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/raid1/www/Hosts/bankrupt/TCRLA_Public/030218.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 Tuesday, February 18, 2003, Vol. 4, Issue 34 Headlines A N T I G U A & B A R B U D A LIAT: Significant Shareholder May Create Serious Competition A R G E N T I N A TELECOM ARGENTINA: Creditors Disatisfied With Debt Proposal TELEFONICA DE ARGENTINA: Blames Economy for $1.1B Loss In 2002 * IMF Press Briefing Generally Upbeat on Argentina, Brazil B R A Z I L BADEP: Parana Governor Alleges Itau Obtained $205M Illegally CEMAR: Aneel Delays Wrapping Up Intervention CEMIG: Considers Investing In New Projects CEMIG: Chairman Remains Mum Over Shareholder Legal Dispute COPEL: Poor Cash Flow Prompts Moody's Ratings Cut ELETROPAULO: BNDES Decision Expected By March EMBRATEL: Highest Bidder In 3.5GHz Spectrum Auction GUARANIANA: Discord Among Shareholders May Cause Default SANEPAR: Parana Head Revokes Vivendi Ownership SANEPAR: Moody's Downgrades Ratings Following Deal Revocation C O S T A R I C A ICE: Finance Minister Nixes Privatization Despite Squabble M E X I C O AVANTEL: CFC Approves Banamex's Stake Sale To Employees UNEFON: Parent's Stock Up On Positive Expectations N I C A R A G U A ENITEL: Government To Sell Remaining 49% Stake This Year P E R U VOLCAN: Annual Loss Widens Despite Profits In 4Q02 T R I N I D A D & T O B A G O BWIA: No Further Reductions in Barbados Staff BWIA: Grounded Planes Exacerbate Losses V E N E Z U E L A * Venezuela Sells $32M Of Bonds To Dodge Liquidity Squeeze - - - - - - - - - - ================================= A N T I G U A & B A R B U D A ================================= LIAT: Significant Shareholder May Create Serious Competition ------------------------------------------------------------ LIAT may be threatened with the possibility of having to compete with Tobago Express, which is 49% owned by LIAT's single largest shareholder, BWIA. Local reports say that the new competition may adversely affect LIAT's call for new investors. BWIA continues competing with LIAT despite its 29% ownership of the latter. The Antigua Sun recalls that Tobago Express has applied to St. Vincent aviation authorities for a license to operate in the Port of Spain - St. Vincent route, which is in direct competition with LIAT. The Tobago Express also applied to operate services between St. Lucia and Barbados, said the newspaper, citing well-placed sources. The airline has been operating in the Port of Spain - Grenada route in behalf of BWIA. Tobago Express is using one of BWIA's three Dash-8-300's in servicing the local airbridge. LIAT benefited when troubled BWIA pulled out of some of the routes they shared. Cash-strapped BWIA rationalized its fleet and laid off some 40 pilots in line with its reorganization plan. Last month, more than 600 workers were retrenched after the airline failed to obtain the necessary concessions from unions representing its workers. If Tobago Express is granted the license to operate in direct competition with LIAT, then LIAT, which expects to recover this coming March may find some serious obstacles. Last year, LIAT reportedly suffered from predatory pricing practices of another competitor, the Caribbean Star. CONTACT: LIAT Corporate Headquarters V.C. Bird International Airport, P.O. Box 819, St. John's, Antigua West Indies Tel. 1 (268) 480-5600/1/2/3/4/5/6 Fax: 1 (268) 480-5625 Homepage: http://www.liatairline.com/ Contacts: Garry Cullen, Chief Executive Officer David Stuart, Vice President of Marketing BRITISH WEST INDIES AIRWAYS Phone: + 868 627 2942 E-mail: mailto:mail@bwee.com Home Page: http://www.bwee.com/ Contacts: Conrad Aleong, President and CEO (Trinidad) Beatrix Carrington, VP Marketing and Sales (Barbados) Paul Schutz, CFO (Trinidad) ================= A R G E N T I N A ================= TELECOM ARGENTINA: Creditors Disatisfied With Debt Proposal ----------------------------------------------------------- Telecom Argentina's proposal to buy back a portion of US$3.2 billion in defaulted debt failed to stir enthusiasm from creditors. In fact, a Telecom spokeswoman told Reuters the first round of meetings with creditors had been "difficult." "The negotiations are difficult but we are still working together," the spokeswoman said. Telecom has said it plans to use US$260 million in cash to buy back debt. The Company would pay up to 50% of face value, and the plan may allow it to cancel about US$700 million in debt. However, according to an El Cronista report, banks including BankBoston NA and Citigroup Inc. that hold about US$1.2 billion in Telecom Argentina SA's defaulted debt may call for a bankruptcy