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

To: Steve Fancy who wrote (9532)	11/9/1998 4:50:00 PM
From: Steve Fancy	Respond to of 22640

Brazil devaluation less likely as IMF loan nears Reuters, Monday, November 09, 1998 at 14:06 By Joelle Diderich BRASILIA, Nov 9 (Reuters) - Pressure for a devaluation in Brazil is easing thanks to hopes of an international loan package and signs the value of the local currency is not as unrealistic as it seemed a few months ago, economists said Monday. The International Monetary Fund (IMF) and other global lenders were likely to announce this week a loan, seen totaling between $30 billion and $45 billion, to prevent a crisis in emerging markets from toppling Latin America's biggest economy. The package should underpin the domestic currency, the real, easing fears that Brazil could follow Russia down the path of devaluation, IMF First Deputy Managing Director Stanley Fischer said Monday. "I think the Brazil package, including the fact that the Brazilians have a very serious set of policy measures, together with the financial support, will convince investors that they can follow the policies they are following," said Fischer. "And they regard maintaining their current exchange rate as very important," he told reporters in Australia. The real has been under pressure since Russia devalued in August, triggering a massive flight of capital from emerging markets as a whole and sapping Brazil's foreign currency reserves, its main defense against speculative attack. Dollars started trickling back last week and shares jumped 25 percent, reaching their highest level since the Russian crisis hit, after the government announced a sweeping fiscal austerity plan qualifying Brazil for international aid. Amid this improving outlook, some economists are contesting the widespread notion that the real is overvalued between 20 percent and 30 percent. They say falling consumer prices and a weakening dollar are working in favor of Brazil's foreign exchange policy and the real is now just 8 percent to 15 percent overvalued against the dollar. "In combination, these two factors -- inflation and the dollar -- paint an encouraging picture," said Neil Dougall, Latin America economist at Dresdner Kleinwort Benson, in a report. The real's overvaluation against the dollar had declined to less than 8 percent from 21 percent in January, he said. "By the end of 1999, all of the real's current overvaluation will have been eliminated -- moreover, without any change in the current depreciation rate of 7.5 percent a year," he concluded. Some economists were reluctant to place such precise values on the real's effective dollar exchange rate, but noted nonetheless that a reversal in recent sharp dollar outflows and optimism about an IMF-led loan were benefiting the currency. "There has been a reduction (in the real's overvaluation against the dollar)...because there is less capital flight and contrary to September, Brazil's situation seems sustainable," said Constantin Jancso, economist at consultancy MCM. A Reuters poll of economists last week found that the risk of a steep, sudden devaluation of the real fell thanks to the fiscal austerity plan and expectations of an IMF-led loan. The probability of a once-off devaluation of more than 15 percent between now and the end of 1998 fell to 6 percent from 13 percent last month, while chances of a devaluation in the first six months of 1999 fell to 17 percent from 22 percent. Brazilian officials have said repeatedly they do not plan to widen the band in which the real trades against the dollar. The Central Bank gradually adjusts the mini-band to produce a controlled nominal devaluation of the domestic currency against the dollar of 7.5 percent to 8 percent a year. But the "real" devaluation of the currency could be greater, with Brazil's inflation index forecast to end the year with zero percent inflation or slight deflation and prices set to remain in check next year as a recession hits the economy. "We have successfully devalued the currency without stoking inflation," said Carlos Kawall, chief economist at Citibank in Sao Paulo. He predicted the real would end 1998 overvalued by 7 to 8 percent, down from 19 percent at the end of last year. joelle.diderich@reuters.com)) Copyright 1998, Reuters News Service

To: Steve Fancy who wrote (9532)	11/9/1998 4:58:00 PM
From: Steve Fancy	Respond to of 22640

Brazil forex mkts lose about $70 mln, real weakens Reuters, Monday, November 09, 1998 at 14:45 SAO PAULO, Nov 9 (Reuters) - Brazil lost about $70 million through foreign exchange markets Monday, according to traders' preliminary estimates, while the real slipped against the dollar. The currency weakened 0.12 percent in the commercial forex market to 1.1895 reais against the dollar. Brazil posted another day of dollar loss -- after two days of net inflows -- as about $70 million left the country. Dollar outflows have slowed and even reversed as the number of corporate bonds and loans coming due overseas declines. A currency devaluation in Russia sparked a wave of capital flight, draining the country of more than $30 billion through the forex markets in August and September. Growing optimism that Brazil will pull back from the verge of a financial crisis has stabilized forex markets. As of 1715 local/1915 GMT, a net $50 million had left Brazil through the commercial forex market, the Central Bank said, while a net $18 million had left through the floating forex market, according to traders. In the floating market, the real weakened 0.17 percent to 1.197 to the dollar and the currency firmed 0.40 percent in the parallel market to 1.250 reais against the dollar. Copyright 1998, Reuters News Service

