/raid1/www/Hosts/bankrupt/TCRLA_Public/021129.mbx
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
Friday, November 29, 2002, Vol. 3, Issue 237
Headlines
A R G E N T I N A
TELECOM ARGENTINA: Investor Confidence Slowly Improves
B E R M U D A
ANNUITY & LIFE: 3Q02 Results Show Continued Losses
ESG RE: S&P Cuts Ratings to 'B'; Withdraws Ratings
GLOBAL CROSSING: Objections Will Not Disrupt Reorganization
TYCO INTERNATIONAL: SEC Could Have Found Irregularities Long Ago
B O L I V I A
REPSOL YPF: Unit Completes Accounting Probe
B R A Z I L
AES CORP.: Exchange Offer Nears Completion
CESP: To Auction 100MW On December 12
ELEKTRO: Gets Extension On Payment of $213M Inter-company Loan
VARIG: Appoints New President
C H I L E
DISPUTADA: Completes Sale To Anglo American
GASATACAMA: To Spin Off 800km Transmission Lines
TELEFONICA CTC: Appeals Court Yet To Hear Appeal
TELEFONICA CTC: Fitch Affirms Ratings At BBB+
C O L O M B I A
BELLSOUTH COLOMBIA: Asks Court To Review 1994 Government Deal
VALORES BAVARIA: Issuing New Shares To Pay Off Debt
M E X I C O
AHMSA: Asks Banks To Take 40% Stake In Exchange For $1.3B Debt
CATALYST INTERNATIONAL: Announces Notice of Nasdaq Delisting
EMPRESAS ICA: Shares Price Soars on Investor Optimism
GRUPO MEXICO: Stock Jumps As Asarco Solution Nears
P A R A G U A Y
* S&P Downgrades Ratings on Paraguay; Outlook Negative
U R U G U A Y
* Fitch Says Debt Exchange Indicates Financial Pressure
- - - - - - - - - -
=================
A R G E N T I N A
=================
TELECOM ARGENTINA: Investor Confidence Slowly Improves
------------------------------------------------------
Despite the fact that Telecom Argentina STET-France Telecom SA
(TEO) has defaulted on US$3.2 billion in debt and racked up more
than US$1 billion in losses amid the worst economic crisis in the
second-largest South American economy, equity investors are
seeing a bright future for the Company.
Telecom Argentina, according to Dow Jones, is laying claim to the
title of hottest emerging market stock on the New York Stock
Exchange these days, up 57% in the past month as the Company, a
longtime blue chip recently leveled by Argentina's economic
troubles, attempts to regain its financial footing.
"I thought it was really cheap when it was at 70, 80 cents. It's
still really cheap, so it might be worth a punt," said
Christopher Ecclestone, the New Jersey-based director of Buenos
Aires Trust, an Argentine equity research group.
Telecom Argentina's American Depositary Receipts, which were
trading hands above US$40 a share in early 2000, plunged below
US$1 earlier this year after the Company defaulted in April. Last
week it crossed back above $2/ADR for the first time in seven
months, helping push its market capitalization back above US$2
billion. Volume has also been picking up, averaging above 330,000
shares a day over the past 10 trading sessions.
The Company, which is controlled by Telecom Italia SpA (TI) and
France Telecom SA (FTE), began restructuring talks with creditors
in September. Widespread market speculation suggests that foreign
banks on the hook for roughly US$1.6 billion in loans will extend
maturities and lower interest payments without demanding a debt
for equity swap.
That would give the Company breathing room to work out a more
leisurely settlement with bondholders holding about the same
amount in defaulted paper.
Telecom Argentina's foreign bonds have also rallied, albeit in
thin volume, and are being quoted at around 35 cents to the
dollar, up about 10 cents from a few months ago, according to one
corporate debt trader in New York.
"I think the news is that the restructuring process throughout
Argentina has begun," said the trader, adding that Telecom
Argentina might be among the first to wrap up negotiations.
The Company earlier this month named Amadeo Vazquez as president,
and Vazquez, who brings with him an extensive financial
background, is being viewed as the right man for the job in some
industry circles.
CONTACT:TELECOM ARGENTINA STET - FRANCE TELECOM SA(TELECOM)
Alicia Moreau de Justo 50, 10th Floor
Capital Federal (1107) República Argentina
Phone: +54 11 4968 4000
Home Page: http://www.telecom.com.ar
Contacts:
Alberto J. Ricciardi, Chief Financial Officer
Elvira Lazzati, Finance Director
Pedro Insussarry, Investor Relations Manager
Phone: (5411) 4968-3626/3627
Fax: (5411) 4313-5842/3109
Email: inversores@intersrv.telecom.com.ar
=============
B E R M U D A
=============
ANNUITY & LIFE: 3Q02 Results Show Continued Losses
--------------------------------------------------
Annuity & Life Re (Holdings), Ltd (NYSE: ANR) announced Wednesday
that it is reporting financial results for the third quarter.
The Company reported a net loss of $(19,147,000) or $(0.74) per
fully diluted share for the three month period ended September
30, 2002 as compared to a restated net loss of $(42,680,000) or
$(1.66) per fully diluted share for the three month period ended
September 30, 2001. Net loss for the nine months ended September
30, 2002 was $(29,007,000) or $(1.13) per fully diluted share as
compared to a restated net loss of $(38,870,000), or $(1.52) per
fully diluted share for the comparable nine months of 2001. The
three and nine month financial information presented in this
report reflects the restatement of the Company's financial
statements for the first and second quarters of 2002 and the
fiscal year ended December 31, 2001. The Company's discussions
with the Securities and Exchange Commission regarding the
implementation of FAS 133 -- Accounting for Derivative
Instruments and Hedging Activities with respect to certain of its
annuity reinsurance agreements are still ongoing. Depending upon
the outcome of these discussions, it is possible that further
restatements may be necessary. The following table summarizes
some of the significant items affecting net income.
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
as restated as restated as restated
Cumulative effect
of a change in
accounting
principle $ -- $ -- $ -- $(3,665,735)
Net change in fair
value of embedded
derivatives (13,277,822) (5,265,396) (18,254,530) (3,567,342)
Change in
amortization of
deferred
acquisition
costs related
to embedded
derivatives 5,790,244 269,009 7,292,964 1,410,724
Transamerica
contract deferred
acquisition cost
write downs -- (19,157,798) (24,796,000) (34,538,991)
Variable annuity
minimum guarantee
reserve
strengthening (7,760,000) -- (7,760,000) --
Variable annuity
minimum guarantee
payments
in excess of
premiums (3,117,100) 1,364,121 (2,171,700) 3,735,923
World Trade
Center -- (12,000,000) -- (12,000,000)
Net realized
investment
gains 9,297,351 1,078,933 10,813,315 1,425,183
Unrealized loss on
interest rate
swap (2,005,000) -- (2,005,000) --
Total of
significant
items $(11,072,327) $(33,711,131) $(36,880,951) $(47,200,238)
The cumulative effect of a change in accounting principle, the
change in fair value of embedded derivatives, and the change in
amortization of deferred acquisition costs related to embedded
derivatives all relate to the Company's implementation of FAS 133
-- Accounting for Derivative Instruments and Hedging Activities.
