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To: William Peavey who wrote (26007)	1/12/1999 12:45:00 PM
From: Alex	Read Replies (1) \| Respond to of 116906

I.D.E.A. Global Focus Jan 12 1999 11:35AM CSTArchives... Latin American news and views Political tensions in Brazil continue to drive Latin American bolsas down despite more encouraging news elsewhere in the region. A key vote in Brazil's congress could yet spark a sharp rally. The political battle in Brazil is heating up as Minas Gerais governor Itamar Franco and president Fernando Cardoso try to lure governors and lawmakers to their respective camps. Tensions were sparked last Wednesday when Franco said his government would not make debt payments to the federal government for 90 days. Investors are worried that the discord between the federal government and opposition states could spread to congress. That would make passing tough economic reforms difficult and add to the uncertainty surrounding Brazil's fragile currency. But InterMoney thinks there's no reason to panic yet. Franco has yet to rally widespread support and all out political revolt is unlikely. If he fails to muster support from Rio de Janeiro, one of the wealthiest states in the country, Franco will look increasingly isolated, and the opposition to Cardoso's government will be unlikely to spread to congress. A coalition of governors opposed to his move is meeting Tuesday to address the issue. As long as congress continues to pass economic reforms, Cardoso's fiscal plan could emerge from the crisis relatively unharmed. On Wednesday Brazil's congress will be voting on a corporate tax reform that could raise R5.4bn ($4.5bn) in the year ahead. If congress approves the measures, sentiment should start to rebound. In fact, 'there could be a juicy, short-term rally if congress passes the measures,' says IDEA Latam analyst Santiago Millan. For now, the conflict continues to weigh on the bolsas. At 17:00 GMT, the Bovespa had plunged 7.25% while the Merval had lost 3.30%. 'There's no new news to spark these sharp declines,' says Millan. 'But no news is bad news in Latin America.' The Bovespa could fall to 5,763 from 5,939 in the short term before rallying back to 6,800 in a week. The Merval could slide to 392 from 397 before rallying to 441 in a week. Venezuela's newly reappointed finance minister Maritza Izaquirre says she will focus on financing the country's budget deficit. It could reach $8bn in 1999. She is considering levying a financial transaction tax as a quick way to boost government revenue. The announcement should reassure investors. They were worried that president-elect and ex-coup leader Hugo Chavez would initiate market-unfriendly, populist economic policies. Pressure on the Peruvian sol and Igra could ease as newly-elected economic minister Victor Joy Way forms an economic team. Market players have been on the edge of their seats, waiting to see if Way would sway from Peru's current economic policy. The country should see primary surplus of 1.7% of GDP in 1998, meeting its IMF target. Way's selection should cheer the markets. A consultant from the World Bank will head his team, a signal that Way won't implement unorthodox economic policies. Despite good news in Venezuela and Peru, sentiment in Brazil will continue to drive their markets. The IBC could tumble to 4,400 from 4,530 before rallying back to 4,650 in a week. The Igra should slide to 1,351 from 1,357 before heading back to 1,371 in a week. I.D.E.A. : Tue Jan 12 17:12:28 1999 [GMT] wallstreetcity.com