proceeding to set new repayment terms. Telecom, majority owned by France Telecom SA and Telecom Italia SpA, had the biggest corporate default in Argentina after the government defaulted on US$95 billion of debt and devalued the currency in January 2002. Telecom shares fell 27 centavos, or 9.8%, to ARS2.50 on the Buenos Aires Stock Exchange. Its stock had soared nearly 10% on Wednesday after the buyback offer was made public. CONTACT: Telecom Argentina Stet France Telecom SA Head Office 10th Floor Alicia Moreau de Justo 50 Buenos Aires Argentina 1107 Tel +54 11 4968 4000 Fax +54 11 4313 5842 Web Site http://www.telecom.com.ar Contacts: Juan Carlos Masjoan, Chairman Christian Chauvin, Vice Chairman Franco Bertone, Vice Chairman Susana Malcorra, Chief Executive TELEFONICA DE ARGENTINA: Blames Economy for $1.1B Loss In 2002 -------------------------------------------------------------- Telefonica de Argentina, owned by Spain's Telefonica, posted a ARS3.44-billion ($1.1 billion) loss last year, reports Reuters. In a statement, the Company attributed the loss to Argentina's worst-ever economic crisis and a punishing currency devaluation. The Company said it would distribute "neither profits nor dividends" related to the irregular 15-month accounting period, stretching from October 2001 to December 2002, as it aligns its accounting to the calendar year. Telefonica also disclosed its net worth for the period was ARS2.39 billion. Meanwhile, Telefonica is lobbying to have the government allow it to hike its tariffs, which were frozen and converted to devalued pesos after the January 2002 devaluation -- measures which compounded utility firms' efforts to service their dollar debts abroad. Telefonica de Argentina also has operations in Spain, Brazil, Chile, Mexico and Peru providing local exchange, long distance, residential Internet access and directory publishing services. Until October 1999, the Company was the exclusive provider of telecommunications services in southern Argentina and controlled nearly two-third of the Buenos Aires metropolitan area market. Telefonica Argentina is now allowed to provide telecommunication services to northern Argentina, where Telecom Argentina Stet France Telecom S.A. is the incumbent operator CONTACT: TELEFONICA DE ARGENTINA Tucuman 1, 18th Floor, 1049 Buenos Aires, Argentina Phone: (212) 688-6840 Home Page: http://www.telefonica.com.ar Contacts: Carlos Fernandez-Prida Mendez Nunez, Chairman Paul Burton Savoldelli, Vice Chairman Fernando Raul Borio, Secretary * IMF Press Briefing Generally Upbeat on Argentina, Brazil ---------------------------------------------------------- Thomas C. Dawson Director, External Relations Department International Monetary Fund Thursday, February 13, 2003 Washington, D.C. MR. DAWSON: Ladies and gentlemen, I'm Tom Dawson, Director of External Relations at the IMF, and this is another of our regular press briefings. As is standard practice, the briefing is embargoed until approximately 15 minutes after conclusion, and we will set the time there. I have no prepared remarks to offer today. Would you please identify yourselves and your affiliations, which is the protocol we like to follow. Any questions? QUESTIONER: Can you just give us a status on the mission to Brazil and Argentina? And specifically on Argentina, there's been a lot of buzz about whether or not the issue of utility rate increases is actually under discussion with the IMF, if you'd address that as well. MR. DAWSON: As far as Brazil goes, we are certainly very much on track. We've taken note of and had a brief press line on the authorities' announcement of their new fiscal targets. And I think we are looking forward to a good mission. I don't think there's anything of any news to report. Obviously, the broad parameters of the program, the performance, have been quite strong. So I think that augurs well for the mission about to take place. As far as Argentina goes, there is a mission. I believe the latest date that I have on it is the 17th, but that could wind up being delayed. That was going to be a joint Bank-Fund mission discussing a number of issues relating to the utility pricing issue. It is not a negotiating mission about increases. It is more to deal with frameworks so that everyone has a better sense of what the rules of the game are and how one might go forward. So it's more in the nature of a technical assistance mission as opposed to a negotiating mission. I think that's the best way to describe it. QUESTIONER: You talked about Brazil being on track. You didn't use the same language for Argentina. There's some discussion apparently from the authorities down