The write downs of deferred acquisition costs associated with the
Transamerica reinsurance contract are the result of high
surrender rates on the underlying policies and the Company's
obligations for minimum interest guarantee payments associated
with those policies. Variable annuity reserve strengthening of
$7,760,000 in the third quarter of 2002 reflects the Company's
increase in guaranteed minimum death benefit reserves as a result
of increasing claim activity in recent quarters. This increase in
claims activity also resulted in losses of $(3,117,100) and
$(2,171,700) on the Company's guaranteed minimum death benefit
reinsurance contracts during the three and nine month periods
ended September 30, 2002, respectively. The Company's net loss
for the three and nine month periods ended September 30, 2002 was
also significantly affected by net realized investment gains. The
unrealized loss on our interest rate swaps reflects the change in
fair value of the Company's interest rate swaps related to its
deposit liability. In addition to each of these items the
Company's net loss for the three month period ended September 30,
2002 also increased relative to the comparable prior period of
2001 as a result of higher than anticipated mortality experience
from certain of the Company's life reinsurance contracts and
variability in the timing of the receipt of premiums. The three
and nine month periods ended September 30, 2001 and 2002 were
both negatively affected by adverse mortality experience on
certain of the Company's life reinsurance contracts, including
significant losses on its life reinsurance contract with Lincoln
National, which was recaptured in the third quarter of 2002.
Realized investment gains for the three month period ended
September 30, 2002 were $9,297,000 or $0.36 per fully diluted
share compared with realized investment gains of $1,079,000 or
$0.04 per fully diluted share for the three month period ended
September 30, 2001. Realized investment gains for the nine month
period ended September 30, 2002 were $10,813,000 or $0.42 per
fully diluted share compared with realized investment gains of
$1,425,000 or $0.06 per fully diluted share for the nine month
period ended September 30, 2001. Cash flow from operations for
the three and nine month periods ended September 30, 2002 was
$9,330,000 and $27,726,000, respectively.
Life segment loss for the three months ended September 30, 2002
improved to a loss of $(10,150,000) or $(0.39) per fully diluted
share as compared to a loss of $(20,425,000) or $(0.80) per fully
diluted share for the three months ended September 30, 2001. Life
segment income for the nine months ended September 30, 2002
improved $12,403,000 to $3,490,000 or $0.14 per fully diluted
share from a loss of $(8,913,000) or $(0.35) per fully diluted
share for the nine months ended September 30, 2001. During the
third quarter of 2002 Lincoln National recaptured its reinsurance
contract with the Company, which was in arbitration, and the
Company agreed to terminate the arbitration proceeding. The
impact of the Lincoln National contract (including the recapture
in the third quarter of 2002) on the three and nine month periods
ended September 30, 2002 was a loss of $(6,189,000) and
$(6,988,000), respectively. After adjusting for the World Trade
Center tragedy in the third quarter of 2001, Lincoln National
losses in 2001 and 2002, and the unrealized interest rate swap
loss in the third quarter of 2002, segment income for the three
months ended September 30, 2002 declined compared to the
corresponding prior quarter due to adverse mortality in the third
quarter of 2002 being worse than that experienced in the third
quarter of 2001 and certain variability in the timing of the
receipt of premiums. After the same adjustments, life segment
income for the nine months ended September 30, 2002 improved from
the comparable prior period, primarily as a result of strong
growth in the first six months of 2002 offsetting the increase in
adverse mortality in the third quarter of 2002. The Company's
life premium grew 29% and 42% for the three and nine month
periods ended September 30, 2002 as compared to the prior
periods. Life premium for the three months ended September 30,
2002 was $82,304,000 compared to $63,924,000 for the three months
ended September 30, 2001.
Annuity segment loss for the three months ended September 30,
2002 was $(18,346,000) or $(0.71) per fully diluted share
compared to a loss of $(25,386,000) or $(0.99) per fully diluted
share for the three months ended September 30, 2001. Annuity
segment loss for the nine months ended September 30, 2002 was
$(45,218,000) or $(1.76) per fully diluted share compared to a
loss of $(38,000,000) or $(1.48) per fully diluted share for the
nine months ended September 30, 2001. The impact of write downs
of deferred acquisition cost associated with the Transamerica
contract on the nine month period ended September 30, 2002 was a
charge of $(24,796,000). For the three and nine months ending
September 30, 2001 the impact of write downs of deferred
acquisition cost associated with the Transamerica contract was
$(19,158,000) and $(34,539,000), respectively. The impact of the
change in fair value of embedded derivatives (net of the related
change in amortization of deferred acquisition costs) on the
three and nine month periods ended September 30, 2002 was a loss
of $(7,488,000) and $(10,962,000). For the three and nine month
periods ended September 30, 2001 the losses were $(4,996,000) and
$(2,157,000), respectively. In the third quarter of 2002 the
Company strengthened its reserves for variable annuity minimum
guarantees by $7,760,000 in response to increasing claim payments
relative to premiums collected. Claim payments for the three and
nine month periods ended September 30, 2002 exceeded premiums
collected on our guaranteed minimum death benefit contracts by
approximately $3,117,000 and $2,172,000, respectively. After
adjusting for the write downs associated with the Transamerica
contract, embedded derivatives (net of the related change in
amortization of deferred acquisition costs), and losses on the
Company's variable annuity minimum guarantees, segment income
declined an insignificant amount from the comparable prior
period. After the same adjustments, annuity segment (loss) for
nine month period ending September 30, 2002 also declined an
insignificant amount from the comparable prior period. These
insignificant declines in segment income for both periods were
the result of additional expenses incurred in arbitration and
reduced investment income.
Total revenues for the three months ended September 30, 2002 grew
25% to $115,631,000 from $92,380,000 for the three months ended
September 30, 2001. Total revenues for the nine months ended
September 30, 2002 grew 32% to $343,256,000 from $260,039,000 for
the nine months September 30, 2001. This increase was the result
of growth in life premium and investment income related to the
Company's reinsurance collateral funding program. Operating
expenses were 3.0% of total revenue (excluding the net change in
fair value of embedded derivatives) for the three months ended
September 30, 2002, as compared with 2.5% for the three months
ended September 30, 2001. For the nine months ended September 30,
2002 operating expenses were 2.9% of total revenue (excluding the
net change in fair value of embedded derivatives) compared to
3.0% for the nine months ended September 30, 2001.
