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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

        Wednesday, September 05, 2001, Vol. 2, Issue 173

                           Headlines


A R G E N T I N A

AEROLINEAS ARGENTINAS: Unions Protest Possible Sale Suspension


B R A Z I L

CVRD: To Decide Ferrovia Vitoria's Future
DAIMLERCHRYSLER: Talking To Suppliers, Dealers Over Compensation
EMBRATEL: At Risk Due To Continuing Battle With Intelig
INEPAR: Sale Proceeds Inadequate To Ease Burdens
PSINET: Employees Obtain Court Injunction For Brasilia Assets


C H I L E

EDELNOR: AES Extends Expiration Date For Tender Offer
TELEX-CHILE: To Approve Chilesat Sale


M E X I C O

BANCRECER: Bidders To Submit Offers Sept. 10
BUFETE INDUSTRIAL: IMSS, Infonavit Lodge Legal Proceedings
FAR-BEN: To Raise Cash Thru Stake Sale
GAM: Giving Up On Sugar Mills
GRUMA SA: U.S. Court To Hear Antitrust Case
GRUPO TELEVISA: Warns Of Slumping Advertising Revenues
GRUPO TELEVISA: Issuing Bonds For Debt-Restructuring
PEMEX: Generates $600M From Bond Issue
QUADRUM: Elektra Continuing To Consider Acquisition


N I C A R A G U A

ENITEL: Telia Defends Consortium's Bid


P A N A M A

PAFCO: Parent Company Faces Another Untimely Predicament

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A R G E N T I N A
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AEROLINEAS ARGENTINAS: Unions Protest Possible Sale Suspension
--------------------------------------------------------------
In response to rumors that the Spanish state holding company
SEPI's sale of Argentine airline Aerolineas Argentinas may be
delayed, unions lodged protests at Buenos Aires airport, El Mundo
reported Saturday. As a part of its demonstration, members tried
to block an aircraft belonging to Iberia, the Spanish airline,
from taking-off. The APA union informed that the protest is due
to SEPI halting negotiations for the sale of its 91.2 per cent
stake in Aerolineas Argentinas.

According to union sources, SEPI's new chairman wants to take his
time with the sale, despite a promise to complete it in
September. The unions claim that Mr. Ruiz Jarabo would prefer to
keep the airline, financially restructure it and sell it in a
better condition, rather than spend some $300m on handing it over
to an interested party.




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B R A Z I L
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CVRD: To Decide Ferrovia Vitoria's Future
-----------------------------------------
SDE (Secretaria de Direito Economico) concluded that CVRD
(Companhia Vale do Rio Doce) holds a transportation monopoly in
the Minas state, undercutting the sales of its competitors,
according to a report Friday in O Globo. As a result, CVRD may be
required to sell off Ferrovia Vitoria-Minas, which transports 46
percent of the company's total iron ore production of 116.8
million m tons in 2000, or even split the company's accounting to
avoid harming its competitors in the iron ore market.


DAIMLERCHRYSLER: Talking To Suppliers, Dealers Over Compensation
----------------------------------------------------------------
In light of the end of the Chrysler brand in Brazil, the
DaimlerChrysler group is now negotiating with suppliers and
dealers over compensation, South American Business Information
reported Aug. 29. Accordingly, the company is offering 4 percent
of the sales in the last 24 months to the dealerships, as well as
buying stocks of parts. Details of discussions with suppliers are
being kept confidential.

Meanwhile, the company also has to settle accounts with the
municipal government of Campo Largo in Sao Paulo, site of the
DaimlerChrysler factory, which had given fiscal incentives to the
car company. The land for the factory was donated and tax
exemption for 5 to 10 years was granted. The state government
will also be looking for between R$100 million and R$120 million
in taxes not collected.