there that they really cannot meet, even if scaled down, an IMF program. What is your reaction to that? MR. DAWSON: I haven't actually seen any indication from the authorities that that is, in fact, the case. The reason I used that particular language with regard to Brazil is we do, in fact, have a negotiating review mission going on, and that's sort of the context in which it's taking place. In Argentina, we are, of course, at an earlier stage since the program was only recently approved. QUESTIONER: Just to follow up, in other words, you say that from everything the IMF knows at this time, the Argentine program is on track? MR. DAWSON: It certainly seems to be, but let us also remember it was only recently approved, and at this point, we are engaged in contact with the authorities on a number of issues. As I think everyone knows, Minister Lavagna was here last Friday, I believe. I don't think it's particularly useful to check in on a weekly or even biweekly basis on status on programs because simply the developments don't happen that quickly. Again, in the context of Brazil, we are at a point where there's a review mission about to take place. But I think they're just at different stages in their different programs. QUESTIONER: Could you update us on the Fund's mission in Uruguay? And, in the last briefing you said that the Fund was concerned about the Uruguayan debt. Do you think that the Uruguayan Government can make an ordered debt restructure? MR. DAWSON: That is actually not quite what I said in the last briefing. I indicated that debt was one of the issues being discussed, and indeed it is. The mission is still in Montevideo. It continues at a pretty intensive level. Progress is being made, and it remains our goal to try to work out an agreement that helps them get back to a sustained growth path. I don't think it is appropriate, since the negotiations are going on, discussing details of the program. But as I say, progress is being made, you know, and when I make that statement, that is a statement that's referenced back to my last briefing two weeks ago. So as between then and now, progress has been made. QUESTIONER: But you actually said that the debt was a significant burden. MR. DAWSON: That is a fact. But I stressed then and I stress now, that is not the only issue that is in the program under negotiation. That's why I would not highlight it, and I made that point last time. And I'll repeat that point this time. QUESTIONER: I just wanted to ask because I know that Mr. Aninat was discussing this issue yesterday with the leader of the Uruguayan opposition here in Washington. MR. DAWSON: I do understand there was a meeting, but I was not part of the meeting. I don't think it would really be appropriate talking about the content of the meeting. But that is true, he did have a meeting with them. QUESTIONER: For the sake of clarification, what are the dates, beginning and ending, for the missions to Brazil and Turkey? And would you please offer an assessment of the Turkish program at this time? MR. DAWSON: On Turkey, I don't have an end date, but that is not unusual. The mission is discussing the 2003 budget plans with the authorities, particularly with a view toward achieving the 6.5 percent primary surplus target, which we continue to view as a good and appropriate target and an achievable target. So I think I would leave it at that. I think we have a pretty good record in terms of the missions in Turkey that when they do wrap up it's made clear. We usually have mission-ending statements, sometimes press briefings, and we'll keep you informed on that. On Brazil, the mission is there right now doing the second review of the program and Article IV consultations. The mission will be working for two and a half weeks. QUESTIONER: In its last World Economic Outlook, the IMF assumed that there will be an average oil price of $24 per barrel. It's been much higher for weeks now. How far does an imminent war against Iraq change the scenario of world economics? MR. DAWSON: Well, we will be in a little more than a month discussing on our own the World Economic Outlook, and then it will be a subject for discussion at the middle of April for the Spring Meetings. So I don't think it's appropriate for me to pre- empt that. I believe the last WEO indicated and Ken Rogoff is talking about certain rules of thumb about the impact of higher oil prices if they are sustained on global growth prospects. And I think I would direct you back to that, and I don't have the number quite in my mind, but we can get it for you. But there are certain rules of thumb that-I believe it was triggered to what a sustained