Unrealized gains increased to approximately $16,000,000 as of
September 30, 2002 as a result of changes in the general level of
interest rates during the period. The Company's investment
portfolio currently maintains an average credit quality of AA.
Book value per share at September 30, 2002 was $14.73 compared to
$15.91 at December 31, 2001.
Frederick S. Hammer, Chairman of the Board and Co-Chairman of the
Transition Committee of the Board of Directors, commented, "We
continue to face significant challenges in a difficult economic
environment, and we are proceeding deliberately in the transition
to new management. We experienced adverse mortality in the third
quarter across several of our contracts, recaptured the Lincoln
National contract that was producing losses, and are experiencing
losses on one of our guaranteed minimum death benefit contracts.
These items along with the embedded derivative losses resulting
from the implementation of FAS 133 produced losses for us in the
three and nine month periods ending September 30, 2002.
Understandably, we have also experienced a slow down of new
business submissions."
"On the positive side we saw improvement in our investment
portfolio. We realized over $9 million of capital gains and
improved our unrealized gain position to approximately $16
million, our experience with the Transamerica contract was in
line with our expectations so no additional write down of
deferred acquisition costs was needed, and as a result of
recapturing the Lincoln National contract we removed that drain
on future earnings."
"The Company continues to face a number of important issues.
These include the Company's need to post up to approximately $210
million of additional collateral under its reinsurance agreements
by December 31, 2002. The Company will seek to meet or reduce
these additional collateral requirements by negotiating the
recapture, retrocession, or sale of certain of its reinsurance
agreements, by accessing its collateral funding facility and/or
by raising capital. In addition, we must complete the SEC
accounting review, and we are moving forward with selecting a
chief executive officer."
The Company has previously advised that, following discussions
with the staff of the Securities and Exchange Commission (SEC),
the Company will restate its financial statements for the fiscal
years ended December 31, 2000 and 2001. The Company also intends
to restate the financial statements included in its Forms 10-Q
filed for the quarters ended March 31 and June 30, 2002. Because
the SEC's review of the Company's prior public filings is still
pending, KPMG, the Company's independent auditor, is not able to
complete its audit of the restated financial information for the
fiscal years ended December 31, 2000 and 2001, or its review of
the financial statements contained in the Company' s Form 10-Q
for the third quarter of 2002 which is the source of the
information in this press release. Accordingly, the Company's
Form 10-Q for the third quarter of 2002 includes unaudited
financial statements for the periods ended September 30, 2001 and
2002 that have not been reviewed in accordance with Rule 10-01(d)
of Regulation S-X promulgated by the SEC, as well as restated
financial information for the year ended December 31, 2001 that
has not yet been subject to audit. Management cannot certify the
third quarter 2002 Form 10-Q filing in accordance with the
Sarbanes-Oxley Act of 2002 or the regulations promulgated
thereunder because the Securities Exchange Act of 1934 requires
that the financial statements be reviewed by the Company's
auditors and because the Company is still in discussions with the
SEC regarding the proper application of FAS 133 to certain of the
Company's annuity reinsurance agreements.
Annuity and Life Re (Holdings), Ltd. provides annuity and life
reinsurance to insurers through its wholly owned subsidiaries,
Annuity and Life Reassurance, Ltd. and Annuity and Life Re
America.
To see financial statements: http://bankrupt.com/misc/Annuity.htm
CONTACT:Annuity & Life Re (Holdings), Ltd.
Jay Burke
+1-441-296-7667
ESG RE: S&P Cuts Ratings to 'B'; Withdraws Ratings
--------------------------------------------------
Standard & Poor's Ratings Services said Wednesday it lowered its
long-term counterparty credit and insurer financial strength
ratings on the main operating entities of Bermuda-based
reinsurance group ESG Re Ltd. (ESG) to 'B' from 'BB-'.
At the same time, Standard & Poor's removed the ratings from
CreditWatch, where they were placed on Aug. 13, 2002. The outlook
is negative. The ratings on ESG were then withdrawn at the
company's request.
The downgrade reflects the group's weakened capital adequacy,
limited ability to access external sources of finance, marginal
business position, and the continuing volatility in reported
earnings. This is offset by actions taken over the past two years
to improve underwriting controls and to implement risk management
processes.
ESG is a specialist provider of accident, life, health, and
disability reinsurance.
"Until reserves have stabilized and the potential threats from
ongoing litigation have been resolved, the impact on capital is
uncertain, and the outlook is therefore negative," said Standard
& Poor's credit analyst Manish Bakhda. "Nevertheless, management
is expected to continue to enforce strict underwriting controls
and to seek profitable growth in direct response marketing."
ANALYSTS:Standard & Poor's, New York
Manish Bakhda, London (44) 20-7847-7046
manish_bakhda@standardandpoors.com
Paul Waterhouse, London (44) 20-7847-7084
paul_waterhouse@standardandpoors.com
GLOBAL CROSSING: Objections Will Not Disrupt Reorganization
-----------------------------------------------------------
Bankrupt company Global Crossing, Ltd said it does expect its
bankruptcy proceeding to go on without delays, despite recent
objections to the Company's plans on one of its pension plans.
A Reuters report quoted Global Crossing spokesperson Tisha
Kresler saying that all payments to retirees would not be
interrupted during this time, and the participants' money is
protected under federal law, regardless of the outcome of this
objection.
The Pension Benefit Guaranty Corp. had revealed its intentions to
take control of Global Crossing's pension plan, which is
underfunded by US$105 million.
However, the federal agency objected to the planned transfer of
the pension plan, saying the Company is "seeking to transfer the
pension plan to a wasting trust of fixed and limited duration,
with little or no assets with which to satisfy the PBGC's claim
for the pension plan's unfunded benefit liabilities when the plan
inevitably terminates."
PBGC is seeking to be named trustee of the pension plan, planning
to take over on Dec. 3, while the government's objections will be
heard on Dec. 4.
The Company, which operates a fiber-optic network connecting 27
countries, filed for bankruptcy after a collapse in the
telecommunications market.
CONTACT:GLOBAL CROSSING
Press:
Becky Yeamans, +1-974-410-5857,
Email: Rebecca.Yeamans@globalcrossing.com
Tisha Kresler, +1-973-410-8666
Email: Tisha.Kresler@globalcrossing.com
Analysts/Investors:
Ken Simril, +1-310-385-5200
Email: investors@globalcrossing.com
TYCO INTERNATIONAL: SEC Could Have Found Irregularities Long Ago
----------------------------------------------------------------
Problems at Tyco International, Inc. could have been discovered
two years ago when the US Securities and Exchange Commission did
an investigation on the Company's books. According to The Bermuda
Sun, the SEC probe, which ended in July 2000, would have
uncovered accounting irregularities had the agency pressed harder
for information. The SEC took no actions when the informal
enquiry ended.
