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

To: Steve Fancy who wrote (11920)	1/18/1999 10:36:00 AM
From: Lucky	Respond to of 22640

The big question...whether to write calls against one's TBH position, or wait until the end of this week? Think I'll wait.

To: Steve Fancy who wrote (11920)	1/18/1999 10:44:00 AM
From: Steve Fancy	Respond to of 22640

Banco Fonte Cindam Says It Lost Money After Brazil Govt Devalued Currency Banco Fonte Cindam Burned by Brazilian Currency Devaluation Mon, 18 Jan 1999, 1:41pm EDT Rio de Janeiro, Jan. 18 (Bloomberg) -- Banco Fonte Cindam SA, a Brazilian investment bank in talks for a tie-up with Banque Nationale de Paris, said it got burned by the government's currency devaluation last week. Fonte Cindam, one of the last Brazilian investment banks without an international partner, had bet the government would keep its promise to maintain the value of the real, at least until Feb. 1, said Jose Rubens Ponte, a bank spokesman. When it became clear that the bet was wrong, foreign banks, which had loaned it money to invest in the currency futures market, demanded their money back. ''There are some very unhappy traders here who aren't going to get their bonuses,'' Ponte said. ''We took a hit, covered our losses and the only real impact is to hurt the owners' profits.'' He declined to say how much the bank lost in currency trading. Last week Brazil abandoned a four-and-a-half-year defense of the real and the currency fell from 1.21 last week to as low as 1.525 to the dollar today. The big loser in futures markets, though, may be the Brazilian government. Traders said it lost at least $700 million in a last ditch attempt to defend the real before letting the currency float last week. It had bought up about 65 percent of the foreign currency futures contracts open on the BM&F commodities and futures exchange at the time of the devaluation, said Sergio Machado, a trader at Banco Fator. Banco Fonte Cindam was formed in July 1996 by the merger of Banco Fonte and Banco Cindam. -------------------------------------------------------------------------------- © Copyright 1999, Bloomberg L.P. All Rights Reserved. latinvestor.com

To: Steve Fancy who wrote (11920)	1/18/1999 10:45:00 AM
From: Steve Fancy	Respond to of 22640

Brazil Congress to Speed Up Tax Measures in Attempt to Boost Confidence Brazil Congress to Speed Up Tax Measures to Boost Confidence Mon, 18 Jan 1999, 1:43pm EDT Rio de Janeiro, Jan. 17 (Bloomberg) -- Brazil's congress plans to speed up voting this week on spending cuts and tax increases, as last week's devaluation of the currency threatens to add to its already bloated budget deficit. The passage of the measures -- a financial transaction tax and a bill to cut pension spending -- are seen as crucial to government plans to restore investor confidence and limit declines in the currency. Brazilian stocks and bonds soared Friday after Brazil agreed to let its currency float against the dollar, as investors speculated interest rates may come down, reviving economic growth. Yet the gains may be short-lived if Brazil's congress doesn't take steps soon to back government proposals to slash spending and raise revenue to reduce an estimated $64 billion budget deficit. ''If the government keeps the floating exchange rate, budget cuts will be more necessary than ever before,'' said Amaury de Sousa of Techne Consultora, a business consulting firm in Rio de Janeiro. Investors also see such cuts as necessary to head off a return of inflation and an even weaker real. Last week the currency slid about 15 percent to 1.43 reais to the dollar, after the central bank agreed to stop its costly defense of the real. ''Any misstep by the congress will be reflected in the exchange rate,'' said Carlos Eduardo de Freitas an economist and former central bank director. The devaluation hits the government coffers hardest. About a fifth of the country's 320 billion reais in domestic debt is linked to the dollar, or 64 billion reais ($44.8 billion) in all. The cost of repaying that debt just rose 15 percent last week with the weaker currency. The government owes another $90.3 billion to foreign creditors. Cutting the budget deficit is also a condition for a $41.5 billion International Monetary Fund-led bailout of Brazil. Government officials met in Washington with the IMF over the weekend to discuss the targets, which include a budget deficit equal to 4.7 percent of gross domestic product by year's end, from a projected 8.1 percent of GDP at the end of 1998. To cut the deficit, Brazil proposed a series of tax increases and spending cuts worth about 28 billion reais for this year. Several of the measures have been delayed or rejected, adding to concerns among investors that Brazil won't be able to finance its deficit. The government is trying to get the cuts back on track, and may get approval in the senate Wednesday for an increase in a financial transaction tax, worth as much as 4 billion reais this year. The proposal must then go to the house of representatives for approval, expected in March. The government also hopes to get a proposal passed this week by both houses to increase income taxes on government workers and retired bureaucrats. This could raise another 4 billion reais a year. The currency could fall as low as 1.70 reais to the dollar if the measures are rejected, De Freitas said. Approval could see the real strengthen to 1.38. The spending cuts are also needed to keep inflation in line. Consumer prices tend to rise on a weaker currency as the costs of imports soars. The inflation rate could rise to at least 5 percent this year, economists said, after prices declined 1.8 percent last year. Until it decided to end its defense of the real, the government controlled the supply of money in the country by controlling interest rates and the exchange rate. By expanding or contracting the supply of money in the economy, it controlled inflation. Now De Sousa says, the government has only one way to control the money supply: through government spending. If it wants to keep inflation low, it's going to have to cut spending. ''To control inflation congress will have to approve a fairly radical fiscal adjustment of the sort that it has been unwilling to approve as of yet,'' he said. Plans to narrow the deficit this week also come as opposition governors meet in Belo Horizonte, Brazil to discuss their debts with the federal government. One state, Minas Gerais, has already frozen payments on its subsidized government loans and is looking for allies in an attempt to renegotiate debt agreements. -------------------------------------------------------------------------------- © Copyright 1999, Bloomberg L.P. All Rights Reserved. latinvestor.com

