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

To: Steve Fancy who wrote (11303)	1/7/1999 3:43:00 PM
From: Steve Fancy	Respond to of 22640

States debts rollover agreements amount to R$ 73.5bn São Paulo, 7 - Brazil's 24 states total debts rollover agreement, excluding the states of Amapá, Distrito Federal and Tocantins -- which do not settle any agreement with the Federal government -- amount to R$ 73.567bn, of a total of R$ 93.685bn (the difference is paid by government subsidies worth R$ 20.117bn). According to the country's National Treasury, all contracts foreseen the refinancing of the debts over a 30 years-period. However there are three exceptions: Ceará, Piauí and Rio Grande do Norte, which count on a smaller period of 15 years. If the penalties included in the debt rollover contracts are taken seriously, not only Minas Gerais, but any other state which incurs in default, will end up facing costly consequences. The contracts say that debt servicing costs for states defaulting on monthly payment to the federal government will rise sharply -- from the current 6% to 29% a month. Recalcitrant states will also lose their share in federal tax revenues and the federal government will be allowed to draw funds from the dedicated ICMS state tax. (By Nélia Marques and Paulo Monteiro) agestado.com

To: Steve Fancy who wrote (11303)	1/7/1999 3:50:00 PM
From: Steve Fancy	Respond to of 22640

Brazil Will Meet All Foreign, Domestic Debt Obligations Dow Jones Newswires BRASILIA -- Brazil will honor all foreign and domestic debt obligations, the Finance Ministry said Thursday in an official communique. The statement was released to calm investors' fears that Brazil's third wealthiest state, Minas Gerais. was going to default on $100 million worth of Eurobonds due Feb. 10. On Wednesday, Minas Gerais Governor Itamar Franco declared a 90-day moratorium on debt payments to the federal government. --------------------------------------------------------------------------------

To: Steve Fancy who wrote (11303)	1/7/1999 3:52:00 PM
From: Steve Fancy	Respond to of 22640

Brazil Senate Committee To Decide Tues On Franco Testimony Dow Jones Newswires RIO DE JANEIRO -- The Brazilian Senate's Economic Affairs Committee (CAE) will meet Tuesday to decide if Minas Gerais state Governor Itamar Franco can explain to the committee his decision to suspend federal debt payments, a CAE spokeswoman confirmed Thursday. "Nothing has been agreed yet, but he (Franco) will probably be invited to appear before the committee," she said, adding that the meeting will deal with opposition Senator Eduardo Suplicy's request in a plenary session Thursday that Franco be allowed to defend the moratorium. As reported, Brazil's third wealthiest state, Minas Gerais, declared Wednesday it would stop its monthly $67 million federal debt payments for 90 days from Jan. 1, 1999, sending shock waves through Brazilian and global financial markets. "If confirmed, Itamar Franco will appear before the CAE on Wednesday," the spokeswoman said. Earlier Thursday, the Estado news agency reported Senate President Antonio Carlos Magalhaes as saying Franco would have to approach him personally, and not the CAE. "If he wants to come to the Senate, like the educated man he is, he will have to ask the president of the Senate," Estado quoted Magalhaes as saying. -By Jamie McGeever (5521) 580-9394; jmcgeever@ap.org --------------------------------------------------------------------------------

To: Steve Fancy who wrote (11303)	1/7/1999 3:53:00 PM
From: Steve Fancy	Respond to of 22640

REPEAT&CORRECT: Brazil Debt Moratorium, Not Default By MARIANNE SULLIVAN Dow Jones Newswires NEW YORK -- The debt moratorium announced by Brazil's third wealthiest state, Minas Gerais, is worrisome political wrangling but doesn't jeopardize the stability of the country's foreign exchange regime, currency analysts said. "Whenever there seems to be wavering on the political front in Brazil, investors tend to run," said Ken Colli, Latin American economist at Credit Lyonnais in New York. But, said Colli, the country has enough reserves to sustain its currency, the real, "barring a total collapse of confidence in the country." Late Wednesday, the state's governor, Itamar Franco set off the panic, declaring a 90-day debt moratorium on monthly payments of around $67 million to the federal government. Franco, a former president of the country, is considered one of Brazilian President Fernando Henrique Cardoso's major opponents. Indeed, bad news in Brazil rattles nerves of investors who imagine the woes of the world's ninth largest economy spreading to other emerging markets as well as the U.S., whose banks and corporations are largely exposed to Brazil. While Cardoso and his government are believed to firmly support fiscal reform, getting congressional approval for the reform package and gaining the cooperation of the states are seen as major hurdles. The moratorium "will raise speculation that the International Monetary Fund-deal will have to be restructured or that Brazil will have to devalue. Either way, the dollar should be the one to suffer," said Hillel Waxman, chief foreign exchange dealer at Bank Leumi in New York. The dollar has fallen against both the euro and yen as market players flee to safer currency investments. At 1951 GMT (1451 EST), the dollar is trading at Y110.83, down from Y112.95 late Wednesday. The euro is trading at $1.1719, up from $1.1626 late Wednesday. While the dollar may suffer from contagion, the Brazilian government still has what it takes to shield the currency from panic, Colli said. Between the IMF-led relief packages, complementary taxes and spending cuts, Brazil has bought time, Colli said. Enough time to sustain the country's exchange regime at least until the CPMF financial transactions tax is implemented. (In an item timed about 1919 GMT (1419 EST), the moratorium was incorrectly termed a default.) Economists agree the real is overvalued by some 15% and will eventually have to be devalued. But doing so now in the midst of this political battle would be "crazy" said J.P. Lacombe, emerging markets director at Barclays Capital in New York. Currently, the real trades in a mini band against the dollar and is weakened at a nominal rate of 7.5% per year. While devaluation may be inevitable, the government would prefer it be controlled and not forced by the market. Controlled devaluation would be undertaken when market confidence in the country is strong, perhaps after the reforms are passed, so an announced devaluation wouldn't create a stampede out of the real, analysts said. It is about such a stampede-producing crisis of confidence which investors worry. "From a net fiscal basis this will not impact Brazil," said Lacombe said of the moratorium. "But from a credibility standpoint, it is negative." Investors will continue to assess the credibility of the government's reform efforts and the potential for them to be implemented. Right now, said Lacombe, investors are waiting to see if other states jump on Franco's bandwagon. "The bottom line is that the fiscal government will have to take swift action. If it doesn't the fear is that other opposition groups could undermine its fiscal effort," Lacombe said. -By Marianne Sullivan; 201-938-4385 email:marianne.sullivan@cor.dowjones.com --------------------------------------------------------------------------------