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       T R O U B L E D   C O M P A N Y   R E P O R T E R

                   L A T I N   A M E R I C A

            Tuesday, May 29, 2001, Vol. 2, Issue 104

                           Headlines



A R G E N T I N A

AEROLINEAS ARGENTINAS: Sepi Refuses More Funds If No Restructure
AEROLINEAS ARGENTINAS: Workers Lodge Protests At Spain's Embassy


B O L I V I A

EL MUTUN: Shortlists Five Banks To Manage Sale Of El Mutun


B R A Z I L

BANESPA: Moody's Upgrades Rating To D, With A Stable Outlook
BANESPA: Santander Hastens Brazilian Bank's Procedures
VARIG: To Kick Off Talks With Airbus
VARIG: To Add 737-800's To Fleet


C H I L E

CHILESAT: Lays Off 184 Workers As Part Of Restructuring Plan


C O L O M B I A

SIETE FLORES: Restructures Debts Under Law 550
UNIMEC: Future Depends On Final Word From Superintendencia


M E X I C O

AEROMEXICO: Yet To Start Talks With Union Leaders Over Wage Claim
AHMSA: Made Right Move When It Suspended Payments, Says Chairman
ATLANTICO: Bital Wants Changes In Agreement Struck With IPAB
BANCRECER: Sale Process To Start This Week
GOODYEAR: Seeks to Increase Share In Mexican Market
GRUPO PULSAR: Government Seen Likely To Help In Restructuring
INDUSTRIAS UNIDAS: S&P Credit Rating Review; Possible Downgrade
INDUSTRIAL VINIUL: Halts Production Temporarily
SAVIA: Creditors Extend Deadline To Restructure Seminis Debt
SAVIA: Stock Price Plunges On Concern Over Restructuring


     - - - - - - - - - -


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A R G E N T I N A
=================

AEROLINEAS ARGENTINAS: Sepi Refuses More Funds If No Restructure
----------------------------------------------------------------
Infrastructures Minister Carlos Bastos attempted to establish
last week the fiscal and airport tax reductions that the
Argentinean government had promised. The agreement for the fees
came as part of the airline's restructuring plan drawn by Spain's
State Industrial Holding Company (SEPI), which included a $650
million capital injection, Buenos Aires Economico said Thursday.
Word on the street in bot Argentina and Spain says that if the
Argentinean government does not implement all of these measures,
it would be allowing Sepi to declare the airline bankrupt. Emilio
Cabrera, chairman of Aerolineas Argentinas, and Juan Gurmindo, a
Sepi representative, are already in Argentina with orders from
Pedro Ferreras, chairman of Sepi, to continue to press for all of
the restructuring plan to be implemented. Sepi will not invest
any more funds into the airline unless the plan is implemented.


AEROLINEAS ARGENTINAS: Workers Lodge Protests At Spain's Embassy
----------------------------------------------------------------
On Thursday, employees of the struggling Argentinean airline
Aerolineas Argentinas protested at the Spanish embassy in Buenos
Aires, according to Reuters. Workers were throwing eggs, tomatoes
and black paint to show their resentment for the Spanish
government's handling of the carrier's finances since its
privatization in 1990.

"Aerolineas Argentinas used to be efficient and profitable. We
had 30 of our own planes. The privatization was an embarrassment.
They dismantled our flagship, which was the pride of the
country," Alicia Castro, head of the Argentine Airworkers
Association, told the demonstrators.

Burdened by debts of $900 million and hit by a strike earlier
this month, the airline has had trouble paying wages to its
workers. Airline sector analysts speculate that the company may
have to be put up for auction or radically reformed if it is to
keep its fleet in the skies.



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B O L I V I A
=============

EL MUTUN: Shortlists Five Banks To Manage Sale Of El Mutun
-----------------------------------------------------------
Comibol, Bolivia's state mining corporation, has arrived at a
shortlist fo five banks for a contract to manage the sale of El
Mutun iron ore and steelmaking complex. According to company
executive in charge of the process, Rolando Ibanez, in a report
Friday in Business News Americas the group has been narrowed to
the company's top picks. Comibol now awaits the World Bank's
approval of the shortlist and bidding rules, before sending the
terms to the pre-selected banks, Ibanez added. Subsequently, the
banks will then have 40 days to submit their bids, and within two
months, the contract should be awarded.