To: Steve Fancy who wrote (11920)	1/18/1999 10:48:00 AM
From: Steve Fancy	Respond to of 22640

Latin American Stocks Rise for Second Day on As Lower Rates Expected Latin American Stocks Rise for Second Day on Lower Rates Mon, 18 Jan 1999, 1:46pm EDT Sao Paulo, Jan. 18 (Bloomberg) -- Brazilian stocks rose for a second straight session on optimism the central bank's decision to continue allowing the real to float freely against the dollar may help reduce interest rates. ''This means interest rates will fall, making Brazilian products more competitive,'' said Carlos Hokama, who manages $40 million in equities at Banco Credibanco SA. The country's main Bovespa index rose 8.8 percent to 7320. Some 21 stocks rose, while 10 fell and 25 were unchanged. The index rose 33.4 percent Friday, or about 25 percent in dollar terms --its biggest gain since 1991 -- as investors approved Brazil's decision to end its costly defense of the real. Gains were offset in dollars terms by a 5.3 percent decline in the real versus the dollar. Chile's main IPSA index rose 0.3 percent to 90.01. Receipts for Telecomunicacoes Brasileiras SA -- the former holding company for Brazil's telecommunications sector -- led the rise, climbing 7 percent to 106 reais, as investors snapped up a stock whose price looked cheap compared to its earnings potential. Petroleo Brasileiro SA Petrobras, Brazil's biggest company, also gained, up 3.8 percent to 109 reais. Brazil's central bank's announcement today it would allow the market to decide the real's true level caused the currency to weaken further, by 6.5 percent to 1.53 reais to the dollar from Friday's 1.43 reais to the dollar. Friday's decision to let the real to float freely removed investor uncertainty over a devaluation, although the wave of relief it prompted may be short-lived, analysts said, as Brazil slips into a recession and inflation rises. ''There's a lot of good feeling around with people believing it's all over,'' said Eduardo Azevedo, a money market manager at ING Barings. ''But the fact is there are a lot of things that still need to be decided.'' Whether the rise is sustained or not will depend on how fast Brazil's congress speeds up approval of the country's fiscal adjustment program, aimed at plugging a $64 billion budget deficit, analyst said. ''These reforms must now be approved quickly,'' said Roseli Machado, of Banco Fator SA in Sao Paulo. ''That's now the crucial point.'' Machado manages a $300 million fund. Investors are also watching the outcome of a meeting today of six rebel state governors allied to Minas Gerais Gov. Itamar Franco. Franco's declaration that he would not meet the state's debt commitments to the central government sent stocks and bonds tumbling last week as investors feared Brazil would not be able to plug its yawning budget deficit. ''We all know what the governors are going to say, but we don't know what their tone will be,'' said Luiz Felipe Stevenson, who manages $45 million in equities at Tudor Asset Management in Sao Paulo. Capital flight from Brazil was about $4.4 billion last week as investors rushed to dollars to protect their money, pushing the country's international reserves to around $30 billion. The exodus of foreign capital fell back to about $319 million Friday, according to Lloyds Bank plc in Sao Paulo, a factor likely to further buoy investor confidence, analysts said. Brazilian bonds also rose. A basket of Brazilian debt gained 3 percent according to J.P. Morgan & Co., while a basket of emerging market debt was up 1.1 percent. -------------------------------------------------------------------------------- © Copyright 1999, Bloomberg L.P. All Rights Reserved.