increase of $5 a barrel would have in terms of growth prospects over the longer term. But it does indeed need to be sustained. And I do not expect-we are not in a situation where we will be putting out a revised WEO or anything like that. We are reasonably close to having the actual WEO Board discussion and then release of the WEO and WEO press conference. QUESTIONER: Minister Lavagna in Argentina has said that his government entered into some technical agreements with the IMF separate from the letter of intent, and that one of the issues covered by one of the agreements is utility prices. I'm wondering: What other issues are covered by these agreements, and why were these issues treated in this way and not in the letter of intent? MR. DAWSON: We do not discuss what is or is not or when there is or is not a so-called side letter. That is usually the term of art for when there is a non-public aspect of an agreement. On the other hand, I would direct you to the discussion of the issue of side letters and our policy on side letters and when they are appropriate and when they take place. And that was the subject of a fairly extensive series of Board meetings that culminated with a PIN, I believe around September 27th, I think, approximately. It was a discussion of IMF transparency policy. And if you go in there, you can see the circumstances under which the Board and the authorities have these so-called side letters. But I'm not in a position to talk about the position of Argentina or of any other country that may or may not have had a side letter. Just so you want to know, because I learned a little bit about our website yesterday. If you just go on to the website, go into the transparency discussion, or actually you can search "side letter," then find the September document. There is both a PIN, but there is also the underlying Board document which goes into a reasonable amount of more detail about what a side letter is. It's a longstanding practice in the Fund. There have been them, although they are not very common. QUESTIONER: Why the IMF didn't show yet the Argentinean last report? And the second question will be: What do you expect for the mission that will take place next week in Argentina also with the World Bank? MR. DAWSON: As I indicated at the very beginning, as far as the latter part of the question first, it's a mission to go down to talk about issues that involve the issues of utility pricing. It is not, however, a negotiating mission, as I understand it. Staff reports are only published when it is agreed to with the authorities. I'll just leave it at that. We do not automatically publish staff reports. They have to be agreed. I just see back there, next to Francisco, Sergio Serrichio, having just arrived to hear his successor ask a question. And I understand he's returning to Argentina next week. I'm authorized to say several soccer-sorry, football teams in Washington will be missing Sergio's participation, including, I understand, that he was-and this may not be suitable to be reported back to Buenos Aires-apparently a member of the Washington Consensus, but which, I will quickly add, was a soccer/football team. Sergio, you will be missed. Now we can go back to business. Or are we finished with business? QUESTIONER: There was a report this morning suggesting that there is a joint World Bank-IMF study of the voting power balances between various regions and nations around the world. My understanding was that the management had submitted to the Boards a report and there was some discussion on this among the Board. MR. DAWSON: Yeah, let me describe what I think the process is. The process is that the Development Committee last September asked that the staffs of the two institutions take a look at issues regarding voting and representation in the institutions, and that was a report that will be, as far as I know, presented to the Development Committee at the meeting at the middle of April. The paper has not been discussed at the Fund Board. I honestly don't know whether it's been discussed at the Bank Board or not. I don't think it has, but that will be an issue that will be discussed in the meetings in the middle of April. The format of it is typically for reports to the Development Committee-they are jointly prepared by the staff of the Fund and the Bank, reviewed by the two Boards, and then submitted to the Committee. It's my understanding that we're in the process of preparing it. So the story that you referred to this morning, while it was readable and interesting, I think this is a work in progress. The report has not been submitted for final approval by management. Thank