To: Steve Fancy who wrote (9532)	11/9/1998 5:00:00 PM
From: Steve Fancy	Respond to of 22640

BRAZIL CONGRESS WEEK-All eyes on austerity plan Reuters, Monday, November 09, 1998 at 14:53 By William Schomberg BRASILIA, Nov 9 (Reuters) - The Brazilian government, fresh from victory in approving a key pension reform bill, faces another important week in its austerity drive in Congress, officials said Monday. A revised version of the 1999 federal budget, detailing a previously announced $7.3 billion worth of spending cuts, was sent Monday to parliament where it has to be approved. The new, lower budget is an important part of the government's plan to save $23.5 billion in 1999 and meet a budget surplus target agreed with the International Monetary Fund. The IMF is expected to announce this week a multibillion-dollar package of loans to help Brazil survive financial turmoil on international markets. Further action on the government's belt-tightening drive was expected Tuesday when leaders of pro-government political parties were due to discuss how to approve tougher pension rules for civil servants, another essential part of the cost-cutting plan. News reports have said lawmakers may also propose alternatives to a higher tax on financial transactions, principally a new levy on gasoline prices. "We're going to spend this week deciding what will happen over the next few weeks," a government spokeswoman in Congress said. She said it was unlikely that any measures included in the austerity plan would be put to vote this week. Tuesday's meeting would focus on proposals to increase social security contributions from civil servants and another controversial measure to effectively cut public sector pensions, a Social Security Ministry spokeswoman said. The proposals, essential to the government's savings target for next year, were expected to be spelled out in presidential decrees. Decrees require approval by a simple majority in each house of Congress, making them relatively easy to pass. The government wants to approve the social security measures quickly to follow up on last week's final approval in the lower house of Congress of a constitutional reform bill that overhauls the country's pension system. The bill had been stuck in Congress for nearly four years. Also Tuesday, both houses of Congress were due to meet in a joint session to begin considering a parliamentary motion to speed up the process of voting the new 1999 federal budget. A daily Senate newsletter said the motion sought to make up for time lost during October's general election campaign and allow Congress to vote on the new budget by the end of the year. william.schomberg@reuters.com)) Copyright 1998, Reuters News Service

To: Steve Fancy who wrote (9532)	11/9/1998 5:04:00 PM
From: Steve Fancy	Respond to of 22640

