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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, July 17, 2001, Vol. 2, Issue 138

                           Headlines


A R G E N T I N A

AEROLINEAS ARGENTINAS: Airbus Makes Contact With Two Bidders
EL SITIO: Law Offices of Marc S. Henzel Commences Class Action
MASSERA: To Go Back On The Auction Block At A Reduced Price


B R A Z I L

ITAIPU: Debts Rose To More Than US$15B
LIGHT: Signs US$204M Contract With Siemens do Brasil
VARIG: Merger Talks With TAM To Proceed Despite Chairman's Death


G U Y A N A

GA 2000: President Says No Govt. Rescue With Taxpayers' Money


M E X I C O

BANCO UNION: Congressional Investigators Uncover Irregularities
CINTRA: Tourism Minister Hails Privatization Plan
GAN: Bank Creditors Approve Steps Toward Debt Restructuring
GRUPO PULSAR: In Talks With Apolo Prudential Regarding Vector
MINERA AUTLAN: Signs Refinancing Deal With Bank Creditors
VITRO: Cuts 20% Of Management Staff To Boost Sagging Profits


P A R A G U A Y

CORPOSANA: To Go Into Private Hands Before December 9


V E N E Z U E L A

GRAFFITI: Fixing Liquidity Problems With Spanish-Owned Banks


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A R G E N T I N A
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AEROLINEAS ARGENTINAS: Airbus Makes Contact With Two Bidders
------------------------------------------------------------
Executives of Airbus Industrie, a unit of the European Aeronautic
Defence and Space Co (EADS), have decided to come to Argentina to
meet two of the bidders for Sociedad Estatal de Participaciones
Industriales' (SEPI) unit Aerolineas Argentinas, AFX Europe
reported Friday. Airbus is initiating contact with Juan Carlos
Pellegrini, a former chief executive of Aerolineas Argentinas,
and some representatives of Eduardo Eurnekian, as it is aware
that both are already holding talks with Boeing Co. in a bid to
include the US carrier with their rescue project for Aerolineas.

Eurnekian, who had previously flown to Italy to meet Alitalia SpA
representatives, journeyed to New York last week in order to hold
talks with US carriers and Boeing Co.


EL SITIO: Law Offices of Marc S. Henzel Commences Class Action
--------------------------------------------------------------
A class action lawsuit was filed in the United States District
Court for the Southern District of New York, on behalf of
purchasers of El Sitio, Inc. (Nasdaq: LCTO) between December 9,
1999 and December 6, 2000, inclusive, against defendants El
Sitio, certain of its officers and directors, and its
underwriters.

The complaint alleges that defendants violated the federal
securities laws by issuing and selling El Sitio common stock
pursuant to the December 9, 1999 IPO without disclosing to
investors that some of the underwriters in the offering,
including the lead underwriters, had solicited and received
excessive and undisclosed commissions from certain investors.

Specifically, the complaint alleges that in exchange for the
excessive commissions, defendants allocated El Sitio shares to
customers at the IPO price.  To receive the allocations (i.e.,
the ability to purchase shares) at the IPO price, the
underwriters' brokerage customers had to agree to purchase
additional shares in the aftermarket at progressively higher
prices.  The requirement that customers make additional purchases
at progressively higher prices as the price of El Sitio stock
rocketed upward (a practice known on Wall Street as "laddering")
was intended to (and did) drive El Sitio's share price up to
artificially high levels.  This artificial price inflation
enabled both the underwriters and their customers to reap
enormous profits by buying stock at the IPO price and then
selling it later for a profit at inflated aftermarket prices.


MASSERA: To Go Back On The Auction Block At A Reduced Price
-----------------------------------------------------------
The traditional ice cream factory Massera will be auctioned again
in over a month but at a reduced price of US$6.8 million, South
American Business Information reported Friday. In its first
attempt to sell, the minimum price was set at US$15.7 million.
Unfortunately, the attempt failed because noone made an offer.

Massera was created nearly 70 years ago, but due to a series of
external problems, its shareholders were forced to file for
bankruptcy in September 2000. Massera began experiencing problems
when an old shareholder made demands of investment fund JP Morgan
to extend the bankruptcy protection. A similar demand was made of
ex-owners of Petrolera San Jorge, a group considered to be
adversarial partners of Massera.



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B R A Z I L
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ITAIPU: Debts Rose To More Than US$15B
--------------------------------------
Itaipu, the hydroelectric power plant, which is owned by Brazil
and Paraguay, saw its debts grow by US$481 million between 1999
and 2000, to more than US$15 billion at present, South American
Business Information revealed Friday. Market sources see no
financial reason as to why the debts should increase when the
plant, since 1997, had agreed to increase its fees gradually
every year for the purpose of eliminating its debts by 2023. The
power plant's balance sheets lack details about the supply
agreements signed with Paraguayan companies between 1999 and
2000.