you very much. We'll adjourn and embargoed until 10 minutes after 10:00. And the expectation is that the next press briefing would be on Tuesday, March the 4th. Thank you very much. CONTACT: IMF EXTERNAL RELATIONS DEPARTMENT Public Affairs: Tel: 202-623-7300 Fax: 202-623-6278 Media Relations: Tel: 202-623-7100 Fax: 202-623-6772 =========== B R A Z I L =========== BADEP: Parana Governor Alleges Itau Obtained $205M Illegally ------------------------------------------------------------ Brazil's second largest private bank, Banco Itau was accused of illegally getting BRL750 million (US$205 million) from former state bank BADEP, according to a report by local paper Valor Economica. Roberto Requiao, governor of the Brazilian state of Parana, challenged Itau's acquisition of the exclusive right to handle the state's payrolls and bank accounts for five years. Prior to Itau's purchase of Parana state bank Banestado in 2000, the state's development bank Badep folded and its operations were transferred to Banestado, says Business News Americas. But the governor claims that Badep's loan portfolio belongs to the state, and not to Banestado. He asserts that it should not have been transferred to Itau. Mr. Requiao, who reportedly supplied evidence supporting his statements in court, said, "Itau sold those credits to Goldmann Sachs, which is charging the bonds through its company's Rio Araguaia and Rio Parana." CONTACT: BANCO ITAU, S.A. Rua Boa Vista, 176 01014-919 Sao Paulo, Brazil Phone: +55-11-237-3000 Fax: +55-11-5582-1133 Home Page: http://www.itau.com.br Contacts: Olavo Egydio Setubal, Chairman of the Board Roberto Egydio Setubal, President and CEO Geraldo Soares, Investor Relations Superintendent Pra�a Alfredo Egydio de Souza Aranha, 100 Torre Concei�ao - 11� andar 04344-902 - Sao Paulo - SP Phone: +5511 5019-1549 Fax: +5511 5019-1133 CEMAR: Aneel Delays Wrapping Up Intervention -------------------------------------------- Brazil's power regulator Aneel was supposed to conclude its intervention in Maranhao state power company Cemar on February 17. However, according to a Business News Americas report, the regulator extended the intervention for 180 days to allow more time to resolve Cemar's financial difficulties. Aneel intervened in Cemar in August 2002, after the controlling shareholder, US-based PPL Global, failed to reach an agreement with creditors to sell the Company. Cemar filed for bankruptcy, and Aneel intervened to take the Company over and sell it to an investor that would offer the best financial solution to Cemar's debts. However, Aneel's efforts have been hampered by the legal injunctions filed by Stiu-MA - the local utility workers' union - and the federal public ministry, which oppose the sale. According to Stiu-MA President Fernando Pereira, the union is advocating a federal takeover of Cemar and does not want to risk the "lottery" of a private partner again, as it has already failed once. The union said Cemar's debt jumped from BRL200 million to BRL800 million, while service has deteriorated. Aneel is still working to overturn the injunctions and continue with the sale. CONTACT: COMPANHIA ENERGETICA DO MARANHAO Av. Colares Moreira, 477 65075-441 - Sao Luiz- MA PHONE: (98) 217-2119 FAX: (98) 235-3024 WEBSITE: http://www.cemar.com.br/ CREDITORS: CENTRAIS ELETRICAS BRASILEIRAS S.A. - ELETROBRAS Avenida Presidente Vargas 409, 13 Andar 20071-003 Rio de Janeiro Brazil Phone: (21) 2514-5151 Fax: +55-21-2242-2697 Home Page: http://www.eletrobras.gov.br Contacts: Cladio da Silva avila, President Jose Alexandre Nogueira de Resende, Director of Financial and Market Relations Investor Relations Division Phone: (0XX21) 2514-6207 / 2514-6333 Av. Presidente Vargas, 409 - 9 andar 20071-003 - Rio de Janeiro - RJ Email: arlindo@eletrobras.gov.br CENTRAIS ELETRICAS DO NORTH DO BRAZIL - ELETRONORTE Av. Presidente Vargas, 489 -13 andar. 20071-003- Rio do Janeiro RJ Phone: + (55+61) 429 5139 Fax: +(55+61) 328 1373 E-mail: elnweb@eln.gov.br Home Page: http://www.eln.gov.br/ Contact: Mr. Arlindo Soares Castanheira, Investor Relations Phone: 55 21 2514.6331 55 21 2514.6333 Fax: 55 21 2242.2694 E-mail: arlindo@eletrobras.gov.br FLEETBOSTON FINANCIAL CORP. 100 Federal Street Boston, MA 02110 Phone: (617) 434-2200 Fax: (617) 434-6943 URL: http://www.fleet.com/home.asp CEMIG: Considers Investing In New Projects ------------------------------------------ Wilson Brumer, chairman of Brazil's Minas Gerais state power company, Cemig, recently declared "crisis always brings opportunities." In a Business News Americas report, Mr. Brumer said the Company will examine the possibility of investing in generation projects