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

To: Steve Fancy who wrote (11752)	1/15/1999 2:17:00 AM
From: Steve Fancy	Respond to of 22640

Few parallels between Brazil, Russia debt-analysts Reuters, Thursday, January 14, 1999 at 18:01 By Catherine Evans LONDON, Jan 14 (Reuters) - Brazil's short-term debt refinancing crisis is nothing like the same magnitude as Russia faced last summer and comparisons between the two are overdone, analysts said on Thursday. They said Wednesday's effective devaluation of the real currency did not signal a massive withdrawal of capital from Brazil's domestic debt market. Provided the authorities make the new exchange rate stick, rolling over government debt would not present a serious problem, they said. "Brazil's short-end debt volumes do look frightening but the environment is completely different," said Richard Fox, director of Latin American sovereign research at Fitch IBCA in London. "This is not a Russia situation." According to the most recent official figures, Brazil had $438 billion of debt outstanding at the end of October last year, of which 314 billion reais ($238 billion) was domestic debt. Total external debt was around $200 billion, with public sector liabilities accounting for only half that total. The Federal government's domestic debt is almost entirely short-dated, with an average maturity of seven months. "Average maturity used to be shorter than that, but the government managed to extend its maturity profile last year by selling more dollar-linked debt," Fitch IBCA's Fox said on Wednesday. Around 21 percent of domestic debt was dollar-linked at the end of October, with the vast majority of the remainder -- 60 percent of the total -- structured as real bonds paying a floating rate of interest. In contrast, the government has virtually no short-dated external debt, with total external redemptions this year forecast at just $2.0 billion. A short-term refinancing problem will therefore only arise if Brazil cannot persuade holders of domestic bonds to roll over debt -- the same problem that scuppered Russia last year. Analysts say a similar situation is unlikely to prevail in Brazil, however, as more than 95 percent of domestic debt is owned by Brazil-based institutions such as pension funds and insurance companies. In Russia, foreigners held the lion's share of the domestic debt. Brazil's existing capital controls mean it is difficult for these institutions to invest outside the country and so they effectively constitute a captive audience for the government's bonds. "Parallels drawn with Russia are wrong. Practically all Brazil's domestic debt is owned by domestic investors and so the government doesn't face the danger that foreigners will pull their capital out all in a rush," said Peter West, chief economist at BBV Securities in London. Instead, investor confidence in Brazil's credit quality will be reflected in the rate of interest the market charges for new debt. "If people can't shift their money, the key question is 'what price?'" said Fitch IBCA's Fox. Buyers of Brazil's dollar-linked domestic bonds typically charge a yield-premium of around three percent over Brazil's Brady bonds, Fox said, but are likely to demand a seven percent premium over the short-term in order to compensate for the devaluation. Brazil's huge debt-servicing burden -- interest payments on government debt account for the country's entire budget deficit -- means higher interest rates could imperil fiscal targets on which a $41.5 billion financial aid package Brazil agreed with the International Monetary Fund last year are contingent. "Brazil must make the new exchange-rate regime stick," Fitch IBCA's Fox said on Friday. "Interest rates won't come down until investors believe the currency is stable." DOMESTIC DEBT AT END-OCTOBER 1998 (ESTIMATED) TOTAL 314 billion reais ($238 billion) OF WHICH DOLLAR-LINKED 65.9 billion reais ($50 billion) REAL-DENOMINATED FRNs 188.4 billion reais (143 billion) EXTERNAL DEBT AT END-OCTOBER 1998 (ESTIMATED) TOTAL (PUBLIC AND PRIVATE SECTOR) $200 billion OF WHICH MEDIUM-LONG TERM $168 billion OF WHICH SHORT-TERM $32 billion TOTAL (PUBLIC SECTOR) $100 billion OF WHICH MEDIUM-LONG TERM $76 billion BRAZILIAN GOVERNMENT SAYS PUBLIC SECTOR EXTERNAL DEBT VIRTUALLY ALL TRADE AND INTERBANK CREDITS. catherine.evans@reuters.com)) Copyright 1999, Reuters News Service

To: Steve Fancy who wrote (11752)	1/15/1999 2:19:00 AM
From: Steve Fancy	Read Replies (1) \| Respond to of 22640

