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

To: wl9839 who wrote (15314)	5/16/1999 10:04:00 PM
From: Steve Fancy	Respond to of 22640

Brazil economy mending, but not out of woods yet Reuters, Sunday, May 16, 1999 at 15:06 By Shasta Darlington SAO PAULO, May 16 (Reuters) - Brazil is celebrating signs that a currency crisis and recession appear to be over just four months after a shock devaluation, but analysts warn it is still too soon to throw a party for Latin America's biggest economy. Brazil announced just last week that it pulled out of recession in the first quarter of 1999, much sooner than economists predicted, and posted a wider-than-expected primary surplus in March, beating its own target. Market watchers applauded the results and declared they would temper dire predictions for a contraction of up to 5 percent in 1999. Still, recovery for Brazil will be an uphill battle against unemployment and sluggish exports on the homefront and the possibility of financial turbulence abroad, analysts said. "Things have stopped getting worse," said David Fleischer, political analyst at the University of Brasilia. "But there is still a lot of concern -- concern about what happens in the United States, concern about unemployment and what to do for exports," he said. Huge capital flight forced Brazil to relax its foreign exchange policy in mid-January, sparking a steep devaluation and fueling government forecasts of an economic downturn of between 3.5 and 4 percent of gross domestic product in 1999. The real's partial rebound, quickly falling interest rates, and stable prices have paved the way for a quicker recovery than imagined, however. Brazil's GDP grew 1.02 percent in the first quarter over the fourth quarter of 1998, punctuating back-to-back quarters in which the economy fell. In the same period, the surplus in Brazil's primary accounts, which exclude debt servicing costs, rose to 9.23 billion reais, overshooting by 50 percent the target agreed to with the International Monetary Fund as part of a huge rescue loan. Unemployment, however, has only continued to grow, grabbing headlines and drawing outraged letters from Brazilians. "The economy shows recovery...but dramatic unemployment continues," Folha de Sao Paulo newspaper declared in a front page article Sunday. According to labor unions, the jobless rate in Sao Paulo hit 19.9 percent in March, its highest level since the group began measuring unemployment in 1985. More conservative government figures show joblessness in Brazil as a whole rose to 8.15 percent in March from 7.51 percent in February. Employment agencies in Sao Paulo have started offering coffee and snacks to the thousands of jobless who wait hours in line to apply for increasingly limited openings. "We've already had cases of people fainting in line due to hunger," the director of Top Services agency, Lucinei Scalabrin, told Estado de Sao Paulo newspaper Sunday. And unemployment isn't the only problem facing the still-fragile economy. Brazil also needs to jump-start exports, which have failed to take off even after the near 30 percent currency devaluation, analysts said. While the trade balance has improved, they say it is due more to a drop in imports than a boom in exports. Even officials admit Brazil will not meet its trade surplus target of $10.8 billion in 1999. "There's a lot of concern about how to expand exports," Fleischer said. Brazil, which could still face an economic contraction in the second quarter, is also vulnerable to turbulence in foreign markets, analysts said. An increase in U.S. interest rates, seen as increasingly likely if inflation there fails to slow, could sap much of the short-term investment that has flowed into Brazil in the last month, bolstering the real and pushing stocks up 15 percent. "We have a promising economic situation, one fully recognized by international investors...But hot money might flow out again," Fleischer said. shasta.darlington@reuters.com)) Copyright 1999, Reuters News Service

To: wl9839 who wrote (15314)	5/16/1999 10:25:00 PM
From: Steve Fancy	Respond to of 22640

WEEKAHEAD-Emerging debt seen up on US/Brazil rates ReutersPlus, Sunday, May 16, 1999 at 17:45 By Hugh Bronstein NEW YORK, May 16 (Reuters) - Emerging market bond prices will steam ahead this week if, as expected, U.S. interest rates remain steady and Brazilian rates continue to fall, analysts said. Benchmark Brazil C bonds <BRAZILC=RR> will push through a bid of 70 if monetary policy meetings in Washington and Brasilia yield no sour surprises, said David Roberts, senior international economist at NationsBanc Montgomery Securities. C bonds ended at 66-3/4 Friday, down 1-7/8. Attention this week will be split between Tuesday's meeting of the rate-setting U.S. Federal Open Market Committee (FOMC) and Wednesday's meeting of its Brazilian analogue, the Monetary Policy Council (Copom). Analysts generally expect the Fed to leave rates unchanged, while the Copom cuts Brazilian rates again. "The result will be improved bond prices first for Brazil, and then for Argentina and the other major Latin American countries," Roberts said, who sees Brazil cutting its reference Selic rate by 2 percent or more. "Brazil already cut its base rate twice in the last 10 days and they will continue this downward trend for some time," Roberts said. Lower interest rates reduce debt service payments, which helps reduce the budget deficits of debt-laden emerging market countries. Bullishness on Brazil increased last week when the government announced that first quarter gross domestic product rose 1.02 percent on the previous three months, allaying fears that a serious recession would follow January's currency devaluation. As the biggest economy in Latin America, Brazil often sets the pace for other emerging countries. "If the U.S. bond market stabilizes and they cut rates in Brazil, emerging market bonds will trade higher by the end of the week," said David Rolley, emerging markets strategist at Loomis Sayles & Co. Turning to Russia, analysts said the end of President Boris Yeltsin's impeachment drama is unlikely to depress markets elsewhere. "Last week week when Yeltsin fired the prime minister (Yevgeny Primakov) and Russia bonds traded off hard, Brazil was able to cut its overnight interest rate by 250 basis points and its currency did not move," Rolley added. "So we've already had a Russian contagion test, and there wasn't any." This was not the case in August, when Russia defaulted on some of its debt and investors had to sell Latin American assets in order to raise money after their bankers raised margin calls. Margin calls occur when bankers ask for more collateral to secure speculative investments bought with borrowed money. Since August, investors have recoiled from Russia so dramatically that Yeltsin's troubles are unlikely to reverberate in other emerging markets in the near term, analysts said. And Yeltsin's most recent imbroglio does not necessarily signal a halt to Russia's economic reforms, Roberts of NationsBanc said. "The political impasse in Russia is going to go on for some time. This does not mean Russia is turning away from its effort to bring itself back into the international financial world," he added. Nonetheless, Standard & Poor's on Friday lowered its senior unsecured foreign currency debt ratings on the Russian Federation's Eurobonds to CC from CCC-minus. S&P also lowered its senior unsecured debt rating on the U.S. dollar-denominated Ministry of Finance (MinFin) Series III bonds to Single-D, a default rating, from CC. The lowering of the Eurobond ratings reflects the likelihood that disbursements under the planned International Monetary Fund agreement will be delayed as a result of Yeltsin's unexpected decision on May 12 to dissolve the government, S&P said. "In an environment of political uncertainty, it is doubtful that the IMF agreement can be implemented because of provisions requiring that several tax increases must be passed by Parliament before IMF funds may be disbursed," S&P said. Copyright 1999, Reuters News Service