beyond its traditional operating area of Minas Gerais. The Company has plenty of experience in putting together such projects. With the problems currently facing the sector and many of its largest players, Cemig is well positioned to examine new projects and partnerships with other companies. To this end, the new state government is committed to developing the most transparent relationship with its partners in Cemig, according to Mr. Brumer, who is also the economic development secretary for the new Minas Gerais state government. CONTACT: Companhia Energetica de Minas Gerais Luiz Fernando Rolla, Investor Relations Officer Tel: +55-31-3299-3930 Fax: +55-31-3299-3933 lrolla@cemig.com.br CEMIG: Chairman Remains Mum Over Shareholder Legal Dispute ---------------------------------------------------------- Cemig chairman Wilson Brumer maintains his silence about an ongoing legal action between US-based AES and Brazil's Opportunity over a shareholders agreement that was cancelled by former governor Itamar Franco. Franco reversed an agreement that gave AES and Opportunity operating control, despite not owning a majority of Cemig's ordinary shares. Franco obtained a ruling from a local court declaring the shareholders' agreement illegal and proceeded to take back operating control. "We must await a judicial decision," Mr. Brumer said. But on a day-to-day basis, the relationship with the partners on the board is "cordial", he said, adding that all were agreed on the common objective of adding value to the Company. As part of its plans to resolve its debts with Cemig, the Minas Gerais government has agreed to return all dividends directly to the Company, Mr. Brumer said. Further talks are underway with the federal government to resolve a remaining portion of the debts, he added. COPEL: Poor Cash Flow Prompts Moody's Ratings Cut ------------------------------------------------- Moody's Investors Service downgraded the credit ratings of Cia. Paranaense de Energia (COPEL), Brazil's second largest power generator and distributor. The ratings affected were: - BRL500 million senior unsecured debentures due 2007: downgraded to Baa1.br from Aa2.br (Brazilian National Scale) and to Ba3 from Ba1 (Global Local Currency Scale); - Issuer rating: downgraded to Baa1.br from Aa2.br (Brazilian National Scale) and to Ba3 from Ba1 (Global Local Currency Scale) The rating outlook is negative. "The revised ratings reflect Copel's expected low level of cash flow relative to its debt burden, the sizeable portion of its debt denominated in foreign currency and uncertainties related to the policies of the new government in the state of Parana," Moody's said in a report. As of Sep. 30, 2002, COPEL's total debt is approximately BRL 2.2 billion, about 54% of which is denominated or linked to US dollars, which proportionately affects COPEL's leverage and debt service requirements due to the absence of hedging mechanisms, Moody's said. Moody's recalled that in the first three quarters of 2002, despite a 21% increase in net revenues compared to the equivalent period in 2001, the devaluation of the Real and higher interest expense were key factors driving COPEL's nine-month net loss of BRL(49.8) million, compared to a net income of BRL89.3 million in the prior comparable period. Moody's cited the possibility of "politically motivated decisions" as one reason it is more inclined to lower Copel's rating further. CONTACT: COPEL (in Brazil) Othon Mader Ribas Tel. 011-5541-222-2027 Email: othon@copel.com Solange Maueler Tel. 011-5541-331-4359 Email: solange@copel.com (New York) Richard Huber Tel. 212-807-5026 Email: richard.huber@tfn.com Isabel Vieira Tel. 212-807-5110 Email: isabel.vieira@tfn.com ELETROPAULO: BNDES Decision Expected By March --------------------------------------------- Brazil's national development bank BNDES will announce its decision regarding the future of Eletropaulo by the end of February, Business News Americas reports, citing BNDES president Carlos Lessa. Lessa did not hint at what solution the government might offer for Eletropaulo's problems. Eletropaulo is now considered technically bankrupt after failing to pay in January an US$85-million tranche of loans owed the BNDES. The executives of AES Corp. have hinted that the US-based parent, which is also battling its own financial troubles, may simply hand Eletropaulo back to the government rather than attempt to renegotiate debts. AES bought Eletropaulo from the government as part of a year 2000 privatization program. "The disposal of the Eletropaulo question is not solely up to the BNDES. It involves much more. I'm on the phone to the energy ministry every