LIGHT: Signs US$204M Contract With Siemens do Brasil
----------------------------------------------------
Siemens do Brasil chairman Herman Wever says his company has
sealed a contract with Rio de Janeiro power utility Light in a
transaction worth US$204 million, according to a report Friday in
Gazeta Mercantil. The contract will see Siemens supplying two
turbines for its Norte Fluminense thermoelectric plant, which is
scheduled to generate 450 MW starting in the second quarter of
2002.

"There will be no lack of turbines for the thermoelectric
plants," said Wever after a meeting with Mining and Energy
minister Jos‚ Jorge.

Meanwhile, Light reportedly is managing a R$5 billion total debt
load, 55 percent of which is tied to the US Dollar.


VARIG: Merger Talks With TAM To Proceed Despite Chairman's Death
----------------------------------------------------------------
Discussions regarding the possible merger of both Viacao Aerea
Rio-Grandense SA (Varig) and TAM Express SA will proceed despite
the death of the latter's chairman, Rolim Adolfo Amaro, in a
helicopter accident. Varig chairman, Ozires Silva confirmed the
negotiations will continue in South American Business Information
report Friday. Silva believes that the new managers at the helm
of TAM will continue the deal talks. He also revealed that the
idea of a merger was Amaro's.

Varig is looking to get out of the red and into friendlier skies
in the near future, despite a crushing $1.3-billion debt and
nearly four straight years of losses.

Meanwhile, the Brazilian air transportation company Rio Sul,
which Varig created, is going through a restructuring process.
Rio Sul is cutting costs and making changes to reduce a loss of
R$3.75 million posted during this year's first quarter. The
company will change its sales structure and customer support
services, which are outsourced. Over the last few years, Rio Sul
was the one company which had the best performance within the
group controlled by FRB-Par. The company ended last year as the
fourth major air transportation company of Brazil. Over the last
five years, its gross revenues increased by 285 percent. The
number of passengers transported by Rio Sul jumped from 1.7
million in 1996 to 4 million in 2000.



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G U Y A N A
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GA 2000: President Says No Govt. Rescue With Taxpayers' Money
-------------------------------------------------------------
President Bharrat Jagdeo announced that the Guyana Government
would not use taxpayers' money in order to rescue the
financially-strapped national carrier, Guyana Airways 2000 (GA
2000), which is privately owned, Caribbean AirNews reported
Saturday.

"I am not going to do that because that money I can spend on
water, housing and other areas. I'm not going to put it into the
airline."

When asked about the Government's concern for the more than 150
airline employees who may face the breadline, Mr. Jagdeo said he
is always concerned about workers in any part of Guyana who lose
their jobs.

"But being a minority shareholder in a company does not mean that
in this case you're responsible", he said.

The Government, which owns 49 per cent of the shares in the
airline, is aware of quite a few interests that want to take over
the routes relinquished by GA 2000. Once the company is
liquidated, the Government will be in a position to offer the
routes to other interested carriers, he said. Mr. Jagdeo surmised
that once that happens, there is the possibility that job
opportunities will be created for some GA 2000 workers, adding
that the employees were told this when he (President Jagdeo) had
met them.

"But it would not be fair to bail out GA 2000, because it is a
private company," he reiterated.



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

BANCO UNION: Congressional Investigators Uncover Irregularities
---------------------------------------------------------------
According to lawmaker Antonio Magallanes, Mexican legislators
have uncovered illegal bank operations involving some $4.3
million in the books of the defunct Banco Union, COMTEX reported
Saturday. The Chamber of Deputies, or lower house, already has on
its hands the records of Banco Union. Last year, the Supreme
Court ordered Banco Union records and reports delivered to
Congress, after the Ernesto Zedillo administration (1994-2000)
refused to release them on the grounds that it would be a
violation of bank secrecy. Congress was looking into illegal
donations by the bank to the political campaigns of Institutional
Revolutionary Party (PRI) candidates Donaldo Colosio, who is now
deceased, Zedillo and former Tabasco Gov. Roberto Madrazo.


CINTRA: Tourism Minister Hails Privatization Plan
-------------------------------------------------
Citing the current "inaccessible airfares" as a hindrance toward
the development of the Mexican tourism industry, Mexican Tourism
Minister Leticia Navarro finds the plan to breakup and sell
airline holding company Cintra favorable, Mexico City daily El
Universal reported Friday. Navarro anticipates that Cintra's
planned breakup and sale would ultimately see the reduction of
airfares. According to Ms. Navarro, current airfare levels
prevented processes of regionalization and diversification from
occurring within the country's tourism industry.

Cintra, which controls leading airlines Aeromexico and Mexicana,
is majority-owned by the Mexican government. The company was to
have been broken up and privatized this year, but protests from
the country's opposition-controlled Congress have stalled the
process.


GAN: Bank Creditors Approve Steps Toward Debt Restructuring
------------------------------------------------------------
Bank creditors of Grupo Acerero del Norte (GAN), a holding
company for Mexican No. 2 steelmaker Altos Hornos de Mexico
(AHMSA), on Thursday met and approved a series of steps toward
GAN's goal to restructure several hundred million dollars in
debt, Mexico City daily Reforma reported Friday. The completion
of GAN's restructuring is vital to the lifting of AHMSA's two-
year-long suspension of payments. The holding company's bank
creditors reportedly include Societe Generale, West LB, BBVA
Bancomer, Inverlat and Bital.


