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

To: Steve Fancy who wrote (12150)	1/21/1999 11:33:00 AM
From: Steve Fancy	Respond to of 22640

Brazil Withholds $12.5 Mln Transfer to Minas Gerais State in Debt Dispute Brazil Withholds $12.5 Mln Transfer to Minas Gerais State Sao Paulo, Jan. 21 (Bloomberg) - Brazil's treasury department withheld a 19.8 million reais ($12.5 million) tax payment to the state of Minas Gerais due yesterday, Folha de S. Paulo newspaper reported. The move circumvented a preliminary verdict issued Tuesday that prevented the central government from cutting such transfers to Brazil's second-most populous state. The federal government had already withheld a 11.7 million reais transfer to Minas Gerais on Jan. 11, after the state froze debt payments to the central government. Minas Gerais' governor Itamar Franco declared Jan. 6 the state had no money to meet its obligations and would suspend all payments on its $15 billion of debt to the federal government for 90 days. (Folha 1/21; 1-7) latinvestor.com

To: Steve Fancy who wrote (12150)	1/21/1999 11:36:00 AM
From: Steve Fancy	Respond to of 22640

Deutsche Bank Cuts Brazil's Weighting in Stock Portfolio After Devaluation Deutsche Bank Cuts Brazil's Equity Weighting (Repeat) (Repeats to fix date) Sao Paulo, Jan. 21 (Bloomberg) - Deutsche Bank cut its weighting on Brazil in its emerging markets stock portfolio, as the devaluation of the currency is expected to further cut economic growth. Deutsche Bank said in a report it had reduced Brazil to ''underweight'' from ''neutral'' in its global emerging market portfolio. The bank recommends investors keep 6.8 percent of emerging market assets in Brazil, down from 12.3 percent. The weaker currency will boost the cost of servicing Brazil's $89 billion foreign debt and the 70 billion reais ($45 billion) component of the 330 billion domestic debt, it said. The real has lost more than 20 percent of its value against the dollar since Brazil devalued last week. ''This scenario provides little automatic help for the fiscal deficit,'' said the report, by London-based Geoffrey Dennis and Jane Heap, a New York-based strategist. ''Without some new independent fiscal action, interest rates will remain high.'' Concern over a return of inflation following the weakening of the real has kept interest rates at 32 percent, making borrowing expensive for companies, choking off growth, the report said. Deutsche Bank said Brazil's gross domestic product will shrink 4.5 percent next year -- worse than the previous forecast of a 2.5 percent decline -- while inflation will rise to 4 percent compared with its earlier estimate of zero percent. It said it expected the real to fall to about 1.65 reais to the dollar by year end although it would probably overshoot that level before it gets there. The real closed at 1.58 to the dollar Wednesday. Deutsche Bank -- Europe's second-largest bank -- is the latest to detail a grim outlook for Brazil in 1999. J.P. Morgan forecasts the Brazilian economy will contract by 4.3 percent for 1999. Brazil's first economic slowdown since 1992 could squeeze not only the local economy but also other Latin American countries and international companies exporting to the region. Deutsche Bank predicts gross domestic product in Argentina will stay flat at zero percent in 1999, compared with its earlier forecast of 1.8 percent growth, while in Chile growth will fall to 1.5 percent from 2.3 percent. -------------------------------------------------------------------------------- © Copyright 1999, Bloomberg L.P. All Rights Reserved. latinvestor.com

To: Steve Fancy who wrote (12150)	1/21/1999 11:41:00 AM
From: Steve Fancy	Respond to of 22640