FOCUS-G7 states play down Brazil risks, stress reform Reuters, Thursday, January 14, 1999 at 18:20 (Updates with Tietmeyer comments in paragraphs 3, 7, last para) By Myra MacDonald PARIS, Jan 14 (Reuters) - European governments on Thursday joined the United States in backing Brazil's economic programme, saying reforms underway rather than any new Group of Seven initiative were what was needed to deal with the crisis. Ministers from the G7 rich nations discussed the situation in Brazil by telephone on Wednesday along with International Monetary Fund head Michel Camdessus, and top financial officials weighed in on Thursday to try to play down the risks. "I think the internal situation is better than some believe," Bundesbank head Hans Tietmeyer told a banking forum. French Finance Minister Dominique Strauss-Kahn said that economic problems which led to the effective devaluation of the Brazilian real on Wednesday were not comparable to the crises which swept through Asia and Russia last year. "The situation in Brazil is not good. However, I do not think that we are facing something similar to that which we saw either in Asia or in Russia last August," he told a new year's press reception. "The reform of the Brazilian economy is underway," he said. He added that the entire international community agreed that this must be continued. His comments were echoed Tietmeyer, who said it was important that trust be restored in Brazil's own programmes. The International Monetary Fund last year offered Brazil a $41.5 billion rescue deal to support its economic reforms and prevent an economic crisis which could drag down the whole of Latin America and then spill over into the United States. Italian Treasury Minister Carlo Azeglio Ciampi told Rome's La Repubblica newspaper that it was too early to talk of a new crisis such as that which hit Mexico in 1994. He said that although the latest turmoil in Brazil added to his long-standing fears of global deflation, there was nothing to be done right now in terms of a new rescue. "With Camdessus and the others, we all said frankly that at this moment there is nothing we can or should do. The IMF approved a $41.5 billion loan in October and it would be absurd to think of another intervention of a similar nature. "We did not talk about it (during the G7 teleconference) and nobody raised it -- not even the Americans who would suffer the worst effects if the Brazilian difficulties get worse," he said. Brazil's situation is expected to be discussed by G7 deputy finance ministers at a meeting in Frankfurt on Saturday, while it also likely to overshadow talks between European and Asian finance ministers there on Friday and Saturday. In Bonn, a German finance ministry spokesman said that the G7 did not plan at the moment to make a statement on Brazil. Germany currently holds the rotating presidency of the G7, which also includes the United States, Canada, Japan, France, Germany, Italy and Britain. U.S. Treasury Secretary Robert Rubin said on Wednesday Brazil needed to carry on with "a strong, credible" programme. Earlier in Asia, officials from Japan, South Korea, Thailand and Malaysia said they doubted Brazil's effective devaluation would cause another emerging market rout. "Brazil's situation has been known to all (of us) in recent months. I believe the IMF and U.S. authorities, a lot of people, have been helping out. So I think the contagion will not be too great," said Hong Kong Financial Secretary Donald Tsang. Several European ministers stressed however that the Brazil problems -- and subsequent severe market reaction -- highlighted the need for a reform of the international financial system. "These have been troubled times for the global economy and for some individual emerging market countries as we saw again yesterday in Brazil," British Prime Minister Tony Blair said. He called for greater commitment to world financial reforms, based on transparency, codes of conduct and cooperation. Tietmeyer, who has been charged with preparing a report on reforming the financial system, also said that closer cooperation among authorities was needed. paris.newsroom@reuters.com)) Copyright 1999, Reuters News Service

To: Steve Fancy who wrote (11752)	1/15/1999 2:22:00 AM
From: Steve Fancy	Respond to of 22640

IMF says no decision yet on trip to Brazil Reuters, Thursday, January 14, 1999 at 22:30 WASHINGTON, Jan 14 (Reuters) - The International Monetary Fund has yet to decide whether to send a team to Brazil to evaluate fallout from the nation's currency devaluation, an IMF spokesman said on Thursday. "We haven't made any decision yet on when and if to send a mission to Brazil," a spokesman said, responding to comment on a report in Britain's Financial Times newspaper. The newspaper said that the IMF was poised to send a delegation to Brazil as skepticism is growing about the government's ability to meet the budgetary requirements underlying its loan package. The Financial Times said the IMF package ruled out a devaluation and that the IMF was not consulted before Wednesday's decision to devalue. It said the IMF mission was due to arrive in Brazil in a few days. Last November the IMF put together a $41.5 billion loan program to help Brazil reform its economy and prevent a meltdown which could drag down the whole of Latin America and undermine economic growth in the United States. The fund on Wednesday urged Brazil to push on with spending cuts and structural reform after Brazil gave in to market pressure and allowed its currency to tumble 8 percent. But a terse statement said only that Brazil had "informed the IMF" of its new exchange rate policy and the fund stopped well short of endorsing Brazil's decision. Economists say fund experts had initially been anxious that Brazil should speed up the rate at which its currency, the real, was allowed to fall against the dollar. But Brazilian officials viewed a stable real as the cornerstone of their anti-inflation policy and the IMF agreed not to push for a wider trading range for the real. Copyright 1999, Reuters News Service