Previously, an official from Santa Cruz prefecture, or local
authority, where El Mutun is located, confirmed a bid had been
made for the assets by Brazil's Sidersur, without participating
in the planned auction process.

"The prefecture or any other institution can express its opinions
on the development of El Mutun, but Comibol has right of
ownership," Ibanez said. "Even if the government decides to
support the region by requesting Comibol to hand over the deposit
to another institution to take charge of its sale, this must
still be done through a public auction. Any direct request by
Sidersur or another company to Santa Cruz prefecture will not
have a legal leg to stand on," he claimed.

Comibol itself has received direct offers from a variety of
companies that had been rejected out of hand, he said. "The sale
of El Mutun has to proceed through a national and international
public auction. That's why we're looking for an investment bank,"
he said.



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B R A Z I L
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BANESPA: Moody's Upgrades Rating To D, With A Stable Outlook
------------------------------------------------------------
Moody's Investors Service upgraded the bank financial strength
rating of Banco do Estado de Sao Paulo S.A. (Banespa) to D from
E. The outlook for that rating is stable.

Banespa's foreign- currency deposit rating is B2, which is
constrained by Moody's country ceiling for Brazil. This rating
has a stable outlook.

Moody's stated that the upgrade reflects Banespa's profitability
prospects, which improved following Spains' Banco Santander
Central Hispano's acquisition in November 2000, which should
result in enhanced franchise value.

The rating agency pointed out that Banespa offers significant
revenue growth potential, after having gone through what might be
considered by some observers to have been a long "dormancy"
period in the hands of the federal government. Moody's explained
that a broad distribution network and a client base that is
predominantly retail are two assets that should provide Banespa
with opportunities for cross selling and for cost reduction, thus
bringing it in line with BSCH standards.

Banespa, however, has yet to improve its operating efficiency and
core earnings generation to levels that compare with those of the
large Brazilian banks, according to Moody's. To achieve the
profitability targets established for Banespa, management plans
to reactivate and to focus on growing fee income by leveraging
those product lines in which Banespa already has sufficient
critical mass. The streamlining of Banespa's operations and
processes, and a migration of customers to cheaper distribution
channels should both help boost efficiency. Management estimates
that these efforts could result in 33% reduction in Banespa's
cost base, and in an 18% growth in fee revenues in the next three
years. Moody's expects that these targets are achievable.

When Banespa's restructuring process is completed, however,
Moody's believes that the Spanish group is likely to become a
powerful competitor in the Brazilian market.

Moody's recognizes Santander's successful record in incorporating
acquisitions in Latin America, but it considers Banespa's
restructuring process to be a challenging task because of the
need to revamp personnel skills, technology and corporate
culture. Management has, however, been pleased by the positive
response of the network and clientele to initial marketing
efforts, which confirm the potential of Banespa's franchise, and
points towards the possibility of a faster-than-expected
turnaround.

Banco do Estado de Sao Paulo S.A. is headquartered in Sao Paulo,
Brazil. As of March 2001, total assets amounted to approximately
R$30.3 billion (equivalent to USD14.0 billion).

The following rating was upgraded:

Banco do Estado de Sao Paulo S.A: financial strength rating to D,
from E.


BANESPA: Santander Hastens Brazilian Bank's Procedures
------------------------------------------------------
Currently in the process of reorganizing Banespa, Banco Santander
is now focusing in speeding up the Brazilian bank's procedures,
according to a Gazeta Mercantil report Friday. Santander is
taking the first step by reducing the time for opening a new
account since it believes that shortening the process for each of
its 500,000 customers, Banespa would save R$15 million. Recently,
a voluntary retirement program reduced Banespa labor force by
8,200 employees. By the end of this year, Banespa is to invest
US$175 million in technology, while it contemplates some  218 re-
engineering projects. Automation included the acquisition of
14,000 PCs, 594 office computing machines, and 3,700 ATMs.


VARIG: To Kick Off Talks With Airbus
------------------------------------
Talks between Varig, the biggest airline of the South American
continent, and Airbus, a Boeing archrival, are now about to be
initiated, according to a Gazeta Mercantil report Friday. A team
from the European multinationals is expected to be in Rio de
Janeiro first week of June, with commercial proposals at hand.
The meeting, which will be held at the Varig headquarters, is
likely to form a multi-million-euro business relationship between
the two companies. Varig, currently facing a significant
financial threat, needs to renovate its fleet of almost 100
aircraft within the next ten years. The company sees in Airbus
the possibility of better prices and business conditions.
However, even if an agreement is not struck, Varig executives
believe that a little flirting with Airbus will at least make
Boeing revise its proposals.