IMF, rich nations near agreement on Brazil rescue Reuters, Sunday, November 08, 1998 at 14:29 By Adam Entous WASHINGTON, Nov 8 (Reuters) - The International Monetary Fund and the world's richest nations on Sunday put final touches on a multibillion-dollar rescue package for crisis-hit Brazil in hope of averting an Asia-style financial meltdown in Latin America. Monetary sources said negotiators for the IMF and the Brazilian government, meeting in Washington, made progress in weekend talks on a letter of intent, laying out the country's policy commitments. Final agreement on the document -- expected on Monday or Tuesday -- would clear the way for more than $22 billion in loans from the IMF, the World Bank and the Inter-American Development Bank. Parallel negotiations were underway in Switzerland with the Bank of International Settlements (BIS), which is coordinating billions of dollars in bilateral assistance from Group of Seven major industrial nations and other states eager to shore up Latin America's biggest economy. The BIS serves as central bank to the world's central banks. Estimates of the size of Brazil's rescue package -- including bilateral aid -- run from $30 billion to as much as $45 billion. IMF Managing Director Michel Camdessus said the loan program, which should be ready early this week, would have "all the potential to avoid a major crisis in this country and put it potentially on a sustainable track of recovery." The Brazil package would be one of the largest ever arranged by the IMF. Last year, in response to Asia's financial crisis, the Washington-based lending agency put together a $58 billion package for South Korea, a $42 billion-plus deal for Indonesia and a $17 billion loan arrangement for Thailand. In July, the IMF arranged a $23 billion package for Russia. Group of 10 central bank leaders were due to meet on Monday at the BIS in Basle, Switzerland. Brazilian Central Bank President Gustavo Franco, who held talks on Friday and Saturday with IMF and U.S. Treasury officials in Washington, was due in Switzerland on Sunday. Brazil needs international support to stave off a devaluation of its currency, the real, and to reassure panic-stricken investors. A collapse of the real could cause financial havoc in the rest of Latin America. Negotiations with the IMF reached a final stage after the Brazilian government announced a tough austerity plan to save $84 billion over the next three years. Brazilian officials hope the austerity drive will go a long way to restoring confidence and that the government will not need to draw on much of the international package. "We need a volume of funds that would dissipate any sort of doubt that is currently put against Brazil, although we may not need to use the money," Pedro Parente, executive secretary at Brazil's Finance Ministry, said in an interview published in the O Globo newspaper on Sunday. IMF and Brazilian officials had hoped to wrap up negotiations last week, but international monetary sources said they needed the weekend to complete the letter of intent and to coordinate bilateral support. In exchange for commitments on economic reform, the IMF was expected to offer $15 billion to Brazil, incorporating a special credit line proposed by Group of Seven nations. The precautionary credit line could be tapped at times of acute financial stress, ensuring the government pays its bills on time and has enough cash to defend its currency. The World Bank was preparing a series of loans worth $4.5 billion, while the Inter-American Development Bank stood ready with $3.4 billion. The loans would be issued at higher interest rates than existing World Bank and IADB credits. Money would be disbursed more quickly, but under shorter repayment terms. As part of the loan package, the Group of Seven and other nations planned to offer direct aid to Brazil as well as export-import financing to keep trade flowing. Sources in Washington said the BIS was coordinating the bilateral side of the rescue package through the Group of 10. The G7 countries are the United States, Japan, Germany, France, Italy, Britain and Canada. The G10 forum adds another four countries despite its name -- Switzerland, Sweden, Belgium and the Netherlands. The United States was expected to tap into the Treasury Department's Exchange Stabilization Fund for its contribution, but it was unclear how much money Washington would offer Brazil. Use of the fund has raised hackles in Congress in the past because many lawmakers resent that Treasury Secretary Robert Rubin can use the money without a green light from Congress. Washington's package will also include a large increase in trade finance to help Brazil buy goods from the United States. The U.S. Export-Import Bank plans to increase its financial support for Brazil by $2 billion. The Overseas Private Investment Corporation may offer $700 million or more in additional aid to U.S. firms doing business in Brazil. In February 1995, the Bank for International Settlements offered a $10 billion financing package to Mexico as part of that country's international rescue. Copyright 1998, Reuters News Service

To: Steve Fancy who wrote (9532)	11/9/1998 5:07:00 PM
From: Steve Fancy	Read Replies (3) \| Respond to of 22640

Brazil shares eke out gains amid price tug-of-war Reuters, Monday, November 09, 1998 at 16:04 SAO PAULO, Nov 9 (Reuters) - Brazilian shares inched up on Monday, marking the index's sixth consecutive rise as enthusiasm over the country's economic outlook prevailed even amid a wave of profit-taking, traders said. "In the morning I expected that it would fall, but the result ended up quite good considering its rise in the last few sessions," a trader at a local brokerage said. Sao Paulo's key Bovespa index ended up 0.34 percent at 8,242 points, bringing gains over the last six sessions to 26.1 percent. Light preferred (SAO:LIGH3) led gainers, rocketing 14.4 percent amid a technical correction. The Bovespa began to shoot up on signs Congress will pass the government's recently-announced fiscal plan and on hopes an international line of credit is forthcoming. The International Monetary Fund is expected to announce as soon as Tuesday a support package reported to be worth between $30 and $45 billion. As Banespa preferred (SAO:BESP4) and Cia Siderurgica Nacional common (SAO:CSNA3) posted sharp gains on technical corrections of 6.7 percent and 6.8 percent, the Bovespa blue chips did not fare as well. Telebras preferred receipts (SAO:RCTB40) slipped 0.48 percent to 103.5 reais. Eletrobras preferred (SAO:ELET6) ended off 0.61 percent at 32.50 reais and Petrobras preferred (SAO:PETR4) closed up 1.1 percent at 186 reais. Cia Vale do Rio Doce preferred (SAO:VALE5) finished unchanged at 18.50 reais. Shares worth 494.5 million reais traded hands. shasta.darlington@reuters.com)) Copyright 1998, Reuters News Service