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

To: Steve Fancy who wrote (9537)	11/9/1998 10:37:00 PM
From: Steve Fancy	Respond to of 22640

FOCUS-Brazil lists painful cuts to fight crisis Reuters, Monday, November 09, 1998 at 19:17 By William Schomberg BRASILIA, Nov 9 (Reuters) - Brazil's government on Monday spelled out sweeping budget cuts for 1999 that will reduce already shoestring spending by nearly 20 percent in a bid to save the country's crisis-torn economy. As Brazilian officials negotiated a multibillion-dollar credit line with the International Monetary Fund in Washington, the government back home sent the new, smaller federal budget to Congress, proposing $7.3 billion in cuts affecting every ministry. "We know that 1999 will be a year of sacrifice," said Martus Tavares, the Planning Ministry's executive secretary. The biggest savings will be in infrastructure projects, like highways and ports, which will be reduced by 40 percent. But resources for the ailing health and education services will also be trimmed from a previous 1999 budget plan by 6.7 percent and 12.3 percent, respectively. Other victims of the cuts included the government's program to settle landless families. With about three-quarters of its budget earmarked for pay, debt servicing and other untouchable items, the government chopped its "other spending" -- including its most basic services -- by 17.3 percent to $34.45 billion. "This a deep cut. We have had to reprioritize our priorities," Tavares said. Brazil was pushed to the brink of a devastating currency crisis after Russia's devaluation in August triggered financial chaos around the world and sparked capital flight of more than $30 billion from Latin America's biggest economy. Financial markets around the world are anxiously watching Brazil's every move, fearing that a full-blown crisis may hurt the global economy. Shortly after winning re-election in October, Brazilian President Fernando Fernando Henrique Cardoso authorized a plan to save $23.5 billion in 1999, including tax increases and tougher pension rules for civil servants as well as lower spending. Monday's cuts seek to bring the 1999 budget in line with that plan and general spending targets agreed on with the IMF in October as a condition for emergency credit expected to total at least $30 billion. The budget was also revised to reflect an expected 1 percent drop in economic output next year. Inflation in 1999 is estimated at around 1.6 percent, virtually unchanged from this year, and interest rates should average 24.7 percent, down from rates of more than 40 percent now that are choking the economy and adding to Brazil's debt burden. The budget plan must be approved by Congress, where some important lawmakers have said they oppose cuts in areas like health and education. Health Minister Jose Serra also protested against the proposed cuts last week. The government needs further congressional approval for unpopular tax increases, higher social security contributions for civil servants and an effective cut in the value of public sector pensions to meet its target of $23.5 billion in savings next year. The austerity plan is crucial to Brazil's chances of reassuring investors it is able to tackle a huge budget of about $60 billion that is the root problem of the economy. Last week, the government overcame the first hurdle in its austerity drive when the lower house of Congress approved an overhaul of the massively loss-making pension system that had been bogged down amid opposition for nearly four years. Copyright 1998, Reuters News Service

To: Steve Fancy who wrote (9537)	11/9/1998 10:42:00 PM
From: Steve Fancy	Respond to of 22640

New type of credit line not for Brazil-IMF Reuters, Monday, November 09, 1998 at 21:24 By Adam Entous WASHINGTON, Nov 9 (Reuters) - Less than two weeks after it was endorsed by Group of Seven nations, the International Monetary Fund has dropped plans for using a newly-proposed precautionary credit line to rescue crisis-hit Brazil, IMF officials said on Monday. Instead, the IMF is expected to offer billions of dollars in direct, higher interest rate loans under existing lending facilities as part of a $30 billion-plus international package to stabilize Latin America's biggest economy. IMF officials said the crisis-prevention fund, first proposed by U.S. President Bill Clinton and quickly endorsed by G7 leaders in an Oct. 30 statement, would not be up-and-running in time for Brazil's loan package. An agreement with Brazil was expected this week. The new IMF mechanism, described by G7 bureaucrats as a "contingent financing facility," would offer countries that are deemed to be on the right path of reform a line of credit that could be drawn on when needed and repaid relatively quickly. Brazil was widely touted to be the precautionary fund's first beneficiary, reflecting the Clinton administration's fear of a financial meltdown in the world's eighth-largest economy. "This facility will not be ready in time for the announcement of the Brazilian support program, which will probably be later this week," IMF First Deputy Managing Director Stanley Fischer said in Melbourne on Monday. "But several aspects of the design of the Brazilian package will reflect features that should be present in this new facility," he added. The IMF-orchestrated loan package for Brazil was expected to top $30 billion and could run as high as $45 billion, depending on how much bilateral aid is offered by the world's richest nations. The program was expected to include $15 billion from the IMF, $4.5 billion from the World Bank, $3.4 billion from the Inter-American Development Bank, and billions of dollars more from the United States and other leading industrial nations. Rather than offering cash through the new, G7-backed credit line, the IMF plans to use existing loan facilities to aid Brazil, officials said. The IMF was likely to offer the government a so-called standby loan arrangement, which would provide short-term balance-of-payments support. Standby loans typically run from 12 to 18 months. Loan payments are make on a quarterly basis, conditioned on IMF reviews of the economy and reforms. The IMF was also expected to use its supplemental reserve facility (SRF) in Brazil. The facility charges higher interest rates and demands quicker repayment than other IMF loans. Under the SRF program, created last year, repayments are made within one to one-and-a-half years. It was used for South Korea's $58 billion rescue package in 1997 and to help Russia in July. Copyright 1998, Reuters News Service

To: Steve Fancy who wrote (9537)	11/9/1998 10:48:00 PM
From: Steve Fancy	Read Replies (1) \| Respond to of 22640

Brazil's Cardoso Victim Of Blackmail Attempts - Media Dow Jones Newswires SAO PAULO -- Brazilian President Fernando Henrique Cardoso and some of his closest allies have been the victims of blackmail attempts over the past 18 months, local media reported Sunday and Monday. In one instance, recordings were made of public and private conversations of Cardoso and three top officials from the National Development Bank, known as BNDES, including former BNDES head and current Communications Minister Luis Carlos Mendonca de Barros. The reports said that the blackmailers managed to tape conversations which included embarrassing remarks by Mendonca de Barros, as well as negotiations on the telecommunications privatization process. The BNDES officials have had their phone conversations tapped since April 1997, weekly magazine Epoca reported. Cardoso handed the tapes to the Brazilian Intelligence Agency for investigation last week. Another blackmail attempt involves a set of documents which allegedly indicates that the president, Health Minister Jose Serra, recently-reelected Sao Paulo state governor Mario Covas, and a former Communications Minister, the late Sergio Motta, are partners in a Cayman Islands-based company. The company is said to have a banking account worth $368 million. The blackmailers reportedly gave the documents to former Sao Paulo governor Paulo Maluf a few days before run-off state elections on Oct. 25, in which Maluf was going up against Covas. Maluf then tried unsuccessfully to persuade opposition party members to make the documents and accusations public before Oct. 25. His party, the Brazilian Progressive Party (PPB), comprises the government's political support base. Local press reports strongly suggested that the accusations are unfounded, but they did say that the BNDES phone conversations would put the government in an embarrassing situation. Presidential spokesman Sergio Amaral said during his daily press briefing Monday that Cardoso isn't concerned and that "the recorded phone conversations are a setup for certain government members." According to local press reports, the "setup" would be designed to jeopardize Mendonca de Barros, who is widely expected to be appointed to be the new Production Minister when this ministry is created. -By Adriana Arai; 5511-813-1988; aarai@ap.org