Tyco International had filed charges of grand larceny and
enterprise corruption against its former chief executive Dennis
Kozlowski and former finance chief Mark Swartz.
The two executives, along with the Company's general counsel had
allegedly looted the Company of hundreds of millions of dollars
through unauthorized loans.
Nevertheless, the SEC has already asked the Company to submit
relevant documents for the said period, and the Company is
cooperating, according to the report.
CONTACT: Tyco International Ltd.
Corporate Office
The Zurich Centre, Second Floor
90 Pitts Bay Road
Pembroke HM 08, Bermuda
Phone: 441-292-8674
Home Page: http://www.tyco.com
=============
B O L I V I A
=============
REPSOL YPF: Unit Completes Accounting Probe
-------------------------------------------
Sixteen employees were sent home after Petrolera Andina concluded
an investigation into the accounting irregularities and fraud at
the Bolivian subsidiary of Repsol-YPF.
Citing company President Jose Maria Moreno, Business News
Americas reports that 10 employees were laid off after clear
evidence of wrongdoing, including providing privileged
information to third parties participating in tenders, and
neglecting duties such as monitoring and auditing. The other 6
were dismissed because they could not be trusted, although
nothing could be proven against them, he said.
The Company is still contemplating on what actions to take
against the 10 employees. Andina is also planning to take action
against suppliers linked to the suspect deals.
"The investigation allowed us to identify the companies involved
in these practices and for that reason they will stop being
suppliers to Repsol-YPF Bolivia and the operations in which we
participate," Moreno said.
===========
B R A Z I L
===========
AES CORP.: Exchange Offer Nears Completion
------------------------------------------
The AES Corporation (NYSE: AES) announced Wednesday that it has
been informed by its exchange agent that, as of 5:00 p.m., New
York City time, on November 26, 2002, approximately $219,193,000
in aggregate principal amount of its outstanding 8.75% Senior
Notes due 2002 ("2002 Notes") and approximately $157,851,000 in
aggregate principal amount of its 7.375% Remarketable and
Redeemable Securities due 2013, which are puttable in 2003
("ROARs") had been tendered in the exchange offer.
These amounts represent approximately 73% and 79% of outstanding
2002 Notes and ROARs, respectively.
Consummation of the exchange offer is subject to a number of
conditions, including the condition that 80% in aggregate
principal amount of the ROARSs and 80% in aggregate principal
amount of the 2002 Notes are validly tendered. At this time,
neither 80% of the ROARs nor 80% of the 2002 Notes have been
tendered. The exchange offer expires on December 3, 2002.
The offering of the new senior secured notes in the exchange
offer is being made only to "qualified institutional buyers" and
"persons other than a U.S. person" located outside the United
States, as such terms are defined in accordance with Rule 144A
and Regulation S of the Securities Act of 1933, as amended.
The new senior secured notes will not be registered under the
Securities Act of 1933, or any state securities laws. Therefore,
the new senior secured notes may not be offered or sold in the
United States absent an exemption from the registration
requirements of the Securities Act of 1933 and any applicable
state securities laws. This announcement is neither an offer to
sell nor a solicitation of an offer to buy the new notes.
CONTACT:The AES Corporation
Kenneth R. Woodcock, 703/522-1315
CESP: To Auction 100MW On December 12
-------------------------------------
Sao Paulo generator Cesp is counting on the long-term contracts
it will auction on December 12 to "dilute" short-term low power
prices, reports Business News Americas, citing Cesp generation
and transmission manager Silvio Roberto Arec Gomes.
The Company hopes that the 900MW it plans to auction under ten-
year contracts would be the solution to the low power prices in
the market.
The low prices, reaching down to US$1.2/MWh is due to rationing
and other factors, and is expected to last until 2004.
Analyst Oswaldo Telles believes that long-term contracts are the
best solution for both buyers and sellers. According to him,
buyers may face losses in the first year, but will profit in the
next.
The Sisbex trading platform, which is operated by Brazil's
futures exchange, the BM&F would be used, said Mr. Areco. All
participants will have to contact an existing Sisbex broker to
but or sell power.
Mr. Areco revealed that the Company would be basing its
calculations on the Company's cash flow needs, and that the VN
price (the value that generators are allowed to pass on to
distributors) would not be used as a benchmark.
However, he would not divulge the minimum price Cesp expects.
State government authorities say that Cesp would seek prices
higher than ARS70 per megawatt-hour.
Telles suggested that the Company would be able to sell at ARS55-
60 per megawatt-hour, and still get better prices than existing
initial contracts.
According to Mr. Areco, other companies would not be able to sell
power at those prices and still cover operating costs, adding
that Cesp's operating assets are old and have been amortized, and
power production is very cheap.
Areco said that the auction, which the Company had been preparing
for in the last two years, is the most transparent way for a
state-controlled company to sell power without being accused of
underhand dealings.
Areco pointed out that the Company had delayed the auction while
the process involves legal uncertainties, adding that the
likelihood of the formal passing of the MP64 legislation and
resolutions from Brazil power regulator Aneel had paved the way
for an auction.
The report also indicated that the auction is open to any other
company who wants to join.
ONTACT:Cesp-Companhia Energetica De Sao Paulo
Rua da Consola‡ o, 1.875
CEP 01301 -100 S o Paulo, Brazil
Phone: +55-11-234-6322
Fax: +55-11-287-0871
Home Page: http://www.cesp.com.br/
Contact:
Mauro G. Jardim Arce, Chairman
Ruy M. Altenfelder Silva, Vice Chairman
Vicente Kazuhiro Okazaki, Finance Director
ELEKTRO: Gets Extension On Payment of $213M Inter-company Loan
--------------------------------------------------------------
Sao Paulo distributor Elektro renegotiated terms for the payment
of a US$213-million debt with parent company Energia Total do
Brasil (ETB), reports Business News Americas. Under the new
terms, Elektro will repay principal in 11 installments from
December 2007. In addition, interest payments will be cut by
37.6%.
ETB, which is a holding company through which bankrupt US-based
Enron controls 99% of Elektro, will use the loan payments to pay
off an identical loan with Italy's IntesaBCI.
The renegotiations, as well as the bankruptcy of Enron do not
affect Elektro's rating, which is BB- on Standard & Poor's Brazil
national scale, S&P analyst Marcelo Costa said.
According to Costa, inter-company loans are treated differently
from loans taken out by third-party investors.
