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

To: BOB JOHNSON who wrote (9769)	11/18/1998 1:29:00 AM
From: Steve Fancy	Respond to of 22640

Brazil budget gap to narrow, but debt stays high Reuters, Tuesday, November 17, 1998 at 18:55 By Joelle Diderich BRASILIA, Nov 17 (Reuters) - Brazil's bloated fiscal deficit is set to narrow in 1999 thanks to a massive fiscal effort, but the government is still forecasting a worryingly high interest rate bill for next year, economists said Tuesday. Finance Minister Pedro Malan, speaking Friday after the IMF announced a $41 billion loan deal for Brazil, said he expected the nominal budget gap to shrink to 4.7 percent of gross domestic product (GDP) in 1999 from more than 7 percent now. Brazil is attacking the budget deficit, considered the Achilles heel of its four-year economic recovery, with a sweeping austerity plan designed to save or raise $84 billion over the next three years. The towering fiscal deficit had raised fears among international investors that Brazil would be unable to meet its debt obligations and might be forced into devaluing the local currency, the real. But Malan's budget gap forecast has raised eyebrows in local markets, with some economists saying his estimate appears pessimistic despite the fact that high interest rates will continue to swell the debt stock next year. Official estimates see net public sector debt rising to 44.9 percent of GDP in 1999 from 41.9 percent of GDP in 1998, assuming the overnight rate averages 21.8 percent next year. "The market is interested in knowing how these numbers will tally," said Ana Cristina Costa, chief economist at BCN Alliance in Sao Paulo. "The government is said to be including some fiscal skeletons into debt." A budget deficit of 4.7 percent of GDP, coupled with the government's target of a primary budget surplus of 2.6 percent of GDP, implies a debt payment bill of 7.3 percent of GDP in 1999. According to some, this is more than the government will shell out this year, with interest rates still teetering close to 40 percent. Some analysts said the forecast was too gloomy, considering the Central Bank last week began steadily lowering the benchmark overnight rate it pays on 66 percent of its internal debt of around $270 billion. The rate now stands at an annualized 38 percent. "Just to give an idea, in this crisis year interest rate payments will be 7 percent of GDP," columnist Miriam Leitao said in O Globo newspaper. "The explanation from the economic team is that it is better to be conservative, to be safe than sorry." Others said the forecast appeared accurate, although they conceded the government may have darkened the picture in order to avoid having to renegotiate its arduously conquered credit line with the International Monetary Fund. "The worse the number the government comes out with, the more credible it is," noted Constantin Jancso, economist at MCM Consultores. He said a 4.7 percent budget gap appeared "pretty reasonable" given that interest rates would fall very gradually, and only if Congress approved unpopular fiscal measures aimed at saving $23.5 billion next year. Marcelo Allain, chief economist at BMC Bank in Sao Paulo, said that although the government figures were coherent, he hoped the debt payment bill would come in lower than expected. "Interest rates are set to fall quite significantly, so despite the fact that the stock of debt will be larger, the size of interest rate payment spending should be reduced," he said. The debate was unlikely to be cleared up Wednesday, when the Central Bank will announce public sector deficit data for January to August. The budget gap stood at 7.02 percent of GDP in the January-July period. Economists said the August figures would be boosted by $4.87 billion in revenues from the privatization of federal telephone system Telebras (SAO:TELB3) in July. But the data will be considered largely irrelevant, as they cover the period before the Central Bank yanked up rates to stem a massive outflow of dollars amid a global crisis in emerging markets in September. joelle.diderich@reuters.com)) Copyright 1998, Reuters News Service

To: BOB JOHNSON who wrote (9769)	11/18/1998 1:31:00 AM
From: Steve Fancy	Respond to of 22640

Brazil's Malan sees no accelerated devaluation Reuters, Tuesday, November 17, 1998 at 19:30 NEW YORK, Nov 17 (Reuters) - Brazilian Finance Minister Pedro Malan told U.S. investors on Tuesday that Brazil will not dramatically devalue its currency in the near term. "We are not going to change our exchange rate regime," Malan said. Brazil's current exchange rate policy allows for a 7-1/2 percent nominal devaluation of the currency per year. Malan addressed about 200 members of the New York financial community, reassuring them about Brazil's fiscal reform effort, which is aimed at reducing the country's gaping budget deficit. "The discussion of the exchange rate has strengthened confidence in my mind and among members of this group about the stability of the currency and the avoidance of a big devaluation," Robert Hormats, vice-chairman of Goldman Sachs International, told Reuters after Malan's presentation. The roadshow for Brazil's recovery plan goes on to Europe and Asia from New York. Copyright 1998, Reuters News Service

To: BOB JOHNSON who wrote (9769)	11/18/1998 1:32:00 AM
From: Steve Fancy	Respond to of 22640