To: Steve Fancy who wrote (11920)	1/18/1999 10:51:00 AM
From: Steve Fancy	Respond to of 22640

Brazil Equity Movers: Stocks Rise; Telebras, Steel Shares Gain Mon, 18 Jan 1999, 1:46pm EDT Sao Paulo, Jan. 18 (Bloomberg) -- Brazilian stocks rose for a second session on optimism a weaker real would prompt a slide in interest rates, reviving growth in Latin's America's biggest economy. The Bovespa benchmark index of 57 leading shares rose 5.5 percent -- a 0.3 percent decline in dollar terms -- to 7120.7. Thirty-seven stocks rose, 4 fell, while 15 were unchanged. The climb followed a central bank decision to continue allowing the market to determine the Brazilian currency's true level -- a move which saw the real drop 5.3 percent to 1.51 reais to the dollar compared with 1.43 reais to the dollar Friday night. Interest rate futures fell further on the announcement, with rates for March delivery down to 35.4 percent compared with 47.9 percent Friday. The following is a list of companies with shares that moved in Brazilian markets today. The stock symbol is given in parentheses after the company name. Telecomunicacoes Brasileiras SA (RCTB40 BZ), the former holding company for the Brazilian telecommunications industry, rose as much as 7.5 percent to 106.5 reais. A decline in interest rates would prompt higher demand for telecommunication services, one of the Brazil's fastest growing sectors, analysts said. Usinas Siderurgicas de Minas Gerais SA (USIM4 BZ) climbed as much as 15.5 percent to 2.75 reais and Cia. Siderurgica Paulista (CSIP6 BZ) rose 8.3 percent to 0.13 centavos. Sales at both Brazilian steelmakers are expected to surge as a weaker real makes their products cheaper for foreign customers. Cia. Brasileira de Distribuicao Grupo Pao de Acucar (PCAR4 BZ) rose as much as 8.1 percent to 20 reais after the supermarket operator said it formed an association with Peralta Comercial e Importadora Ltda, adding 37 supermarkets and one hypermarket to its extensive store chain. -------------------------------------------------------------------------------- © Copyright 1999, Bloomberg L.P. All Rights Reserved. latinvestor.com

To: Steve Fancy who wrote (11920)	1/18/1999 10:55:00 AM
From: Steve Fancy	Respond to of 22640

Sounds like the Brazilian TBH equivalent was as high as R$106.5/1.53 = US$69.6 Telecomunicacoes Brasileiras SA (RCTB40 BZ), the former holding company for the Brazilian telecommunications industry, rose as much as 7.5 percent to 106.5 reais. A decline in interest rates would prompt higher demand for telecommunication services, one of the Brazil's fastest growing sectors, analysts said. sf

To: Steve Fancy who wrote (11920)	1/18/1999 10:56:00 AM
From: Steve Fancy	Respond to of 22640

Brazil's Tele Norte Celular Part. Maintained 'Hold' at SG Cowen Mon, 18 Jan 1999, 1:54pm EDT Sao Paulo, Jan. 18 (Bloomberg Data) -- Tele Norte Celular Participacoes (TCN US) was maintained ''hold'' by analyst Jose M. Linares at SG Cowen. -- Marcelo Figueiredo in Sao Paulo, (011)5511-3048-4543 (Story illustration: For a chart of the company's stock prices, see TCN US GP D. For more company news and information, see TCN US BR, BQ, CN, COMP, TRA. For more country and industry news, see NI TLS, NI ANA, NI BRAZIL, NI LATAM, NI EM. For more rating changes, see BBSA2) -0- ( ) Jan/18/ 99 10:02 --------------------------------------------------------------------------------

To: Steve Fancy who wrote (11920)	1/18/1999 10:57:00 AM
From: Steve Fancy	Respond to of 22640

