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Strategies & Market Trends : HONG KONG -- Ignore unavailable to you. Want to Upgrade?

To: Frodo Baxter who wrote (2612)	1/4/1999 1:23:00 PM
From: Tom	Read Replies (2) \| Respond to of 2951

Certainly. Most of the following was transmitted earlier to another station. Begging their pardon,... About Brasil There was a private deal negotiated for appearance purposes...a part to the international bailout. Seems Brasilian corporates require a rather large reduction in the workforce in order to remain viable; especially one of the largest sectors -- automobile manufacturing. The deal is that no layoffs would be affected until January 1st. Wouldn't want to spook investors, let alone the U.S. Congress, while attempting a rescue package. Additionally, my suspicions are aroused by the fact that I have never been able to find a report of the expected worker layoffs, but for one Brasilian Spanish-language newspaper and one Mercosur report. Combine the above w/ the fact that the IMF just last Monday reviewed and downgraded their expected growth figure for Brasil's economy, and accompanied it with a statement saying they did not however expect Brasil to slip into a deep recession. Well, then why even mention a "deep recession?" The IMF's chief economist, as reported last week in the Buenos Aires Herald: "Latin America's largest economy (Brasil) will shrink by 1.0 percent next year as its outlook has deteriorated significantly." Also last week, an enormous Brasilian debt payment was made. This helped move capital outflow to a record figure. Outflows have dropped Brazil's international currency reserves to about 38 billion dollars, from a high of 75 billion dollars in August. Commodities prices also have shown no strength to rebound, whatsoever. The Mercosur can't survive without their economies' commodities engine. Markets in the region are not sufficiently mature to rely on any other sector. That's something both the press and other analysts very rarely mention. I, myself, have only seen it in print once. Creeping into media reports are conclusions (I counted three last week) that Brasil's real will be devalued. And the sooner the better, they say. Reporting also, and at least twice that I've seen, that investment funds are preparing to adjust their portfolios accordingly. Too, Weiss Research (the Weiss family lived in Brasil for a number of years) has countered every proponent of a successful international bailout of the Brasilian economy. (The October issue, maybe. Can't recall right off.) One of the Weiss's was schooled and still lives in Brasil. I assign a good deal of creedence to what Weiss says. Goes back to an event in the 80's that among financial research firms they alone predicted. But why did I indicate a radical move down within a fortnight? Just my personal timing of the events as they appear to be unfolding. What I've mentioned happening this past week, and ahead of the expected layoffs, lends an image of events accelerating. From a newspaper in Mexico last week... Brazil's central bank said earlier in December that total capital flight for the month was expected to reach about 5 billion dollars, or 227.3 million dollars a day. The bank has now revised the estimate to 5.5 billion dollars for the month. The continued capital flight has made investors concerned Brazil will be unable to cut interest rates further to stimulate the economy, as it needs high rates to attract investors to its debt. Brazil's benchmark stock index fell 3 percent Tuesday in part because of the outflows, which have averaged 244 million dollars a day this month, up from 107 million dollars in November. The big picture also shows that the people of Brasil are more than a bit upset over the additional debt about to be heaped upon them. More grist for the opposition's legislative mill in Sao Paulo. -----