day about this," Lessa said. CONTACT: ELETROPAULO METROPOLITANA Avenida Alfredo Egidio de Souza Aranha 100-B, 13 andar 04726-270 San Paulo Brazil Phone: +55-11-548-9461, +55 11 5696 3595 Fax: +55-11-546-1933 URL: http://www.eletropaulo.com.br Contacts: Luiz D. Travesso, Chairman and President Orestes Gonzalves Jr., VP Finance/Investor Relations EMBRATEL: Highest Bidder In 3.5GHz Spectrum Auction --------------------------------------------------- Brazilian incumbent long distance operator Embratel emerged as the biggest bidder in last Tuesday's 3.5GHz spectrum auction, Business News Americas reports. The operator paid BRL13.2 million (US$3.61) in total for the three licenses, which together cover the entire country. According to Embratel operations and engineering VP Ivan Campagnolli, the Company plans to make use of the licenses before the end of June. Embratel will use the licenses to increase its last-mile coverage nationwide via point to multi-point Broadband Wireless Access (BWA) technology, he said. Meanwhile, Embratel also gained authorization for further expansion in the metro areas of Sao Paulo and Rio de Janeiro. Embratel launched local telephony services in 4Q02, targeting the corporate segment. The Company ended 2002 with more than 300 local telephony clients and expects to have the service in 29 cities by the end of the first quarter this year. To see Income Statement: http://bankrupt.com/misc/Income_Statement.htm To see Balance Sheet: http://bankrupt.com/misc/Balance_Sheet.htm CONTACT: Embratel Participacoes S.A. Silvia Pereira, Investor Relations Manager Tel: 55 21 2121-6474/9662 (messages) Email: Silvia.Pereira@embratel.com.br invest@embratel.com.br GUARANIANA: Discord Among Shareholders May Cause Default -------------------------------------------------------- Guaraniana SA is likely to default with the Brazilian development bank BNDES, to which it owes BRL400 million (BRL130 million will fall due this year), reports Gazeta Mercantil. All the Company's shareholders but one have agreed to a BRL361 million capital injection. Shareholders consenting to the plan include Previ and BBI (Banco do Brasil Investimentos). Meanwhile Spanish group Iberdrola is expected to veto the proposal. Iberdrola earlier announced its plans to reduce its investments in Brazil by EUR400 million. Guaraniana claimed it has been working to roll over its BRL4.6 billion debts. In 2002, it refinanced BRL450 million debts for three years. SANEPAR: Parana Head Revokes Vivendi Ownership ---------------------------------------------- Brazil's seventh- most populous state, Parana, took back control of state water utility SANEPAR from French group Vivendi Environnement SA following complaints about both poor water quality and under-investment. Parana owns 60% of SANEPAR with the balance owned by Domino Holdings, a group comprising Vivendi, asset management firm Opportunity and Brazilian builder Andrade Gutierrez SA. But even with just 40% ownership, a deal with the previous governor gave them power over staffing, loans, deals with shareholders and final say over tariffs. Recently however, the state's newly elected governor, Roberto Requiao, annulled the four-year-old agreement, claiming that Vivendi and the other shareholders have raised prices to boost profits while water quality in cities such as the state capital Curitiba is "doubtful." "[The state government] understands that sanitation is not an activity to make a profit but a social service," a spokesman for Sanepar said. Requiao also said that his predecessor never signed the relevant decree. The revocation of the agreement sent worrying signals for foreign investors - just as new President Lula da Silva is trying to woo them back after a rocky 2002 for the Brazilian economy, a source close to SANEPAR told Reuters. "No one puts money into a Brazilian company without getting some control," the source said. "Changing the rules of the game now that everyone has invested makes no sense." SANEPAR: Moody's Downgrades Ratings Following Deal Revocation ------------------------------------------------------------- Moody's Investors Service downgraded the ratings of Parana state water utility SANEPAR. The ratings downgraded include SANEPAR's National Scale Rating to Baa3.br from A3.br (Brazil National Scale), debentures to B1 from Ba3 (Global Local Currency Scale), and Issuer Rating to B1 from Ba3 (Global Local Currency Scale). This concludes the review for downgrade. The rating outlook is negative. The downgrades came after Parana Governor Roberto Requiao revoked a shareholders agreement that gave management of SANEPAR to Vivendi, the world's largest water