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To: Calvin who wrote (93910)	2/2/1999 10:19:00 AM
From: Mohan Marette	Respond to of 176388

<Brazil> More details- Good show I say. Brazilian Real Soars as Much as 10% as Concerns Ease on Currency Controls Brazil Real Rises; Soros Aide Hired as Central Banker (Update1) (Adds nomination of Fraga as central banker. More comments, updates prices.) Rio de Janeiro, Feb. 2 (Bloomberg) -- Brazil's currency soared as much as 10 percent against the dollar and the government replaced its central banker for the second time in a month, hiring a fund manager for financier George Soros. A two-day rally in the currency came as meetings with the International Monetary Fund stoked optimism the government may soon announce new policies to steady the real, which has lost more than a third of its value the past three weeks. The appointment of Arminio Fraga as central bank president shored up that optimism, traders said. Fraga, a former central bank director, has managed the Quantum Emerging Markets Growth Fund for Soros. He replaced Francisco Lopes, who replaced Gustavo Franco last month when the currency was devalued. ''The market is receiving the news well,'' said Pedro Tomazoni, head of capital markets at Lloyds Asset Management in Sao Paulo. ''Lopes didn't know how to deal with crisis.'' The real rose as high as 1.74 to the dollar from 1.91 yesterday. It recently traded at 1.81. Overnight interbank interest rates were unchanged at 39 percent. IMF Talks The IMF talks could also yield agreements on new steps by Brazil to narrow its budget deficit and may hasten a $9 billion payment from the $41.5 billion loan package arranged by the IMF. The agency's No. 2 official, Stanley Fischer, arrived in Brazil demanding quick action to shore up confidence in the currency. ''We are looking for some clear policies from the government and perhaps the release of new IMF money,'' said Brendan Tynan, head of emerging market trading with Barclays Capital in London. ''The difficulties aren't over as at these price levels things could stall.'' Investors also rallied to comments yesterday by Soros saying the real was undervalued after plunging below 2 reais to the dollar as government officials denied rumors of impending capital controls. Investors got an extra incentive to buy reais after the government pushed overnight interest rates to almost 40 percent from 38 percent Friday. ''With interest rates higher and fears of currency controls failing to materialize, people aren't rushing to sell their reais,'' said Odair Abate, chief economist at Lloyds Bank Plc's Sao Paulo office. Since Brazil gave up a four-and-a-half-year defense of its currency on Jan. 15 the real slipped more than a third. Last Friday Brazilians flocked to banks to withdraw money and buy dollars on concern that Brazil would confiscate their money to prevent speculation against the real. New Action Needed To be sure, Abate said that the real could soon fall if the government fails to define its new exchange rate policy after meetings this week with the IMF, which arranged a $41.5 billion bailout approved in December. The IMF is in Brazil to monitor compliance with the bailout. ''Investors will sell the real if budget reforms are not passed soon,'' Abate said. ''There is still likely to be a lot of turmoil to come.'' Lower trade, current account and budget deficits along with stable or higher reserves are the things investors want most, he said. The decline in the real has raised the cost of Brazil's large dollar- indexed or dollar-denominated debts, costs that will require additional cuts to meet December IMF targets for the reduction of the deficit, Abate added.