To: Steve Fancy who wrote (11752)	1/15/1999 2:31:00 AM
From: Steve Fancy	Respond to of 22640

Brazil's Senate To Vote CPMF Tax Rise In 2nd Reading Tue Dow Jones Newswires BRASILIA -- The Brazilian Senate will vote on the extension and increase of the Financial Transactions Tax, known as CPMF, in a second reading next Tuesday, Senate chairman Antonio Carlos Magalhaes announced Thursday. The CPMF increase and extension is a cornerstone of the government's three-year fiscal stability plan and vital for Brazil to achieve the fiscal goals it is committed to in terms of the $41.5 billion international aid package. On Jan. 6, the upper house approved the measure 61 to 19 in a first reading. If approved by the Senate, the proposal still needs two more voting rounds in the volatile Chamber of Deputies before it can be applied 90 days later. The CPMF rise and extension was expected to earn the government more than 7.2 billion reals (BRR) ($1=BRR1.32) this year when it was originally proposed, but Congress didn't approve the measure before year's end. The temporary tax, which runs out Jan. 23, is charged on all financial transactions by bank-account holders. Under the proposal, the CPMF will be extended to the year 2001, simultaneously increasing its rate to 0.38% from the current 0.20% for the next 12 months, and then lowering it to 0.30% in 2000 and 2001. Because of the delay in its approval by Congress, the government issued a "mini-package" Dec. 29 aimed at partially offsetting losses from the expected CPMF revenue this year. On Wednesday, a joint session of Congress approved with a large majority the emergency mini-package that includes hefty rises in corporate taxation. This gave new hope to President Fernando Henrique Cardoso, who asked legislators Wednesday to heed his call to push through reforms that he considers indispensable to saveguard Brazilian economic stability and create renewed growth. In a statement issued by the Senate's press office Thursday night, upper house chairman Magalhaes said that if approved swiftly by the Senate Tuesday, the CPMF ammendment can already be handled by the lower house Chamber of Deputies before the end of the current extraordinary session of Congress, which runs out Jan. 29. The session was called by Cardoso specifically to speed up voting on reforms he considers vital to deal with the continued crisis battering Brazil and defend the real. -By William Vanvolsem; (5561) 244 3095; wvanvolsem@ap.org

To: Steve Fancy who wrote (11752)	1/15/1999 2:33:00 AM
From: Steve Fancy	Read Replies (7) \| Respond to of 22640

Brazil's Supreme Court OKs State To Hold Debt Payment Dow Jones Newswires BRASILIA -- Brazil's Federal Supreme Court late Thursday ruled that the country's fourth-richest state be allowed to go into receivership on a 57 million reals (BRR) ($1=BRR1.32) debt to the federal government due Friday. Judge Carlos Velloso accepted a plea by Rio Grande do Sul state attorney-general Paulo Torelly that BRR31.2 million be deposited in judicial receivership with the court as a guarantee until the merit of the case be judged. On Jan. 11, Rio Grande do Sul governor Olivio Dutra said that his state's total debt to the federal government - totaling BRR800 million in 1999 - is "unpayable." The court decision follows a 90-day moratorium declared by Minas Gerais state Governor Itamar Franco last week on his state's federal debts - of which BRR26.8 million was due Jan. 10 - and which caused local and international stocks to plunge as a result of renewed doubts about Brazil. Judge Velloso allowed Rio Grande do Sul state to deposit BRR31.2 million as a judicial guarantee until the merits of the case are judged. Torelly told the judge that within 30 days Rio Grande do Sul will present arguments to the court why it's not able to meet its commitments to the federal government. Last week, Governor Dutra's administration held talks with Finance Minister Pedro Malan in efforts to reach an agreement on the state's debt, which the federal government says it won't roll over. On Jan. 11, the government reacted to the Minas Gerais moratorium by blocking a BRR11.7 million federal subsidy payout to the state in retaliation. Dutra, who is a member of the radical Workers'Party (PT), has chosen a different way from Franco's head-on clash with the federal government, resorting to the legal path instead of "rebellion," said political analyst Gerdt Kleyn. -By William Vanvolsem; (5561)244 3095; wvanvolsem@ap.org