Brazil Stocks Fall for 1st Time in 5 Days on Concern Recession Is on Way Sao Paulo, Jan. 21 (Bloomberg) -- Brazilian stocks fell, snapping a four-day rally, as investors bet stock prices rose too high given the prospects for a recession. The benchmark index tumbled 5.1 percent to 7278.41, on concern the effects of last week's currency devaluation would offset Congressional efforts to narrow a yawning budget deficit. Legislators last night approved a tax which could raise 3.1 billion reais ($2 billion) this year. It was considered crucial to efforts to slash the 73 billion reais deficit and bring down interest rates. ''There are other votes still to come,'' said Carlos Hokama, who manages $35 million in equities at Banco Credibanco SA in Sao Paulo. ''And we still don't know really how much the government will raise from this tax.'' The fall on Brazil's main Bovespa index snapped four days of gains that have made it the world's best-performing index over the past five sessions, up 26 percent in dollars even as the real lost one-fifth of its value. Banks and utilities, which are facing a squeeze because of dollar debts and real revenue, were among leading decliners. Banco Estado de Sao Paulo SA, slid 8.4 percent to 43. Elsewhere in the region, stocks in Chile rose with the country's IPSA up 0.16 percent to 92.68. Bonds also fell, indicating investors are still concerned about Brazil's ability to cut its 73 billion reais deficit. A basket of emerging market debt fell 1.4 percent, according to J.P. Morgan & Co. Brazil's benchmark ''C'' bond fell 1.25 percent however, to 57.50. Capital Flight Capital flight continued Wednesday, with more than $330 million leaving the country. Outflows have averaged more than $500 million a day this month as companies flock to dollars to pay off maturing dollar debt before the currency weakens further. Deutsche Bank said it reduced its economic forecast this year to a decline of 4.5 percent, from a previous estimate of a 2.5 percent contraction. The bank expects the real to end the year at about 1.65 reais to the dollar, from 1.58 Wednesday. High interest rates and a weaker currency are expected to push Brazil into a recession this year. Legislators overwhelmingly approved the tax bill 334-147 with four abstentions. The bill will now go to the Senate, where a vote is scheduled for next Tuesday. The tax bill was part of 28 billion reais in deficit cuts proposed last year as condition for a $41.5 billion aid package arranged by the International Monetary Fund. -------------------------------------------------------------------------------- © Copyright 1999, Bloomberg L.P. All Rights Reserved.

To: Steve Fancy who wrote (12150)	1/21/1999 11:45:00 AM
From: Steve Fancy	Respond to of 22640