VARIG: To Add 737-800's To Fleet
--------------------------------
VARIG Brazilian Airlines will be the first Latin American carrier
to operate the Boeing 737-800 with winglets when it adds two of
the advanced aircraft to its fleet in September and October of
2001. VARIG will operate these aircraft through a lease agreement
with GATX Capital Corp. and has an additional 14 of the 737-800's
already on order with Boeing.

"The winglets on the 737-800 represent the latest technology to
improve flight performance and operating economics," said Ozires
Silva, VARIG's president and CEO. "This is yet another important
step in our fleet modernization process to lower costs and
provide superior service to our customers," he added.

Silva noted that the blended winglets on the 737-800 curve out
and up from the wing tip, reducing aerodynamic drag and improving
performance. Among the anticipated benefits are up to 4% better
fuel burn, improved take-off performance, additional payload
capability, increased optimum cruise altitude and reduced noise
decibels on takeoff.

"VARIG will experience first-hand the performance benefits of the
blended winglets on these advanced airplanes," said Daniel da
Silva, vice president of sales for Latin America, Boeing
Commercial Airplanes. "This airplane helps continue our long-
standing relationship with VARIG by providing the newest
technology, the best economics and the highest comfort this
market has to offer."

The airline, the largest in Latin America, and the anchor for
Star Alliance in the region, plans to use the aircraft on
regional services in South America as well as on domestic
services within Brazil where the high-performance aircraft will
produce the greatest operating benefits. VARIG currently operates
a fleet of 16 MD-11's, 12 767's and 56 737's in its passenger
operations in addition to 2 DC-10's and 7 727's in its cargo
unit, VARIG Log.



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C H I L E
=========

CHILESAT: Lays Off 184 Workers As Part Of Restructuring Plan
------------------------------------------------------------
Chilean long distance carrier and network operator Chilesat
issued a statement to the Santiago stock exchange informing the
bourse of its plans to lay off 184 employees. The labor moves
come as part of a restructuring plan aimed at improving
profitability, Business News Americas reported Thursday.
Chilesat, a unit of telecoms holding company Telex-Chile,
believes that the move, accompanied with outsourcing and a
reduction in offices, would save the company US$5.45 million
annually. The company's announcement comes a day before a
scheduled Telex-Chile's extraordinary shareholders meeting,
wherein shareholders are expected to vote on a US$60 million
equity capital increase.

Chilesat defaulted on a US$8.9-million credit facility that
expired April 5 and the parent company said it would recommend
that shareholders approve the sale of the long distance and
networking unit in order to meet financial obligations.



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C O L O M B I A
===============

SIETE FLORES: Restructures Debts Under Law 550
----------------------------------------------
With the aid of the financial sector, Colombian horticulturalist
and florist Siete Flores was able to restructure its debts in
accordance with Law 550 for economic intervention, according to a
South American Business Information report released last week.
The company had to restructure its activities in order to
convince creditors and kick off exportation with Japan, Spain and
Holland as the targets. Payment of Flores 9-billion-peso debt is
now re-distributed over 11 to 12 years among its 400 creditors.


UNIMEC: Future Depends On Final Word From Superintendencia
----------------------------------------------------------
Unimec, Colombia's leading subsidized health plan administrator,
struck a debt-restructuring agreement with creditors under
Colombia's law 550 for economic intervention in March 2001, South
American Business Information reported last week. The institution
now awaits the final word on its 'recovery' from Colombia's
Health Superintendencia, which had revoked Unimec's rights in
late March on account of insufficient computer support.

Unimec, with 21 branches across Colombia, employs nearly 900
people directly. The company has almost 1 million subsidy
affiliates and 190,000 contribution affiliates. It has set about
improving its information technology operations to cover fully
administrative services. A total of 1,500 new shareholders in
Unimec contributed 30 billion pesos to save the company recently.