GRUPO PULSAR: In Talks With Apolo Prudential Regarding Vector
-------------------------------------------------------------
Mateo Mazal, a Marketing head at Monterrey-based Mexican
conglomerate Grupo Pulsar, confirmed that the company is
currently in talks with independent funds manager Prudential
Apolo. Negotiations center around Apolo's potential acquisition
of Pulsar's subsidiary brokerage and funds manager, Vector,
according to a report Friday in Mexico City daily Reforma.
Vector, which manages 16 mutual funds and has branches in 22
Mexican cities, drew the interest of Apolo Prudential because of
its success in the area of funds management, the Marketing head
revealed. Around 25-percent of all Vector earnings currently come
from fund management operations, Mazal added.


MINERA AUTLAN: Signs Refinancing Deal With Bank Creditors
---------------------------------------------------------
Mexican mining company Minera Autlan, which has liabilities
totaling 1.7 billion pesos, has signed a refinancing agreement
with a committee of creditor banks, according to a report Friday
in Mexican financial daily El Economista.

"We expect to carry out a restructure of financial liabilities,"
the company said. Autlan's committee of bank creditors comprises
Grupo Financiero BBVA Bancomer, Bank of Montreal and ABN-Amro
Bank.

In February, trading in Autlan stock was suspended by the Mexican
Stock Exchange after the company failed to make a $7 million debt
payment. The payment was for euro-paper issued by Standard Bank
of London on the company's behalf in August last year.

Autlan is widely believed to be looking for a major financial
partner to help it fulfill its debt obligations. The Mexican
mining and minerals group has been buffeted by increases in the
price of natural gas and electricity, which account for one-third
of its operating costs.


VITRO: Cuts 20% Of Management Staff To Boost Sagging Profits
------------------------------------------------------------
Mexican glassmaker Vitro SA announced plans to fire 20 percent of
its management staff, or about 1,120 people, in a bid to boost
profits, Bloomberg reported Friday. The announcement came after
the company said that operating profits might be down by 15
percent in the second quarter of this year, as compared to the
same period in 2000.

According to Albert Chico, company spokesman, they have a
management staff of about 5,600. Vitro has a total of 34,000
employees, including workers in the U.S., Spain, Colombia,
Bolivia, Guatemala and Costa Rica.

Analysts said the cuts won't have a large effect on Vitro's
payroll as they are only cutting about 3 percent of the entire
workforce.

"It doesn't seem they are taking a big step," said Jorge
Beristain, an analyst at Deutsche Bank in New York. "In the U.S.,
we're seeing far larger layoffs."

In a related story, the company also shuffled its senior
management, including the replacement of Jose Manuel Contreras as
chief financial officer. Luis Nicolau, chief corporate officer,
will assume his duties, according to Chico. Contreras will stay
with the company as a project adviser.



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P A R A G U A Y
===============

CORPOSANA: To Go Into Private Hands Before December 9
-----------------------------------------------------
The Paraguayan water supply company Corposana, which has been
unable to pay its debts, will go to the hands of a private
investor before December 9 of the current year, according to a
report Friday in South American Business Information.
Subsequently, the Vinas Cue plant will then be expanded so as to
prepare for the next summer. The expansion project will require
an investment, which will be backed by the amount that remained
from a US$6-million loan taken out from the Japanese bank JBIC.
Corposana anticipates posting a G$20-billion loss this year.

Corposana has serious problems of charging for water, according
to Corposana auditor Gabriel Gonzalez in report released earlier
by Business News Americas. He added that some 48 percent of water
produced is not charged for. Only 40 percent of Paraguay receives
a drinking water service and only 18 percent receives a sewage
treatment service, he stated. If Corposana's efficiency does not
improve by year-end, there will be a serious water deficit next
year, Gonzalez warned. Corposana is currently taking steps to
tighten its accounts before private capital is incorporated.



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V E N E Z U E L A
=================

GRAFFITI: Fixing Liquidity Problems With Spanish-Owned Banks
------------------------------------------------------------
Distribuidora Al Galope, better known as Venezuelan clothes chain
Graffiti, is slowly emerging from its liquidity crisis, according
to a South American Business Information report released Friday.
Just recently, the clothes chain secured a deal for the
restructuring of its debts with Banco de Venezuela and Banco
Caracas, to which it owes Bs$3.2 billion and Bs$12.5 billion,
respectively. The transaction with the two banks, which are both
part of the Spanish-owned BSCH empire, involved a cash guarantee
and property options in order to cancel the debt. With this deal,
Graffiti has recovered rights to the Graffiti brand-name. Only
Unibanca and Banesco have been reluctant to renegotiate debts to
allow the firm to continue operating. The company's total debts
most recently approached Bs$63 billion.




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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