In totality, Elektro's credit quality has been largely unaffected
by the Enron bankruptcy, Costa said. This is surprising as a
parent company's bankruptcy often causes liquidity pressures at
its subsidiaries, but Elektro remains in fairly good financial
shape, Costa said.
Enron creditors have already put Elektro up for sale, and are
expected to reveal in late December whether they have any takers.
CONTACT:ELEKTRO ELETRICIDADE E SERVICOS SA
Rua Ary Antenor de Souza, 321
Jd Nova America 13053-024 Campinas - SP
Brazil
Phone: +55 19 3726 1098
Home Page: http://www.elektro.com.br
Contact:
Orlando Rufo Gonzalez, Chairman
Britaldo Pedrosa Soares, Finance Director
VARIG: Appoints New President
-----------------------------
Viacao Aerea Rio- Grandense SA, Latin America's biggest airline,
announced Wednesday the appointment of Manuel Guedes as the
airline's acting president. Guedes' appointment came two days
after Armin Lore, the ailing airline's previous president, quit
in a dispute over debt renegotiations.
Luiz Carlos Vaini of the airline's board of directors explained
that Guedes was only named acting president due to the
uncertainty of the airline's situation.
Guedes, who had been director of investor relations prior to his
appointment, was chosen because of his involvement in ongoing
negotiations with creditors.
Varig is reportedly carrying a debt load of around US$900 million
and is looking at Brazil's National Development Bank for an
injection of capital of between US$300 million to US$400 million.
Guedes said much would depend on the position of the bank,
expected next week, regarding what it wants the airline to do in
order to obtain help. One possible condition of the bank's
support would be for the foundation to reduce its position to
become a minority stake holder, Guedes suggested.
Consultants studying the airline said it remained a viable
company, Guedes revealed, adding their report would determine
whether the airline would shut down any of its routes or lay off
any of its 16,000 employees.
But industry analysts remained skeptical that Guedes' appointment
would herald significant change.
"They've said this before and all that happens is a change in
leaders. They have to be serious about restructuring if they want
a Brazilian airline to be the continent's leader," said Michael
Miller, president of the Orlando-based Miller Air Group.
CONTACT:VARIG (Viacao Aerea Rio-Grandense, S.A.)
Rua 18 de Novembro No. 800, Sao Joao
90240-040 Porto Alegre,
Rio Grande do Sul, Brazil
Phone: (51) 358-7039/7040
(51) 358-7010/7042
Fax: +55-51-358-7001
Home Page: www.varig.com.br/english/
Contacts:
Dorival Ramos Schultz, EVP Finance and CFO
E-mail: dorival.schultz@varig.com.br
Investor Relations:
Av. Almirante Silvio de Noronha,
n 365-Bloco "B" - s/458 / Centro
Rio de Janeiro, Brazil
KPMG Brazil
Belo Horizonte
Rua Paraba, 1122
13th Floor
30130-918 Belo Horizonte MG
Telephone 55 (31) 3261 5444
Telefax 55 (31) 3261 5151
or
Brasilia
SBS Quadra 2 BL A N 1
Edificio Casa de Sao Paulo SL 502
70078-900 Braslia - DF
Telephone 55 (61) 223 2024
Telefax 55 (61) 224 0473
BAIN & CO
Primary Contact: Wendy Miller
Two Copley Place, Boston, MA 02116
USA
Phone: +1-617-572-2000
Fax: +1-617-572-2461
Email: miles.cook@bain.com
URL: http://www.bain.com
=========
C H I L E
=========
DISPUTADA: Completes Sale To Anglo American
-------------------------------------------
Top executives of Anglo American and Exxon Mobil have
signed a deal finalizing Anglo American's acquisition
of Chilean copper mine Disputada de Las Condes on
Monday. According to a report from EFE News, the deal
gives Empresa Nacional de Mineria (ENAMI) the option
to acquire 49 percent of Disputada. ENAMI had held the
right since it sold the mine to Exxon Mobil in 1978.
Exxon had violated that option, which is valid until
2027, when it announced the sale three months ago.
However, ENAMI fought to keep the option by
threatening to sue Exxon if the option is not included
in the deal.
Disputada, which produces about 250,000 tons of copper
annually, boosts Anglo American's position as a
leading copper producer.
Anglo American also owns copper mines Mantos Blancos
and Mantos Verdes, producing 150,000 tons of copper
per year.
CONTACT:ENAMI (Empresa Nacional de Mineria)
MacIver 459,
Santiago, Chile
Phone: 637 52 78
637 50 00
Fax: 637 54 52
Email: webmaster@enami.cl
Home Page: www.enami.cl/
Contact:
Jorge Rodriguez Grossi, President
EXXON MOBIL CORP
Head Office
5959 Las Colinas Boulevard
Irving
TEXAS
United States
75039-2298
Tel: +1 972 444-1000
Fax: +1 972 444-1350
Web: http://www.exxonmobil.com
Contact:
Lee R. Raymond, Chairman & Chief Executive
GASATACAMA: To Spin Off 800km Transmission Lines
------------------------------------------------
In a bid to generate cash flow and in preparation for the power
sector's new legislation, Chilean gas transporter and power
generator GasAtacama will transfer about 80km of transmission
lines to a new transmission subsidiary, GasAtacama Transmision,
reports Business News Americas, citing GasAtacama chief executive
Rodulf Araneda.
According to the report, the Company is considering whether to
sell the lines for US$100 million or keep them to generate about
US$10 million per annum on transport charges.
Araneda explained that, whether the transmission lines are sold
or not, the Company expects the subsidiary to generate cash flows
to finance new projects.
However, the report indicated that keeping control on the lines
may pose problems for the Company. A bill in the country's
electric sector limits the number of transmission lines per
generator in the northern grid (SING).
Araneda said that possible investors would be interested in
buying GasAtacama's transmission lines along with those of
Endesa, because the buyers may link up the SING.
Endesa, which also plans to sell its SING transmission assets,
owns 50 percent of GasAtacama, while US power company CMS owns
the rest.
According to the report, the Gasatacama Transmision lines to be
transferred are: Atacama-Encuentro (153km), Atacama-Antofogasta
(70km), Patache-Iquique (70km), Iquique-Arica (225km), Atacama-
Escondida (205km), Palestina-El Penon (60km), Encuentro-El Tesoro
(90km), and a number of substations.
TELEFONICA CTC: Appeals Court Yet To Hear Appeal
------------------------------------------------
An unidentified person connected with Telefonica CTC Chile
refuted a report that suggested a Santiago appeals court has
rejected an appeal by Chile's largest telco against a labor court
ruling that it must pay CLP7.5 billion (US$10.8mn) to its
employees in compliance with a collective contract that expired
June 30.