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M E X I C O
===========

AEROMEXICO: Yet To Start Talks With Union Leaders Over Wage Claim
-----------------------------------------------------------------
Negotiations between management and the leaders of the flight
attendants union (ASSA) at Mexican airline Aeromexico regarding a
wage claim hasn't been initiated yet, despite a threatening
strike scheduled for May 31, Reforma/Infolatina reported
Thursday. The reason for the delay is the union's insistence that
a dispute over alleged collective-contract violations committed
by the airline be resolved first. ASSA is led by Alejandra
Barrales, an opposition member of the Mexican Congress, for the
leftist Party of the Democratic Revolution (PRD). Observers
speculate that Barrales' intention could be to call a strike in
order to force President Vicente Fox to abandon a campaign
promise that he would not use his executive powers to admit
striking airline employees back to work.


AHMSA: Made Right Move When It Suspended Payments, Says Chairman
----------------------------------------------------------------
Leading Mexican steelmaker Altos Hornos de Mexico (AHMSA)
Chairman Alonso Ancira defended his company's decision to declare
a suspension of payments two years ago, Reforma/Infolatina
reported Friday. According to Ancira, had the company not
declared a suspension of payments, thus avoiding an estimated
4400 million in interest payments, the former state-owned company
would have been bankrupt by now.

"The suspension worked. I never thought it was the right move.
But given conditions in the industry today, we would not have
been able to survive without a suspension. We were the first to
fall, and now we're the first to be getting up," Ancira said.


ATLANTICO: Bital Wants Changes In Agreement Struck With IPAB
------------------------------------------------------------
The board of Mexico's Grupo Financiero Bital wants to make some
changes in the preliminary agreement struck with bank bailout
agency IPAB regarding its acquisition of government-intervened
bank Atlantico, according to a Reforma/Infolatina report
Thursday. In view of the fact that Bital also needs a capital
injection of approximately $350 million (about 3.4 billion pesos)
the board now is looking to cut back its commitments under the
preliminary agreement with IPAB.

Under the terms of the preliminary agreement, IPAB was to
contribute 13 billion pesos to Atlantico's recapitalization,
while Bital was to have provided 700 million pesos. Bital
reportedly also was to have paid IPAB a premium of some 500
million pesos at the time of closing the acquisition.


BANCRECER: Sale Process To Start This Week
------------------------------------------
Formal expressions of interest likely will be invited early this
week from potential bidders for government-intervened Mexican
bank Bancrecer, according to a report in Reforma/Infolatina. At
the same time, extensive details of the assets for sale will also
be published, regardless of whether bank bailout agency IPAB
eventually decides to modify some aspects of the sale in view of
U.S.-based Citigroup's recently announced decision to pay 2.8-
times the book value for Grupo Financiero Banamex Accival. In
addition, Bancrecer's data-room is expected to be opened to
potential bidders from June 15 through Sept. 15.

Among the likely bidders for Bancrecer, whose book value
currently stands at around US$400 million, are Canadian-owned
Scotiabank Inverlat; Grupo Financiero Banorte, which owns
Mexico's fifth-largest bank; and U.K.-owned banking giant Hong
Kong Shanghai Bank Corporation (HSBC).

Meanwhile, in a related report, Spanish financial services firm
Sabadell also informally expressed interest in acquiring
Bancrecer. The firm's representatives have been in contact with
Mexican bank bailout agency IPAB regarding its intention.  


GOODYEAR: Seeks to Increase Share In Mexican Market
---------------------------------------------------
Following the closure of one of its plants in Mexico, tire-
manufacturer Goodyear is looking to boost its share of the
combined original-equipment and replacement markets in Mexico by
2 percentage points, to 25 percent, by the end of 2002,
Reforma/Infolatina related Thursday. Goodyear, which decided to
import the majority of tires it will sell in Mexico, is confident
that handling a higher percentage of imports than its competitors
will give it an edge.

Meanwhile, Goodyear is also planning to launch two new products
in Mexico during the second half of the current year - a radial
tire for trucks and a new passenger-vehicle tire.


GRUPO PULSAR: Government Seen Likely To Help In Restructuring
-------------------------------------------------------------
The Mexican federal government is expected to lend a helping hand
in Monterrey-based Grupo Pulsar's ongoing efforts to restructure
its estimated $1.3 billion of debt, Reforma/Infolatina reported
Thursday. The possibility of the assistance was raised in view of
the fact that Pulsar Chairman Alfonso Romo is a close personal
friend of Mexican President Vicente Fox.

