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

To: Michael Young who wrote (15347)	5/18/1999 8:29:00 AM
From: wl9839	Read Replies (1) \| Respond to of 22640

DJ OECD Outlook:Modest Recovery For South America In 2000 Dow Jones Newswires NEW YORK -- While the near-term outlook for South America is grim with most economies contracting this year, a "modest recovery" is projected for 2000 when lower interest rates will prop up economic activity, according to the Organization for Economic Cooperation and Development based in Paris. The OECD said in a semi-annual report Tuesday that current account deficits across the region will be reduced this year, but mainly through a sharp drop in imports. "Increased export growth and some further gains in the terms of trade may allow additional improvement in 2000," the report said. The OECD forecast a 3% contraction for Brazil this year, compared with a 0.2% growth last year, making 1999 "one of Brazil's worst recessions." If the government is able to implement the program agreed with the International Monetary Fund in March, however, the OECD said some "timid recovery" could start in 2000. It forecast 2.0% growth next year. A key indicator of restored credibility would be a significant decline in real interest rates, the OECD said. The country's benchmark interbank lending rate was sliced to 27% last week, compared with 45% after Brazil devalued its currency in mid-January. The OECD projected Brazil's inflation rate at 15% by the end of the year if the exchange rate stabilizes. "Nevertheless, inflation remains an uncertainty for the outlook," it said. Neigboring Argentina, which suffered the biggest spillover effects from Brazil's currency crisis, is expected to record a decline in economic activity until the end of the year, along with a possible deflation in prices, according to the OECD. The main risks for Argentina's outlook include the management of public liabilities and the fiscal front, the report said. Some fiscal tightening may be necessary with rising unemployment and increasing calls for subsidies to boost exports, it added. The OECD projected a 3% contraction in Argentina's GDP this year, after the country posted 4.2% growth in 1998. The Paris-based organization is forecasting 2.5% growth in 2000. The OECD warned that "avoiding excessive fiscal slippage" will be a major source of concern in most countries, which may call for further tightening. Expectations of a regional recovery are based in part on assumptions of stability and a gradual recovery in commodity prices. Many countries rely on commodity exports for their revenues. -By Namju Cho; 201-938-5692; namju.cho@dowjones.com