Business News Americas, which earlier released the report,
subsequently issued a correction saying that the appeals court
has not yet heard the case.
As such, the appeals court has suspended an asset embargo against
Telefonica CTC. The suspension is in place until the court has
studied CTC's appeal of the ruling.
Local daily La Tercera reported November 22 that the labor court
had placed an embargo on a current account in CTC's name,
containing CLP250 million, after ordering the Company to pay
employees CLP7.5 billion.
CONTACT: TELEFONICA CTC CHILE
Avenida Providencia 111, Piso 2
Santiago, Chile
Phone: +56-2-691-2020
Fax: +56-2-691-2392
Homepage: http://www.ctc.cl
Contacts:
Mr. Bruno Philippi, President
Mr. Jacinto D¡az, Vice President
Gisela Escobar, Head of Investor Relations
TELEFONICA CTC: Fitch Affirms Ratings At BBB+
---------------------------------------------
Fitch Ratings has affirmed the 'BBB+' international scale local
and foreign currency ratings of Compania de Telecomunicaciones de
Chile (CTC) and maintained the outlook at Negative. The national
scale rating of A+(Ch), Tendencia Negativa, has also been
affirmed.
CTC's ratings reflect its leading position in the Chilean
telecommunications industry and its diverse telecom revenue mix
(i.e., local exchange, long distance, data transmission and
wireless telephony, among others), which moderates business risk.
CTC remains well-positioned in an increasingly competitive
industry via its extensive modern network and product offerings.
Strong growth in the mobile and corporate communications sectors
should mitigate some of the effects of competition and pricing
pressures in the long distance and local exchange segments.
CTC has taken several actions to reverse two years of losses
incurred since the implementation of the current rate structure
in mid 1999. These actions have included implementing a cost-
reduction program, selling of noncore assets, materially lowering
capital expenditures and reducing debt levels. Voluntary and
involuntary head count reductions have reduced the workforce by
approximately 40% resulting in annual savings more than $150
million. Divestitures of non-core business units have generated
approximately $300 million in cash over the last three years,
which have been used to pay down debt. Capital expenditures have
been cut to $200-250 million versus historical levels of $600-650
million, which should further improve free cash flow for debt
reduction. These actions are helping to restore credit-protection
measures to historical levels.
Debt levels have been reduced by about US$1.34 billion or 46%
over the last 3.0 years; total debt was US$1.6 billion at October
31, 2002. The company has benefited from declining interest rates
as approximately 54% of the debt is floating. The company reduces
exposure to interest rates with the use of interest rate swaps.
The company hedges its exposure to foreign currency risk; roughly
80% of total debt is primarily dollars, while revenues are
predominately in pesos. Maturities are manageable with free cash
flow sufficient to meet obligations over the next 18 months. A
recent union strike should not materially impact performance in
the near term as the workers elected to return to work for 18
months under the existing contract. Fitch expects credit
fundamentals to improve as cost reduction programs continue to
take hold and the company utilizes free cash flow to further pay
down debt. Recent additional headcount reductions of 1,000 should
add savings and further support credit quality. Credit-protection
measures are expected to strengthen to levels consistent with the
rating category including EBITDA/Interest in excess of 5.0x and
Debt/EBITDA of less than 2.5X by year end 2003.
===============
C O L O M B I A
===============
BELLSOUTH COLOMBIA: Asks Court To Review 1994 Government Deal
-------------------------------------------------------------
BellSouth Colombia, which posted a nine-month loss of COP341
billion, asked a local arbitration court for a review of its
contract with the government, Dow Jones reveals, citing a Company
statement.
The statement didn't detail reasons for explain the move. But
newspaper El Tiempo suggested that the Company might be seeking
payback from the government for an operating concession that was
signed in 1994.
Bellsouth has claimed that the bid price for the concession was
based on official economic projections that haven't been realized
due to a weak Colombian economy that included a recession in
1998.
Minister Pinto, however, was quoted in the newspaper as saying
the Company has "no chance" of winning the lawsuit. The grievance
"gives the impression that BellSouth is trying to replace its
failed business plan with desperate legal action," Pinto said.
According to the minister, in 1994, BellSouth made its own
economic projections, and that it was those projections the
Company used to decide what price to bid for the concession.
In the statement from BellSouth Colombia, "The possibility to
resort to an arbitration court with the goal of reviewing
contractual balance is contemplated in the concession contract."
The company statement also quoted Larry Smith, president of
BellSouth Colombia, who said: "We don't understand the terms and
arguments that the minister has used to refer to our company."
BellSouth Colombia is the No. 2 cellular operator in the country
in terms of number of subscribers and is the only company with
nationwide coverage.
VALORES BAVARIA: Issuing New Shares To Pay Off Debt
---------------------------------------------------
In an effort to raise money to pay off debt and to capitalize
firms, Valores Bavaria SA, Colombia's biggest diversified holding
company, revealed plans to issue shares worth COP385.32 billion,
relates Reuters. Pending compliance of legal requirements,
Valores will issue 2.47 billion shares -- three times the number
of its circulating shares -- to current shareholders at a price
of COP156 each.
Valores, which is controlled by Colombian businessman Julio Mario
Santo Domingo, trimmed its losses in the first nine months of
2002 to COP182.56 billion from losses of COP219.39 billion in the
same period last year. ($1 = 2,716.9 pesos).
The holding controls 50% of Alianza Summa - the merger of the
Colombia's two largest airlines, Avianca and ACES.
CONTACT:VALORES BAVARIA SA
No 7A-47 Calle 94
Santafe de Bogota DC
Colombia
Phone: +57 1 600 2100
Home Page: http://www.bavaria.com.co/
Contacts:
Javier Aguirre Nogues, Chairman
Leonor Montoya Alvarez, President
Victor Alberto Machado Perez, Secretary
===========
M E X I C O
===========
AHMSA: Asks Banks To Take 40% Stake In Exchange For $1.3B Debt
--------------------------------------------------------------
In a recently submitted restructuring proposal, Mexican
steelmaker Altos Hornos de Mexico SA (AHMSA), offered banks a 40%
stake in the Company to write off US$1.3 billion of the debt,
Bloomberg reports, citing AHMSA spokesman Francisco Orduna.
The plan, according to the official, would reduce AHMSA's debt to
US$500 million, as well as extend maturities to 15 years from 9
years.
AHMSA, which stopped paying its US$1.85 billion debt more than
three years ago, began negotiations with banks more than three
years ago. The parties had arrived at a preliminary agreement,
which required the conversion US$540 million of debt to equity
and the sell-off of non-essential assets worth US$120 million.
This would leave AHMSA with debts of US$1.14 billion, which would
be rescheduled with a final installment payable September 2009.