EMBRATEL: At Risk Due To Continuing Battle With Intelig
-------------------------------------------------------
Embratel could be at risk as it continues with its long distance
price war against Intelig, Valor Economico reported Thursday. The
situation has increased phone traffic to such an extent that it
has to be diverted through Japan to reach the US. This has
further increased the costs of the price war for the competing
phone companies, which are charging R$0.06 per minute for the
calls. Given that the cost of the local part of each call alone
is R$0.20, analysts do not see these prices continuing beyond the
beginning of September and point out the danger of such
promotional practices.

Embratel is losing market share in its traditional long distance
market while it is in a phase of investment in its new market of
local calls. The company has disconnected the IP circuits of
Impsat because it is two months behind in payments to Embratel
and owes R$4 million. Impsat is accusing Embratel of charging up
to four times more than its competitors for some services, while
Embratel says it is prepared to discuss its contracts with Impsat
once the outstanding amounts are paid.

The current situation is probably more advantageous for Intelig,
as it is able to charge for the calls in conjunction with local
operators.

For more information on the company's financial statements see:
http://www.bankrupt.com/misc/Embratel.doc


INEPAR: Sale Proceeds Inadequate To Ease Burdens
------------------------------------------------
Although Inepar has benefited from the sale of some of its
investments as evidenced in its second quarter financial figures,
the strategy wasn't sufficient to alleviate the problems it
continues to face, South American Business Information reported
Aug. 29. The company called a meeting with holders of R$8.6
million in debentures in an attempt to postpone payments which
were due on September 1. The company expects that the bond
holders will accept a 90-day postponement, temporarily staving
off a default situation. Inepar's recent cash flow problem stems
from the changes demanded by Desenvolvimento Economico e Social
(BNDES) in it and in its control before new credit will be
released by the bank.


PSINET: Employees Obtain Court Injunction For Brasilia Assets
-------------------------------------------------------------
Employees of PSINet, the US Internet provider, which recently
ceased its operations in Brazil, obtained a preliminary court
verdict blocking the company's physical assets in Brasilia, Valor
Economico reported. Predictions are that similar decisions
regarding the company's assets in other Brazilian cities may also
be made based on this precedent.

PSINet decided to close its Brazilian operations after several
failed attempts to reach an agreement with investors over the
sale of the business. The company has been operating in the
country for two years, investing a total of US$70 million to
acquire 11 local access providers. It filed for a chapter 11
petition for protection from creditors in the US in May due to
dwindling cash reserves and rising losses.



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C H I L E
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EDELNOR: AES Extends Expiration Date For Tender Offer
-----------------------------------------------------
The AES Corporation (NYSE:AES) announced August 31 that it is
extending its tender offer (the "Offer") for cash by Luna III,
Ltd. a Cayman Islands limited liability exempted company ("Luna")
and wholly owned indirect subsidiary of The AES Corporation to
purchase all of the outstanding (i) 10-1/2% Senior Loan
Participation Certificates due 2005 (the "2005 Certificates") and
(ii) 7-3/4% Senior Loan Participation Certificates due 2006 (the
"2006 Certificates" and, together with the 2005 Certificates, the
"Certificates") of Empresa Electrica del Norte Grande S.A., a
Chilean corporation ("Edelnor").

The 2005 Certificates and the 2006 Certificates were issued in an
aggregate principal amount of US $90,000,000 and US $250,000,000
respectively. The Certificates represent pro rata participation
interests in all payments of principal and interest made in
respect of loans of Edelnor.

The Offer will now expire at 5:00 pm Eastern Daylight Time, on
September 10, 2001 unless further extended or earlier terminated.
All other terms remain unchanged.

As of 5:00 pm Eastern Daylight Time, on August 30, 2001, Luna was
advised by the exchange agent that approximately US $10,000,000
of the total amount of the 2006 Certificates were tendered and
none of the 2005 Certificates were tendered.

Information regarding the pricing, tender, and delivery
procedures and conditions of the Offer is contained in the Offer
to Purchase dated August 6, 2001 and related documents. Copies of
these documents can be obtained by contacting Mellon Investor
Services, at 917/320-6286. Banc of America Securities LLC is the
exclusive dealer manager for the Offer.