Amazing how things change over a couple hours sometimes... Brazil Stocks Seen Rising on Government Vote Victory Brazil Stocks Seen Rising on Government Vote Victory Sao Paulo, Jan. 21 (Bloomberg) -- Brazilian stocks and bonds could rise, led by exporting companies, after congress approved a tax on pensioners, a key test of the government's ability to narrow a yawning budget deficit and shore up investor confidence. The tax, worth 3.1 billion reais ($2 billion) this year alone, was considered crucial to efforts to slash the 73 billion reais deficit and bring down interest rates. ''This is a big step in the right direction,'' said Marcelo Gutirman, who manages $300 million in equities at Lloyds Bank Plc. in Sao Paulo. ''We've resolved our fiscal problems for 1999.'' A rise on Brazil's main Bovespa index would extend four days of gains that have made it the world's best-performing index over the past five sessions, up 26 percent in dollars. The Bovespa yesterday rose 3.9 percent to 7674.1, its highest level for more than a month. Stocks that could rise include Cia. Vale do Rio Doce, the world's biggest iron ore exporter, and Aracruz Celulose SA, Brazil's biggest exporter of pulp, on optimism the companies' revenue will rise as the weaker Brazilian currency makes their products cheaper for foreign clients. The real has lost more than 20 percent of its value against the dollar since the central bank allowed it to float against the U.S. currency last week. Petroleo Brasileiro SA could also gain. The oil company, Brazil's biggest, rose in European trading by 6.4 percent to 7.4 euros. Cia. Energetica de Minas Gerais, a state electricity provider, fell 1.5 percent to 12.5 euros, while Uniao de Bancos Brasileiros SA, Brazil's third-largest private bank, slipped 3 percent to 11 euros. The Brazilian tax approval could boost shares in other countries in the region, such as neighboring Argentina. ''(This) is a huge victory for the cause of fiscal austerity and reform in Brazil,'' said Arturo Porzecanski, chief economist for the Americas as ING Barings in New York. ''(It's) a very bullish sign for investors in emerging markets generally and in Brazil specifically.'' Bonds were little changed in early trading, indicating investors are still concerned about Brazil's ability to cut its 73 billion reais deficit. A basket of emerging market debt fell 0.7 percent, according to J.P. Morgan & Co. Brazil's benchmark ''C'' bond rose 0.5 percent however, to 59.25. Capital flight continued Wednesday, with more than $330 million leaving the country. Outflows have averaged more than $500 million a day this month as companies flock to dollars to pay off maturing dollar debt before the currency weakens further. Deutsche Bank said it reduced its economic forecast this year to a decline of 4.5 percent, from a previous estimate of a 2.5 percent contraction. The bank expects the real to end the year at about 1.65 reais to the dollar, from 1.58 Wednesday. High interest rates and a weaker currency are expected to push Brazil into a recession this year. Vital Vote Legislators overwhelmingly approved the tax bill 334-147 with four abstentions. The bill will now go to the Senate, where a vote is scheduled for next Tuesday. Legislators in the lower house were to vote on amendments to the bill, which even the opposition acknowledged would be approved. The tax, aiming to raise 3.1 billion reais ($2 billion) this year, is vital to convincing skeptical lenders the government can narrow its budget deficit. The pension system has become a symbol of Brazil's failure to live within its means. A jump in interest rates and a 22 percent decline in the currency's value against the dollar in the past week won't keep the government from repaying its 320 billion reais of domestic debt, Malan said, countering speculation of a debt rescheduling, according to the reports. Markets around the world were focused on Brazil's Congress, whose role was underlined in testimony by U.S. Federal Reserve Chairman Alan Greenspan at the U.S. Congress. ''Follow through in reducing budget imbalances and in containing the effects on inflation of the drop in value of the currency will be needed to bolster confidence and to limit the potential for contagion to the financial markets and economies of Brazil's important trading partners,'' Greenspan said. The tax bill was part of 28 billion reais in deficit cuts proposed last year as condition for a $41.5 billion aid package arranged by the International Monetary Fund. -------------------------------------------------------------------------------- © Copyright 1999, Bloomberg L.P. All Rights Reserved.

To: Steve Fancy who wrote (12150)	1/21/1999 11:56:00 AM
From: Steve Fancy	Respond to of 22640

Soros: Brazil Interest Rates Too High; Bad IMF Advice Dow Jones Newswires PARIS -- George Soros said Thursday that the world's developed countries are facing an asset price bubble. The financier's comments follow a warning from U.S. Federal Reserve Board Chairman Alan Greenspan Wednesday that the U.S. stock market is over priced. Speaking via video-link at a French investment conference, Soros also said that the International Monetary Fund hasn't offered the best advice to Brazil where interest rates remain too high after the recent devaluation of the real. "Interest rates (in Brazil) are far too high, and unless confidence returns and those rates decline, Brazil will go into a very serious recession," Soros said. He added that the IMF had recommended that Brazil raise rates after it allowed the real to float freely against other currencies. "That was bad advice," he said. Brazil needs high interest rates, but they needn't have been increased, Soros said. On the subject of the level of world equity markets, Soros said: "I think one can detect the formation of an asset bubble, similar to one Japan had in the late 1980s, that is what I see as the next major threat to the (global financial) system." Soros reiterated the need for the IMF to be restructured so that it acts more like a quasi-international central bank. Soros also called for international regulation of hedge funds. Soros controls a group of the world's biggest hedge funds, among which the best known is the Quantum Fund, with a combined $14 billion to $15 billion funds under management. "I think that's too much... it makes management of the funds difficult," Soros said. -By Alan R. Katz; 33 (0) 5300 0303; akatz@ap.org