Brazil's Telemig Celular Part. Reiterated 'Buy' at SG Cowen Mon, 18 Jan 1999, 1:55pm EDT Sao Paulo, Jan. 18 (Bloomberg Data) -- Telemig Celular Participacoes (TMB US) was reiterated ''buy'' by analyst Jose M. Linares at SG Cowen. -- Marcelo Figueiredo in Sao Paulo, (011)5511-3048-4543 (Story illustration: For a chart of the company's stock prices, see TMB US GP D. For more company news and information, see TMB US BR, BQ, CN, COMP, TRA. For more country and industry news, see NI TLS, NI ANA, NI BRAZIL, NI LATAM, NI EM. For more rating changes, see BBSA2) -0- ( ) Jan/18/ 99 10:01

To: Steve Fancy who wrote (11920)	1/18/1999 10:59:00 AM
From: Steve Fancy	Respond to of 22640

Brazil Allows Real to Trade; IMF Rejects Faster Aid (Correct) Mon, 18 Jan 1999, 1:57pm EDT (Corrects that Malan to meet with Summers today.) Sao Paulo, Jan. 18 (Bloomberg) -- Brazilian stocks and bonds rallied for a second day and the currency slumped as the finance minister appealed for support among international lenders to shore up the country's tattered finances. The talks in Washington came after Brazil scrapped its effort Friday to prop up the currency, a defense that became unsustainable when more than $4 billion of capital fled last week and interest rate futures soared to more than 70 percent. Finance Minister Pedro Malan is scheduled to meet with U.S. Federal Reserve chairman Alan Greenspan and Deputy Treasury Secretary Lawrence Summers after reports that the International Monetary Fund rejected his bid to speed up payments from a $41.5 billion credit line. The IMF refused to confirm or deny the reports, though the real slid 5.6 percent to 1.515 to the dollar, bringing its loss to 20 percent for the year. ''If the IMF had given the early payment, it would have been a signal of support for the new policy,'' said Vanderlei Vargas, a currency trader at Banco Sul America in Sao Paulo. ''Their refusal to do so could make foreign investors uneasy.'' Malan is scheduled to give a press conference later today. Stocks Stocks and bonds rallied for a second day. The government's move to allow the currency to trade drove down interest rates, offsetting concerns the devaluation may drive up debt defaults and that Congress may fail to pass measures to narrow a $64 billion budget deficit. The government's inability to push a $23.5 billion of spending cuts and tax increases through Congress -- a condition of the IMF aid -- helped rattle investors and pave the way for the devaluation. ''If something goes wrong [on the Congressional voting], it will be a disaster,'' said Richard Svartman, a Brady bond trader at Banco Fonte Cindam SA. The benchmark stock index rose 5.5 percent -- unchanged in dollar terms -- and the benchmark ''C'' bond jumped 2 percent, driving its yield down 42 basis points to 16.9 percent. Interest rate futures for March delivery fell to 37 percent from 43 percent on Friday. Free Float After dropping its currency defense on Friday and emergency weekend meetings in Washigton, Brazil's central bank said it ''will let the market determine the foreign exchange rate.'' ''The central bank could intervene in the market, occasionally, and in a limited form, to contain disordered movements in the foreign exchange rate,'' the statement said. The real could trade between 1.45 and 1.60 to the dollar, said Henrique de Campos Meirelles, president of BankBoston Corp, in an interview Friday. ''The government cannot go against the markets,'' said Carlos Eduardo de Freitas, a professor of economics at the Fundacao Getulio Vargas, an economic research center in Brazil, and a former central bank director. In the weekend meeting, the Brazilian officials requested an advance installment on the aid package the IMF organized in November, Brazilian radio reported. Brazil, which received $9 billion from the package last month, is expected to receive about another $9 billion at the end of February, with about half of that from the IMF. The IMF turned down Brazil on the weekend, Folha de S. Paulo newspaper reported. The country wants the disbursements to be available sooner to protect against further capital flight and sharp declines in the real. Brazil has agreed with the IMF not to let reserves fall below $20 billion, or enough to finance four months of imports. They're now estimated at between $30 billion and $35 billion. Malan and Lopes were also expected to review Brazil's economic targets with the IMF, according to Brazilian media reports. Inflation is expected to rise to about 5 percent or 10 percent this year because of the devaluation, from deflation of 1.8 percent in 1998, economists said. The devaluation is also likely to deepen an expected recession, with the economy contracting as much as 5 percent. Budget Deficit The weaker currency also makes it harder for Brazil to slash its estimated $64 billion budget deficit because financing costs on its dollar-linked debt will rise. This could be offset by a decline in benchmark interest rates, now at 29 percent a year. Brazil's congress plans to speed up voting this week on spending cuts and tax increases. The passage of the measures -- a financial transaction tax and a bill to cut pension spending -- are seen as crucial to government plans to restore investor confidence and limit declines in the currency. ''Approval of these measures are now more necessary than ever,'' said Freitas. ''The foreign exchange rates will be thermometer of the works in congress.'' -------------------------------------------------------------------------------- © Copyright 1999, Bloomberg L.P. All Rights Reserved. latinvestor.com