To: wl9839 who wrote (15314)	5/16/1999 10:29:00 PM
From: Steve Fancy	Read Replies (1) \| Respond to of 22640

WEEKAHEAD-LatAm stocks may gain, eyeing U.S. Fed Reuters, Sunday, May 16, 1999 at 17:45 By Shasta Darlington SAO PAULO, May 16 (Reuters) - Latin American stocks should mostly rise this week though investors will be wary of a possible rate hike during the U.S. Federal Reserve meeting on Tuesday, traders said. The Fed's policy-setting arm, the Federal Open Market Committee (FOMC), could be prompted to raise rates at its gathering after higher-than-expected inflation data released Friday, traders said. The U.S. Labor Department reported that the Consumer Price Index (CPI) rose 0.7 percent in April in the sharpest monthly advance since October 1990. Higher U.S. rates could lure investors away from riskier emerging markets and from U.S. stocks, fueling profit-taking there. Still, traders were optimistic the Fed would hold rates steady for now. In ARGENTINA, stocks are expected to show little activity as investors await the outcome of Tuesday's Fed meeting. Trade will closely track Wall Street. Local dealers believe higher U.S. interest rates would stanch the flow of foreign cash into the bolsa. The blue chip MerVal <.MERV> index shed 0.1 percent Friday to end at 546.0 5 points, bringing the week's losses to 7.45 percent. The index is still up 27 percent so far this year. In BRAZIL, markets could extend recent gains, but will depend on the Fed to keep rates unchanged, traders said. But investors also will be looking for a rate cut in Brazil Wednesday when Brazil's Monetary Policy Committee (Copom) meets, pending the Fed's decision. It would be the eighth reduction in two months as rates come down following a shock currency devaluation in mid-January. "The Fed meeting Tuesday and the Copom on Wednesday will be influencing factors this week," said Carlos Hokama, a fund manager at Banco Credibanco in Sao Paulo. "If we get a rate cut here, there is even more room for stocks to go up." Sao Paulo's benchmark Bovespa stock index (INDEX:$BVSP.X) ended down 1 percent on Friday, but inched up 0.8 percent for the week and is up a whopping 82 percent so far this year. In CHILE, stocks are seen calmer with a slight upward tilt, with the sale of a $1.85 billion stake in the country's largest power producer finally behind it. The takeover ended a saga in the electric sector going back months that had kept the currency and equities markets hostage, traders said. Santiago-based Enersis (NYSE:ENI) (SAN:ENE), Latin America's largest private electric holding, Tuesday acquired control of Endesa-Chile by increasing its 25.28 percent in the generator by an additional 30 percent. Former shareholders of Endesa-Chile are expected to buy stock in other companies with the proceeds of their stakes in the power producer, dealers said. Traders added that the market also will be keeping an eye on the Fed. The IPSA <.IPSA> index of the leading stocks fell 2.22 percent to 122.73 points on Friday, to end up 0.72 percent on the week. In MEXICO, the market's performance will also hinge on the Fed's decision, with the key IPC index <.MXX> fluctuating between 5,700 and 6,100 points, market watchers said. The IPC shed 109.66 points, or 1.82 percent, to end Friday at 5,913.20 points, resulting in a loss for the week of 0.85 percent. Last week, the local bourse pierced the 6000-point watermark for the first time, boosted by a still-favorable economic picture. However, Friday's U.S.inflation data sparked some nervousness that will linger through the FOMC meeting, traders said. "The Fed's meeting could stir the markets a bit as there are fears interests rates may rise," Gerardo Copca, head of fund management at Mexico City's Finamex brokerage told Reuters. "But the stock market is likely to prove solid before this," he said. In VENEZUELA, stocks are expected to continue their steady rally based on a sustained recovery in the price of oil, the country's main export, and optimism on the economic reforms of President Hugo Chavez. Caracas' IBC index <.IBC> fell 2.7 percent Friday amid profit-taking to close at 6357 points, but stocks were up about 7.7 percent for the week spurred by a 50 percent rise in oil prices since mid-February. To the surprise of many local pundits, foreign investors appear to ignore a new 0.5 percent financial transactions tax, which went into effect Friday. Finance Minister Maritza Izaguirre said in an interview late Thursday the government had incorporated suggestions from the stock market to moderate the impact of the tax by excluding broking operations. shasta.darlington@reuters.com)) Copyright 1999, Reuters News Service