to yesterday's fiscal announcements. According to them, there are four main reasons for that to occur: "Concern that Brazil's Congress may not act promptly, Wednesday announcement that the IMF program could take as much as a month to finalize, difficulty in using tax increases to try to reduce a budget deficit during recession, and guarded reactions from the US and the IMF." The report informed that Brazil's Financing minister, Pedro Malan, said that Congress should begin voting the remaining Social Security reforms next week, but the bank sees that with skepticism. "Assuming that the process is successful, Congress would still need to take up the regulations regarding administrative reforms, the 1999 budget, and the extension of the FEF financial stabilization fund," the report concluded. (By Paulo R. Monteiro Dias)

To: Steve Fancy who wrote (9265)	10/29/1998 2:53:00 PM
From: Steve Fancy	Respond to of 22640

Forex posts a US$751m deficit on Wednesday São Paulo, 29 - Brazil's forex market posted a US$751m deficit on Wednesday, the highest of the month so far. During the session, financial inflow reached US$342m, below outflow which stood at US$1.017bn. In the trade account, exports reached US$108m, against imports of US$185m. The floating dollar was negative at US$261m, boosting the month's negative result to US$2.625bn from US$2.364bn. (By Adriana Carvalho)

To: Steve Fancy who wrote (9265)	10/29/1998 2:54:00 PM
From: Steve Fancy	Read Replies (1) \| Respond to of 22640

Congress to debate R$ 28bn fiscal adjustment next week São Paulo, 29 - The government announced yesterday a public accounts adjustment program that will demand a fiscal effort of R$28.010bn, which corresponds to 3.08% of GDP. The plan foresees that Brazil's economy will shrink by 1% and that interest rates will gradually decline. Finance minister, Pedro Malan, said that the reduction of international loans led the government to abandon its softer approach of the public deficit and adopt a stricter program. According to Malan, the government accepts to negotiate with Congress all items announced, except for the fiscal goal. Of the R$28.010bn, R$13.3bn correspond to extra revenues to be raised with higher taxes. Expenditures will be reduced by R$8.7bn, while the public Welfare system will generate an extra R$2.6bn. However, interest rates will not be reduced immediately, according to Finance Ministry Economic Policy secretary, Amaury Bier. The government expects interest rates to stand at some 20% one year from now. Higher taxes should consume 0.4% to 0.6% of the companies' turnover. The Temporary Tax on Financial Transactions (CPMF - the so-called check tax) will stand at 0.38%, up from 0.20%, while the Tax for Social Security Financing (Cofins ) will increase to 3% from 2%. Congress should begin to analyze the fiscal measures by Wednesday (04). The CPMF hike and the Welfare reform constitutional amendment will be the first topics to be discussed by legislators. (O Estado de S. Paulo/ Jornal da Tarde/ Folha de S.Paulo/ Gazeta Mercantil/ Jornal do Brasil/ O Globo/ Correio Braziliense. Edited by Sergio Caldas)