Additional information concerning the terms and conditions of the
Offer may be obtained by contacting Banc of America Securities
LLC at 888/292-0070 (toll free) or 704/388-4807 (collect).

CONTACT:          AES Corporation
                  Kenneth R. Woodcock, 703/522-1315


TELEX-CHILE: To Approve Chilesat Sale
-------------------------------------
Telex-Chile was expected to approve Friday the sale of Chilesat,
which has attracted companies like Agbar, Manquehue Net, GTD
group and the Southern Cross investment fund, informed Estrategia
in a report. U.S.-based AES Corp., which last December reported
their intention to enter the telecommunication business, has also
demonstrated interest in Chilesat. However, market analysts
predict that AES will not buy telecommunication assets in the
short term; it should wait for the Chilesat definition. According
to Mr. Adolfo Ramiro, company president, they should make a final
decision about the purchase by the end of the year 2001. Ramiro
says that they are planning to have local associates operate the
call center sector that Chilesat offers.



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M E X I C O
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BANCRECER: Bidders To Submit Offers Sept. 10
--------------------------------------------
Carlos Septien Michel, Bancrecer head, revealed that the access
of bidders to the bank's data room, containing its financial
records, was closed on Aug. 31, Mexico City daily Reforma
reported Monday. The closure marks the start of the period for
the bidders to submit their formal proposals. Grupo Financier
Banorte and Scotiabank-Inverlat are expected to submit their
technical and economic offers by Sept. 10.

"The two bidders, Scotiabank-Inverlat and Banorte, are anxious to
get the bank because we feel that for the two of them it would
give them a strategic position," said Septien.

Earlier, bank bailout agency IPAB said that the winning bid would
be announced at the end of September or in early October.


BUFETE INDUSTRIAL: IMSS, Infonavit Lodge Legal Proceedings
----------------------------------------------------------
Mexican federal social security agencies IMSS and Infonavit
initiated a process to embargo Bufete Industrial after the
construction company failed to make semiannual payments, Mexican
financial daily El Economista said Friday. According to sources,
actions are usually undertaken after a first semi-annual payment
is missed.

The legal action was negatively received by the construction
company's employees, who fear being stripped of their benefits.
As laborers worked to load the company's furniture into freight
fans, Bufete spokesperson Selene de Anda said, "Nothing is
happening."

"This is kidnapping," said a Bufete employee. "They bring a
locksmith, the doors have to be opened."

Bufete officials later argued that the actions of IMSS were
legally groundless. "Out! Out of here, everyone!" yelled one of
the Bufete legal representatives.

Infonavit and IMSS said they were following the law in their
reaction to Bufete's non-payment. Bufete is being sued by IMSS
for a debt of 66 million pesos in benefits payments.


FAR-BEN: To Raise Cash Thru Stake Sale
--------------------------------------
Far-Ben SA (a.k.a. Benavides), the largest pharmacy chain in
Mexico, is now in talks with several potential partners over the
sale of a stake in the company, Bloomberg reported Monday. The
company plans to sell a stake in order to raise cash to pay 675
million pesos ($73 million) of notes coming due in June. On the
other hand, it may also call for a rights offering among current
shareholders or refinance the debt with bank loans, said Fernando
Abrego, director of investor relations.

"Basically what Benavides wants to do is to raise capital,"
Abrego said. "We have time. There are a lot of alternatives."

The company needs to pay or refinance the inflation-linked debt
it sold in 1997 as a slowing economy hurts sales and supermarket
competition has slashed pharmacy profit margins for several
years. Abrego declined to name any of the potential partners
Benavides is negotiating with.

"There are very advanced processes with several," he said. "But
there's nothing concrete yet."

Fitch lowered its Mexican rating on the Benavides' notes last
week to `A-' from `A+' because lower sales and profits have
reduce the number of times its cash flow covers interest
payments.