Under the plan, the GAN industrial group would have maintained
control of AHMSA with 50.1% of the firm, the banks would have
40%, and minority shareholders the rest.
However, in April, bank officials revealed talks had broken down
completely, citing lack of action on the part of the board, and
said that a change of management was needed to get negotiations
moving again.
CONTACT: AHMSA
Prolongacion B. Juarez s/n,
Monclova , Coahuila 25770
Mexico
http://www.AHMSA.com
Phone: +52 86 33 81 72
Fax: +52 86 33 65 66
Contacts:
Alonso Ancira Elizondo, CEO, Vice Chairman, Pres./CEO
Jorge Ancira Elizondo, Chief Financial Officer
Manuel Ancira Elizondo, Chief Operating Officer
CATALYST INTERNATIONAL: Announces Notice of Nasdaq Delisting
------------------------------------------------------------
Catalyst International, Inc. (Nasdaq: CLYS), a global provider of
supply chain execution (SCE) solutions, has received notice of a
NASDAQ Staff Determination dated November 22, 2002, indicating
that the common stock of the company is subject to delisting from
The NASDAQ National Market because the company does not meet the
minimum stockholders' equity requirement for continued listing,
as set forth in NASDAQ Marketplace Rule 4450(a)(3). Effective
November 1, 2002, NASDAQ Marketplace Rule 4450(a)(3) was amended
to require a minimum $10.0 million stockholders' equity.The
company intends to file a request for a hearing before a NASDAQ
Listing Qualifications Panel to review the NASDAQ Staff
Determination.Under NASDAQ rules, pending a decision by the
Panel, the common stock of the company will continue to trade on
The NASDAQ National Market.There can be no assurance that the
Panel will grant the company's request for continued listing.If
the Panel does not grant the company's request, the company's
common stock will be delisted from The NASDAQ National Market.
About Catalyst
Catalyst International, Inc. helps companies integrate their
supply chains to optimize their business performance.For more
than 20 years, the company has enabled global Fortune 500
customers to greatly minimize the risks of installing,
integrating and operating WMS software in complex, high-volume
warehouse facilities.Catalyst software offers the broadest
functionality in the industry and is easy to install, modify,
upgrade and maintain.Its broad array of services includes
distribution strategy consulting, pre- and post- implementation
audits, a 24/7 customer services center and facilities
management.
Catalyst has provided successful SCE solutions in 10 countries
for more than 100 customers, including Panasonic, Reebok
International, The Home Depot and Subaru.It is headquartered in
Milwaukee, WI and has offices or representatives in the UK,
Italy, Mexico and South America.For more information, call
toll-free 800-236-4600 or visit www.catalystwms.com .
CONTACT: Catalyst International, Inc.
U.S. Investor Relations
David Jacobson, +1-414-362-6806
Media Relations
Renee Truttmann, +1-262-644-0184
EMPRESAS ICA: Shares Price Soars on Investor Optimism
-----------------------------------------------------
Shares of Empresas ICA Sociedad Controladora SA, Mexico's largest
construction company, soared 13% or 16 centavos, to MXN1.4
Tuesday following the signing of new contracts worth US$154
million and on optimism that construction spending will rise.
The increase, according to Bloomberg, is the stock's biggest one-
day gain since Sept. 26.
"ICA's too cheap," said Gonzalo Fernandez, an analyst at
Santander Central Hispano Investment in Mexico City. "There's
been news of new contracts and construction spending has been
very low and we should start to see it rise."
In October, ICA signed a contract worth US$136.6 million to build
plants for state-controlled oil company Petroleos Mexicanos.
Earlier this month, ICA signed another government contract worth
US$17.4 million for the restoration of roads.
Construction spending rose 2.9 percent in August from the
previous year according to the National Statistics Institute, the
fifth straight rise after more than two years of declines.
The shares have fallen 68% this year, mostly because of a lack of
new contracts as the government cut back on spending.
Empresas ICA (ICA) is Mexico's largest engineering, procurement
and construction company in terms of revenues and assets.
Established in 1947, the company is engaged in a full range of
construction and related activities, including the construction
of infrastructure, industrial, urban and housing facilities. ICA
also participates in the development and marketing of real
estate, the construction, maintenance and operation of highways,
bridges and tunnels and in the management and operation of water
supply systems and automobile parking facilities under
concessions granted by governmental authorities.
To see financial statements:
http://bankrupt.com/misc/Empresas_ICA.pdf
CONTACTS: EMPRESAS ICA SOCIEDAD CONTROLADORA S.A. DE C.V.
Bernardo Quintana Isaac, Chairman/Pres/CEO
Jos, L. Guerrero Alvarez, EVP Finance and CFO
THEIR ADDRESS:
Mineria No. 145, Colonia Escand>n
11800 Mexico, D.F., Mexico
Phone: +52-55-5272-9991
Fax: +52-55-5227-5012
URL: http://www.ica.com.mx
GRUPO MEXICO: Stock Jumps As Asarco Solution Nears
--------------------------------------------------
News that Grupo Mexico is close to resolving the financial
problems of its US subsidiary Asarco sent the Mexican mining
giant's shares to as high as MXN10.80, or a 9.31% increase,
Wednesday.
Reuters quoted Hector Garcia de Quevedo, a senior Grupo Mexico
executive, as saying the group is close to a deal with US
authorities to transfer its 54.2% stake in Lima-based miner
Southern Peru Copper Corp (SPCC) to another Grupo Mexico unit,
Americas Mining Corp. The funds raised would be used to pay off
Asarco's revolving credit line of US$450 million.
New York-based copper company Asarco has signed an agreement with
a consortium of lenders led by JP Morgan Chase to extend the
credit line to January 31, from the previous November 10.
This timeframe will allow Grupo Mexico and Asarco to make new
arrangements with other banks and with the US Department of
Justice (DOJ) to fully settle the debt, Asarco said in a
statement released last week.
The DOJ has objected to the transaction on the grounds that
Asarco was trying to avoid hundreds of millions of dollars in
Superfund clean-up obligations. In August it filed for a
preliminary injunction against the transfer in the US district
court of Tacoma (Washington state) where Asarco is working with
the Environmental Protection Agency and the local community on
cleaning up the site of its former copper smelter-refinery.
AMC is Grupo Mexico's mining division and the world's third-
largest copper producer. SPCC, with a market value of US$1.13bn,
is Peru's largest copper miner.
CONTACT: GRUPO MEXICO S.A. DE C.V.
