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To: Lee who wrote (90176)	1/21/1999 1:03:00 PM
From: Mohan Marette	Read Replies (2) \| Respond to of 176387

<Brazil> Congress passed Key Reform measure, but what the hell is the matter now. Lee: I don't understand this,the other day everybody was afraid the reform measure won't pass now that it is passed the market tanks.Well they ain't getting my money,I am tellingya,nice try though.<g> ====================== Brazil Market Drops After Congress Passes Key Reform Measure Updated 12.26 p.m. ET (1726 GMT) January 21, 1999 BRASILIA, Brazil — Brazilian stock and currency values dropped sharply today, despite approval by Congress of a pivotal austerity measure. Beto Barata/AP Cardoso: 'The deputies demonstrated the necessary firmness and feeling of urgency regarding the measure' The Bovespa index of the Sao Paulo Stock Exchange, Latin America's largest, was down 5.2 percent at midday. The real, trading freely against the dollar since Friday, slipped to 1.69 against the U.S. currency from the previous day's close of 1.58. Traders said shares slipped because investors were taking profits after several sessions of rising prices. The real's decline was blamed on market jitters about everything from high local interest rates to speculation about a possible devaluation of the Chinese yuan. "The market is extremely nervous, and any negative comment on the market at all creates panic," said one Rio de Janeiro dealer. Many traders had expected a calmer scenario today after Brazil's lower house of Congress passed a bill cutting federal pensions, boosting the government's chances of trimming the budget deficit. The Senate must also vote on the measure, which the Chamber of Deputies approved 335-147 on Wednesday. Senate President Antonio Carlos Magalhaes said preparations for a vote will begin immediately. The controversial cuts, which the Chamber had previously rejected four times, affect about 300,000 retirees. The move will save the government an estimated $2.5 billion a year. More important, however, was the message that the bill's approval sends to international investors — that Congress is willing to embrace the measures deemed essential to reinvigorating Latin America's largest economy. "The vote demonstrates Congress's understanding of Brazil's deepest problems," President Fernando Henrique Cardoso said after the vote. "The deputies demonstrated the necessary firmness and feeling of urgency regarding the measure." The bill's passage also gives the government a much-needed boost, showing investors that it can spur Congress into action on crucial economic reforms. Congressman and former Finance Minister Antonio Delfim Netto had said that although he didn't agree with the measure, he would vote for it "to stop the dollar going through the roof." Opposition party deputies took a different view. "We're taking money from the elderly just to show foreign investors we're working on the crisis," said Paulo Paim of the Worker's Party in Rio Grande do Sul. The global financial crisis engulfed Brazil in August, when investors withdrew funds for fear the government would not be able to cover a $65 billion budget deficit and might default on its loans. The government's recent problems in approving fiscal reforms helped rekindle investor fears. After spending billions of dollars in foreign reserves trying to prop up its overvalued currency, the real, Brazil began last week to take a series of steps to devalue it. As of midday trading, the real had lost about 28 percent of its value since then. The United States fears that if Brazil succumbs to an Asian-style currency crisis, it could undermine other countries in the region — and that would likely hurt the U.S. economy, which depends on Latin America as a major market for exports. The president of the Federal Reserve Bank of New York, William McDonough, played down those fears Wednesday, saying that Brazil's economic crisis was not a threat to the U.S. financial system. He spoke after meeting in New York with Brazilian Finance Minister Pedro Malan.