Lucent Latin America chief bullish on area Reuters, Tuesday, November 17, 1998 at 20:05 By Angus MacSwan AVENTURA, Fla., Nov 17 (Reuters) - Telecommunications equipment giant Lucent Technologies Inc (NYSE:LU) sees great opportunities in a vast Latin America that is crying out for modern communications, and it aims for growth ahead of the market, its chief executive for the region said on Tuesday. Despite markets fears that Latin American economies are heading into trouble, "we're extremely committed to this region, it is absolutley key to our success," said Arthur Medeiros, president and chief executive officer for Lucent's operations in Latin America and the Caribbean. "We are cautiously optimistic we are going to be successful...Latin America is not a perfect economy but its got all the opportunities in the world for future growth. We're bullish about our opportunities...we're here for the long term," he told reporters at a Latin American business conference. Medeiros declined to specify Lucent's growth targets. "My goal is to grow faster than the market. If that market's growing at X, I'm growing at X-plus. That's my goal." Latin America, and huge Brazil in particular, promises a bonanza for telecommunications companies as countries benefitting from boom years seek to modernise traditionally weak infrastructures and integrate their economies. Overall growth in the industry in the region last year was about 15-17 percent, though it varied between sectors and countries. The Internet in Brazil grew 60 per cent, the data sector in that country grew 30-35 per cent, and the wirless sector in some countries 40-45 per cent. "Rather than come out with a broadbrush statement, I prefer to look at what countries there are, where we're going, with what technology, determine what growth is within the market place then grow faster," Medeiros said. Lucent's growth in Latin America had been about 30 per cent over the past three years, spokesman Fernando Figueredo said. Other than Brazil, Lucent was concentrating on Mexico, Argentina, Peru and Venezuela, he said. The Coral Gables-based executive declined to say how much Latin America contributed to Lucent's worldwide business but said "I tell my counterparts I think I've got the fastest growing area in the world." Medeiros also expressed confidence in the Latin America economy overall, despite the shockwaves rolling in from Asia. In a speech to the conference, he said that "portfolio" investors looking for short-term gains were seeing dips, but multi-nationals were committed to long term investment in what they still regarded as a region rich in opportunity. The economies had been strong before the Asia crisis and governments were following tight fiscal policies. Lucent now has 12,000 employees in 19 Latin America and Caribbean countries. The Murray-Hill, N.J.,-based company builds the hardware and software for global communications networks, builds local networks and business systems, and makes microchips and related components. Its worldwide 1997 revenues were $27.1 billion. Copyright 1998, Reuters News Service

To: BOB JOHNSON who wrote (9769)	11/18/1998 1:34:00 AM
From: Steve Fancy	Read Replies (1) \| Respond to of 22640

Brazil officials take message directly to Wall St Reuters, Tuesday, November 17, 1998 at 22:45 By Hugh Bronstein NEW YORK, Nov 17 (Reuters) - Top Brazilian financial officials sought to soothe Wall Street concerns about the country's economic outlook on Tuesday with a presentation emphasizing the government's access to billions of dollars in international loans and its commitment to a stable currency. In front of an audience of about 200 bankers and analysts, Finance Minister Pedro Malan and Central Bank Governor Gustavo Franco drew a picture of coming stability that will help lure dollars back to the country after months of uncertainty. "They put on a very convincing show," said Denis Parisien, Latin American strategist at Dresdner Kleinwort Benson. Investment dollars exited the Latin America's largest economy in droves after Russia's debt default in August amid fears that other emerging economies might follow the same path. In a coordinated effort to lure back those dollars, Brazil is poised to accept a $41.5 billion loan package led by the International Monetary Fund (IMF) and to implement an austerity program requiring Congress to pass a series of stringent tax increases and spending cuts. Several of the bankers and analysts who attended the presentation at a New York hotel said they were open to the possibility of reinvesting in Brazil, but not before Congress acts resolutely to implement measures aimed at narrowing the country's gaping budget deficit. Then, they said, they will look for signs that the measures are actually helping to shore up Brazil's finances. One commercial banker who was in a group that met with the Brazilian delegation on Monday said the country's ailing auto industry was a litmus test for reinvestment. "As commercial banks we do not know how much to lend to automobile companies that are not making cars," the banker said. "So if the economic programs work and the economy revives, there will be more opportunities for us to lend money to our good clients." The presentation on Tuesday was the first leg of a road show that will travel to Europe and Asia as part of the Brazilian government's drive to bring enough private investment into the country so that it actually won't need to spend the money promised by the IMF. Stanley Fischer, IMF first deputy managing director, chimed in via telephone hookup from Munich to stress the point that the loan program was designed to be "front-loaded," providing money in quick order. Fischer said that the second $9.0 billion IMF tranche, originally scheduled for release in early February, might be released a month sooner if circumstances demand. The first tranche is expected to be released early next month. "The upfront multilateral funds should alleviate concerns about the effect of a protracted credit crunch on the government's 1999 financing gap, which is expected to be about $60 billion," said Siobhan Manning, Latin American debt strategist at PaineWebber. "Given the coordinated policy action by the Brazilian authorities and support from the multilaterals, Brazilian sovereign bonds are an attractive long-term play," Manning said. Fischer and Malan said there was no need for any sharp devaluation of Brazil's currency, the real. "We are not going to change our exchange rate regime," Malan said. Brazil's exchange rate policy allows for a 7-1/2 percent nominal devaluation of the currency per year. "The discussion of the exchange rate has strengthened confidence in my mind and among members of this group about the stability of the currency and the avoidance of a big devaluation," Robert Hormats, vice-chairman of Goldman Sachs International, told Reuters after Malan's presentation. Copyright 1998, Reuters News Service