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

To: Steve Fancy who wrote (12303)	1/24/1999 9:41:00 AM
From: Fernando Saldanha	Respond to of 22640

Steve, indeed some lawmakers stated that "now nobody can blame the Congress." Not a good sign. The hot topic now are the rumors that Malan will be out. One possible replacement would be Afonso Celso Pastore, which would be positive. On the other hand, if someone with a less market oriented outlook is chosen there will be further sharp drops in asset prices. People are starting to think about the fiscal consequences of inflation. With a 50% devaluation and an estimated elasticity of about 0.3, inflation could go up to 15% per year. The monetary base (M0) is about $20 billion, so the government would earn seignorage of about $3 billion. Further, if the government can resist the pressures from wage earners, inflation could be a way to reduce the real wages of civil servants. The bottom line is the debt/GDP ratio, and the government must find a way to stop it from exploding, as it has been doing. It is now at 44% and growing at at about 6-8% per year. The devaluation added another 4% (already included in my 44% figure above). Regards. P.S. - I sent you a private message.