Avenida Baja California 200,
Colonia Roma Sur
06760 M,xico, D.F., Mexico
Phone: +52-55-5264-7775
Fax: +52-55-5264-7769
Home Page: http://www.gmexico.com
Contacts:
Germ n Larrea Mota-Velasco, Chairman and CEO
Xavier Garca de Quevedo Topete, President and COO
Alfredo Casar P,rez, COO, Ferrocarril Mexicano
Daniel Ch vez Carre n, COO, Industrial Minera M,xico
Daniel Tellechea Salido, VP and Administration and
Finance President
ASARCO
2575 E. Camelback Rd., Ste. 500
Phoenix, AZ 85016
Phoenix City
Phone: 602-977-6500
Fax: 602-977-6701
Home Page: http://www.asarco.com
Contacts:
Germ n Larea Mota-Velasco, Chairman and CEO
Genaro Larrea Mota-Velasco, President
Daniel Tellechea Salido, VP and CFO
===============
P A R A G U A Y
===============
* S&P Downgrades Ratings on Paraguay; Outlook Negative
------------------------------------------------------
Standard & Poor's Ratings Services said Wednesday that it lowered
its long-term local currency sovereign credit rating on the
Republic of Paraguay to 'B' from 'BB-'; its long-term foreign
currency sovereign credit rating to 'B-' from 'B'; and its short-
term local currency sovereign credit rating to 'C' from 'B'.
Standard & Poor's affirmed its 'C' short-term foreign currency
sovereign credit rating on the republic. The outlook on the long-
term ratings remains negative.
"The ratings downgrade and negative outlook reflect Paraguay's
deteriorating fiscal and political environment, which jeopardizes
the government's ability to honor its payroll and debt
obligations," said Sovereign Analyst Sebastian Briozzo.
"Addressing the worsening economic and fiscal conditions is
complicated by the increasing political instability, which will
continue to weaken political institutions in Paraguay and place
debt repayment at risk. Difficulties in finding alternatives
sources of financing in a worsening economic environment would
lead to a downgrade," he added.
According to Mr. Briozzo, the failure of the government to comply
with the prerequisites of its agreement with the International
Monetary Fund
(IMF) have delayed the execution of any program until next year
"An IMF agreement would have provided greater certainty to the
fiscal prospects, working as a fiscal anchor in times of higher
political instability and increasing pressures on spending, he
noted.
According to Standard & Poor's, Paraguay's fiscal problems are
exacerbated by continued economic instability. Growth is at a
standstill and the currency continues to depreciate; these
factors, compounded by the upcoming election and social unease,
inhibit the crafting of a solution to the government's cash-flow
problems.
ANALYST: Sebastian Briozzo, New York 212-438-7342
Jane Eddy, New York (1) 212-438-7996
=============
U R U G U A Y
=============
* Fitch Says Debt Exchange Indicates Financial Pressure
-------------------------------------------------------
The Uruguayan authorities yesterday completed a US$170 debt
exchange with the country's four domestic pension funds. The
pension funds will exchange treasury bonds, 2003 maturity Global
bonds, frozen bank deposits and USD cash for peso-denominated
inflation-indexed bonds maturing in 2012. Fitch believes that
this transaction is indicative of liquidity pressures, and could
presage additional exchange offers to come. Should future debt
exchanges involve substantial upfront losses to bondholders in
NPV terms, Fitch could consider such exchanges as events of
default. The Long-term foreign currency issuer rating for Uruguay
is 'B' with a Negative Outlook.
Fitch Ratings recently completed a rating visit to Uruguay and
will complete a full review in the coming weeks. Given Uruguay's
heavy financing needs, the closure of the financial markets to
the Uruguayan sovereign, doubts about medium-term debt
sustainability, and ongoing problems in the banking system,
Uruguay's sovereign ratings remain prone to further downgrades,
and hence remain on negative outlook.
The exchange offer, which was extended to both public and private
pension funds, may yield substantial amortization relief through
2005. Uruguay has approximately US$1.1 billion in amortizations
due to private creditors between December 2002 and December 2003,
inclusive. Scheduled disbursements from multilateral institutions
of approximately US$1.35 could cover these needs, but would leave
little reserve protection in the event of resident deposit
outflows or other capital account pressures. The offer to
exchange dollar-denominated obligations for peso-denominated
obligations exposes bondholders to substantial exchange rate
risk, for which they may not be adequately compensated. Given the
regulatory power of the sovereign, it remains unclear whether or
not this exchange was undertaken in an atmosphere of duress.
Concerns about public debt sustainability have increased
dramatically this year as public debt to GDP has risen sharply
due to the 48% nominal depreciation of the peso, a real GDP
contraction of approximately 10%, and a bank bailout. End-2002
public debt is likely to reach 100% of GDP. With a poor outlook
for growth in 2003 and continued pressure on the exchange rate
possible, debt to GDP could rise even further. Although fiscal
adjustment is under way and real wage compression should help
authorities achieve a primary surplus next year, it is unlikely
that the improvements in fiscal flows will be sufficient to
reverse the trend of rising debt in GDP terms. Resident and non-
resident deposits have increased slightly since the second week
of October, as have international reserves. The run on deposits
and the consequent drain on reserves had been a key driver of
Fitch's downgrade to 'B' in July 2002.
The freeze on term deposits at public banks, intervention in four
private banks, and US$1.4 billion financial system support
package from multilaterals have all contributed to the
stabilization. Potential pressures on deposits remain, however.
Beginning in August of 2003, approximately US$475 million in
frozen deposits will be released from accounts in public sector
banks. The remaining private banks, largely in foreign hands,
have no deposit guarantees or frozen deposits, and are thus
vulnerable to confidence shocks.
On the political front, there is a general consensus among the
three primary parties to resolve the status of four intervened
banks but none are committed to selling state assets in order to
meet debt obligations. President Battle of the Colorado Party
faces approval ratings below 20%, and governability will be
challenged by the National Party's withdrawal of its ministers
from the government. The National Party affirmed its willingness
to support the government in the legislature on a case-by-case
basis, and there do not appear to be any major policy
discrepancies with the Colorados, but changes in economic policy
may now come more slowly. Weak confidence in the government is
likely to be a drag on domestic consumption and investment, and
could make dealing with any future banking problems harder to
control.
CONTACT: Morgan C. Harting, New York, 1-212-908-0820
Richard Fox, London, 44-20-7417-4357
Roger Scher, New York, 1-212-908-0240
Media Relations: James Jockle 1-212-908-0547, New York
***********
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 Oona G. Oyangoren, Editors.
Copyright 2002. All rights reserved. ISSN 1529-2746.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers.
Information contained herein is obtained from sources believed to
be reliable, but is not guaranteed.
The TCR Latin America subscription rate is $575 per half-year,
delivered via e-mail. Additional e-mail subscriptions for
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or balance thereof are $25 each. For subscription information,
contact Christopher Beard at 240/629-3300.
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