Benavides' operating profit fell to 69 million pesos last year
from 227 million pesos in 1999 and 167 million pesos in 1998. The
company must pay 225 million units of investment, known as udis,
on June 13, 2002. Udis rise with the official rate of inflation
and are worth about 2.99 pesos each now. The notes, which are
voluntarily convertible to shares at 11.21 udis per share, have a
5 percent interest rate.


GAM: Giving Up On Sugar Mills
------------------------------
Grupo Azucarero Mexicano (GAM) stands to lose all its sugar mills
as the Mexican government plans to expropriate 27 of the nation's
heavily indebted sugar mills in its attempt to restore the
industry back to form, Reuters reported Monday. GAM, which
accounts for about 10 percent of Mexican sugar production, has
been under extreme financial pressure since May 2000, when the
government imposed a suspension of payments to the company after
it accrued $126 million in debts.

The expropriation will cut nearly in half the number of
privately-operated mills in the country, currently near 60,
stripping some top sugar producers of their plants. According to
traders, the Mexicans will have to act fast to stave off further
crisis.

"I think the government is going to have to sell the mills very
quickly," said one trader. "It doesn't have the money to operate
them, and they aren't generating profits."

"The sugar industry is an industry with high social impact in
terms of its production and the jobs it creates in the Mexican
countryside," the government said.


GRUMA SA: U.S. Court To Hear Antitrust Case
-------------------------------------------
The District Court of Galveston has accepted the antitrust suit
filed by five U.S. tortilla producers in Texas and California
against Mexican food producers Gruma SA and Bimbo, Mexico City
daily Reforma reported Monday. The case is likely to be heard in
July or August of 2002, said Eastham, Watson, Dale and Forney
lawyer Arturo Eureste, representative of the U.S. companies.

"We expect that in July of next year the case will be heard. In
December there will be a meeting between involved parties and the
judge to establish times and details for the suit," he said. "The
assigned judge, Samuel Kent, is very organized."

Gruma and Bimbo were accused of buying space on supermarket
shelves and preventing competing products from being displayed.


GRUPO TELEVISA: Warns Of Slumping Advertising Revenues
------------------------------------------------------
Televisa, Latin America's leading magazine producer and
distributor and the leading producer of content for Hispanic TV,
is on course to meet its financial goals for the third quarter,
Excelsior reported Friday. However, the company warned of a
reduction in advertising revenue over the year of up to 3
percent.

Televisa reported second quarter total revenues of almost 4.746
billion pesos, 2.778 billion of the total stemming from
advertising receipts due to deceleration.

Televisa received US$1 billion in November 2000 by way of pre-
paid advertising for 2001 (it charges half in advance and accepts
a promissory note for the other 50 percent).

Operating cash-flow fell 15 percent in the second quarter to
1.259 billion and operating profits fell to 940 million pesos.
The company's cash-flow margin is down from 28.6 percent in June
2000 to 26.5 percent in June 2001 despite cost-cutting exercises
announced in early 2001 with which Televisa thus far has saved
half the anticipated US$60.4 million.


GRUPO TELEVISA: Issuing Bonds For Debt-Restructuring
----------------------------------------------------
Grupo Televisa CFO Alfonso de Angoitia revealed that the
television company is planning to issue bonds in order to
restructure its debt and continue with investments of close to $1
billion in the United States this year, Mexico City daily Reforma
said Friday. The bond issue is expected to total $250 million and
be handled by Salomon Smith Barney and JP Morgan Chase. Televisa
is interested in expanding in the United States, but at the
moment has not made moves to acquire Telemundo, a U.S. television
chain aimed at Spanish speakers, said De Angoitia.


PEMEX: Generates $600M From Bond Issue
--------------------------------------
The recent bond issue of Petroleos Mexicanos (Pemex), led by
Lehman Brothers and scheduled to run for 42 months, has raised
US$600 million on the international capital markets, according to
a report in Excelsior. The issue was originally for only US$500
million but despite being stretched, could not come close to
meeting the US$1.5 billion total demand. Institutional investors
(investment grade specialists) accounted for 91 percent of the
demand. The issue was boosted by Moody's timely announcement of
an upgrade in Pemex's credit rating. This new bond will save the
state oil and gas firm US$15 million since the money raised will
be used to retire a higher-interest bond set to mature in 2005.