Previous media reports revealed that Pulsar has approached state-
run development bank Banobras to play a role in its debt-
restructuring plan. These unconfirmed reports however, came as a
surprise because Banobras' legislated mission is to fund major
public works projects, while Pulsar has no interests in the
construction industry.


INDUSTRIAS UNIDAS: S&P Credit Rating Review; Possible Downgrade
---------------------------------------------------------------
New York-based ratings company Standard & Poor's has put the
credit rating of Industrias Unidas SA, a leading industrial
group, on review for a possible downgrade, according to a
Bloomberg report Thursday. The company's lack of progress on its
debt-restructuring efforts led S&P to place the company's credit
rating, which is three tiers below investment grade, on credit
watch with negative implications. Also known as IUSA, the Mexico
City-based company has been struggling for the past 12 months to
extend the maturity of its short-term obligations. According to
the reports about the copper/copper alloy products, electrical
goods and watt-hour meters producing company, it has about $164
million in short-term debt representing more than 60 percent of
the company's total liabilities. More than half of those
obligations, or $74 million, are commercial paper that needs to
be refinanced.

S&P said it would monitor IUSA's efforts to refinance the debt
over the next 90 days. "Failure to address the aforementioned
concerns could result in a downgrade," S&P said in a statement.


INDUSTRIAL VINIUL: Halts Production Temporarily
------------------------------------------------
Grupo Industrial Viniul, which makes rubber sandals sold under
the well-known Calzaletas brand, closed its doors temporarily,
Reforma/Infolatina reported Friday. The company attributed the
move, which will see 150 employees out of work, to present market
conditions. Viniul has been in a struggle to keep the company
afloat, cutting down its 1,200 total workforce since last year.

"We've been firing people as we go, precisely in order to avoid
closing down the company, but unfortunately I realized it was
necessary to say 'We can't keep working under these conditions,'"
Viniul Chairman Juan Arturo Covarrubias said.

The company, in better times, produced up to 800,000 pairs of
rubber sandals per year, with export sales accounting for nearly
20 percent of total sales.


SAVIA: Creditors Extend Deadline To Restructure Seminis Debt
------------------------------------------------------------
Mexican industrial group Savia now has until the end of May 2001
to restructure the debts of its subsidiary Seminis, a world seed
development leader, South American Business Information reported
Thursday. Seminis creditors are believed to have decided to
extend the deadline so they themselves will also have enough time
to complete relevant paperwork. Seminis, with debts of $350
million, was originally given only until May 22, 2001 to
restructure its debts.

Meanwhile, Savia also hopes to have its $1.33 billion debt
restructured at the end of May. Additionally, Savia expects to
wrap up the sale of its stake in Seguros Comercial America (SCA)
by the end of May, Mexico's top insurance company, to ING Group.
ING bought 41 percent of SCA last year for 808 million dollars.


SAVIA: Stock Price Plunges On Concern Over Restructuring
--------------------------------------------------------
Mexican agro-biotechnology company Savia's stock price dropped at
the end of Wednesday's trading by almost 44 percent since the
beginning of the week, Reforma/Infolatina reported Thursday.
Investors dumped their holdings on skepticism that Savia wouldn't
be able to restructure its liabilities to bank creditors and
bondholders. Reports have it that Savia's default on a debt
payment in May drove the stock down during Wednesday's trading.
Public Relations staff at Grupo Pulsar, Savia's parent company,
launched a major damage-control effort during the day, assuring
investors that all possible steps would be taken to finalize a
debt-restructuring deal before a shareholder assembly scheduled
for June 1.

In a related story, about $30 million in debt that Savia is
renegotiating with Santander Mexicano is actually held by
Santander acquisition Serfin. According to Reforma/Infolatina,
after Santander acquired Serfin in May last year, it took over
administration of the loan. The bank loan was made by Serfin
directly to Savia, not to parent company Grupo Pulsar.




S U B S C R I P T I O N   I N F O R M A T I O N

Troubled Company Reporter Latin American is a daily newsletter
co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ,
and Beard Group, Inc., Washington, DC. John D. Resnick, Edem
Psamathe P. Alfeche and Janice Mendoza, Editors.

Copyright 2001.  All rights reserved.  ISSN 1529-2746.

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