To: Steve Fancy who wrote (11920)	1/18/1999 11:06:00 AM
From: Steve Fancy	Read Replies (1) \| Respond to of 22640

This is the understatement of the year... ''If something goes wrong [on the Congressional voting], it will be a disaster,'' said Richard Svartman, a Brady bond trader at Banco Fonte Cindam SA. ...everytime things take a turn up in Brazil, something comes along to burst the bubble. Personally I don't think Itmar will have much credibility going forward, but any slip in Congress and it's all over. I personally think they may get through it this time, based on the overwhelming majorities so far this year, apparent lack of support for Itmar, and what I hope is a new sense of urgency over there. sf

To: Steve Fancy who wrote (11920)	1/18/1999 11:13:00 AM
From: Steve Fancy	Respond to of 22640

Malan Denies Brazil Sought Faster IMF Loan; Vows to Follow Plan Malan Denies Brazil Sought Faster IMF Loan; Vows to Follow Plan Mon, 18 Jan 1999, 2:09pm EDT Washington, Jan. 18 (Bloomberg) -- Brazil's Finance Minister Pedro Malan denied that his government sought accelerated loans from the International Monetary Fund, saying Friday's decision to float the currency eliminated the need for a quick infusion of funds. Malan, speaking at a press conference at IMF headquarters here, said his government was still committed to following the IMF program of budget cuts and other austerity measures, even though it abandoned its defense of the currency, one of the pillars of the IMF program. ''We have a new system in which we have consulted with (the IMF and the U.S. Treasury), and we agreed it was the proper system,'' Malan said. ''We are looking ahead instead of looking at the past.'' Throughout the press conference, Malan stressed the importance of the government's making progress on fiscal measures like budget cuts and on maintaining a strong monetary policy to keep inflation down. These measures include a pledge to slash its $64 billion budget deficit to boost investor confidence and ensure a quick decline in interest rates. He said he'll meet again today with Deputy U.S. Treasury Lawrence Summers and with Federal Reserve Chairman Alan Greenspan. Real Float Brazil said earlier today it will allow the currency to trade freely, following up its move Friday to drop its defense of the real, in a bid to shore up reserves and revive the slumping economy. Brazil's effort to prop up the currency became unsustainable when more than $4 billion of capital fled last week and interest rate futures soared to more than 70 percent. Stocks and bonds rallied for a second day and the currency slumped as Malan appealed for support among international lenders to shore up the country's finances. Investors are betting the benefits of a cheaper real -- lower interest rates and more exports -- will outweigh the costs, which include higher inflation and raising the cost of foreign currency debt. Brazil's central bank said today it ''will let the market determine the foreign exchange rate.'' ''The central bank could intervene in the market, occasionally, and in a limited form, to contain disordered movements in the foreign exchange rate,'' the statement said. Brazil's decision Friday to let the market set the rate for the real sent stocks and bonds soaring, as investors speculated it will ease interest rates and allow Brazil to stop its costly defense of the currency. The benchmark stock index soared 33 percent -- 25 percent in dollar terms -- its biggest one-day gain in eight years, according to Sao Paulo stock exchange estimates. Budget Deficit The weaker currency will make it harder for Brazil to slash its budget deficit because financing costs on its dollar-linked debt will rise. This could be offset by a decline in benchmark interest rates. Brazil's congress plans to speed up voting this week on spending cuts and tax increases. The passage of the measures -- a financial transaction tax and a bill to cut pension spending -- are seen as crucial to government plans to restore investor confidence and limit declines in the currency. -------------------------------------------------------------------------------- © Copyright 1999, Bloomberg L.P. All Rights Reserved.