QUADRUM: Elektra Continuing To Consider Acquisition
---------------------------------------------------
Contrary to previous reports, Grupo Elektra has not dismissed the
possibility of acquiring intervened bank Banca Quadrum, according
to Elektra Vice President of Investor Relations Esteban Galindez
in a Mexico City daily El Universal report Friday. The recent
resignation of Elektra owner Ricardo Salinas Pliego from
Quadrum's board of directors fueled the probability that Elektra
is seriously considering the acquisition of the bank.

"Elektra has one thing clear, that we always analyze
possibilities of acquisition when there are good opportunities.
We try to find value for our shareholders."

There is a strong possibility that Elektra, in its drive to
expand into new businesses, could capitalize Banca Quadrum, said
analysts at Vector Brokerage.

"Someone who were to buy Banca Quadrum would end up with a
banking license. In this case, it would be a way to offer many
new services taking advantage of Salinas' businesses: Elektra,
Dataflux, Unefon and TV Azteca. So we see it as an option," said
Vector analyst Abel Hibert.



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N I C A R A G U A
=================

ENITEL: Telia Defends Consortium's Bid
--------------------------------------
Swedish telecommunications operator Telia (TLIA), which led the
Telia Swedtel AB/EMCE consortium into winning a 40-percent
position in Nicaragua's state-owned telephone company Enitel,
defended the secret auction process, Reuters reported Monday. The
consortium made a successful bid after presenting the sole offer
of $83.1 million on Friday.

The government held the auction in secret, in an undisclosed
location, while reporters waited in a hotel where it was supposed
to happen. Details about EMCE were not realeased but, according
to local reports, it is a Honduran company.

"It has been a totally transparent process, very open," declared
Anders Noren, vice president of the Swedish consortium.

"We are not judges. We are here to develop the telecommunications
market," said Oswaldo Quiroga, legal representative of the Telia-
led consortium.

Under terms of the sale, Telia will pay $33 million to Nicaragua
in the coming days, and will make five additional payments over
the next five years.

Two other companies that qualified to bid but did not do so were:
Compania de Telecomunicaciones de El Salvador, associated with
France Telecom (FTE), and Mexico's RadioMovil Dipsa, associated
with Mexico-based cellular phone company America Movil (AMXL)
(AMX).



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P A N A M A
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PAFCO: Parent Company Faces Another Untimely Predicament
--------------------------------------------------------
Chiquita Brands, the embattled US banana producer, dealt with
another problem Friday, taking its brand name off some of the
fruit it grows after poor quality caused it to lose several
contracts, the Financial Times reported Saturday. The
announcement came after workers at Panama-based Puerto Armuelles
Fruit Company (Pafco), Chiquita's only Pacific coast operation in
Central America, suspended a 10-day strike over working
conditions without reaching any agreement. Pafco directors warned
that the company remained uncompetitive in spite of the ending of
industrial action.

"A significant number of our principal clients in Europe and the
US refused to receive fruit from Puerto Armuelles because of its
chronic quality problems," the company said in a statement. "We
do not have any option but to discontinue exporting the fruit
under the Chiquita brand."

In March, Chiquita announced it would default on $87 million of
debt repayments. According to reports, the company is teetering
on the edge of bankruptcy as it seeks to persuade creditors to
accept a debt-for-equity swap for a "significant portion" of its
$862 million debt.

Pafco, on the other hand, has been losing up to $15 million
annually since an earlier 1998 strike. The company on Friday
reiterated its warning that it could close the operation first
made in a letter from Steve Warshaw, Chiquita's president and
chief executive officer, to Mireya Moscoso, Panama's president,
in August.




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 and Edem
Psamathe P. Alfeche, Editors.

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

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