company, and the other private shareholders. Should the Governor prevail, it is Moody's view that SANEPAR will be less financially and operationally autonomous than was previously the case. This could negatively affect the company's credit quality and result in more limited sources of financing. In the current environment in Brazil, Moody's sees this risk as increasing. SANEPAR's outlook is negative. Future direction will focus on the financial impact of the governor's plans and management changes for the Company, its financial and operating performance, and the degree to which it maintains financial independence from its public owner. CONTACT: Moody's Investors Service, New York Daniel Gates, Managing Director Corporate Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Moody's Investors Service, New York Adam Whiteman, Senior Vice President Corporate Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 =================== C O S T A R I C A =================== ICE: Finance Minister Nixes Privatization Despite Squabble ---------------------------------------------------------- Costa Rican Finance Minister Jorge Walter Bolanos said that the country would not push for the privatization of state electric power and telecom monopoly ICE. The announcement comes despite a misunderstanding between the Company and the government over ICE's budget, Local paper Diario Extra reports. Business News Americas recalls that the Company asked for a 64% budgetary increase this year. Mr. Bolanos said the Company could push the country into an economic crisis if it insists on the said increase. Other public institutions have to settle for a 5.9% increase. ICE, which has four business units: ICE Electricidad and CNFL, Grupo ICE Telecomunicaciones and RACSA, threatened to stage a strike today if the government fails to make an acceptable offer. The Company's union turned down the government's last offer. Earlier, the Company and FIT union proposed to cut the budget by CRC41 billion. The government planned to cut the Company's 2003 budget by CRC156 billion. Mr. Bolanos said, "The needs of ICE are just as important as health and education, but we can't take new loans and get into deeper debt which will be passed on to the next generation." "The government does not want to debilitate ICE, and we want the economic health of the country, but we don't want a poor country and a rich institution...public institutions should be our best allies," he continued, adding that investors are losing confidence in the country. Leaders of FIT union walked out of a meeting with the government last Monday. The meeting lasted for only one and a half hours. Negotiations over the budget proposal have been going on for five months, reports Business News Americas. =========== M E X I C O =========== AVANTEL: CFC Approves Banamex's Stake Sale To Employees ------------------------------------------------------- Mexico's biggest bank Banamex obtained authorization from the country's antitrust commission, the CFC, to sell shares of subsidiary Promotora Banamex to its employees, reports Business News Americas. The sale is part of a strategy to put Mexican phone company Avantel's ownership in line with the federal laws that limit foreign ownership of certain types of telecoms companies. Promotora Banamex controlled Avantel. Banamex ownership in Avantel spurred conflict in August 2001 when Citigroup acquired Banamex, causing the telco to contravene laws that limit foreign ownership to 49%. Banamex has a 55% stake in Avantel and US-based Worldcom has the other 45%. In November 2002, the economy ministry provisionally approved Banamex's plan to transfer 51% of Avantel to the bank's 31,000 employees. The bank is looking to include Avantel's 2,500 workers in its so-called "Mexicanization" restructuring program, which requires an agreement with WorldCom. Under the Mexicanization program, the bank would dilute is equity stake but maintain 49% of voting rights. "Since none of the new shareholders will have a stake of more than 5%, and it is unlikely that they will have a significant stake in any of Avantel's competitors, the operation announced is not expected to have an effect on the competition in the communications market," the commission explained. CONTACT: AVANTEL SERVICIOS LOCALES, S.A. (AVANTEL LOCAL) Reforma No. 265, 6o piso, Col. Cuauhtemoc, 06500, M,xico, D.F. Tel: 5242-1004 Fax: 5242-1060 Home Page: www.avantel.com.mx/ WORLDCOM 500 Clinton Center Drive Clinton, MS 39056 1-877-624-9266 Phone: (601) 460-5600 Fax: (601) 460-8350 E-mail: http://www.worldcom.com/ Contact: John Sidgmore, President and CEO UNEFON: Parent's Stock Up On Positive Expectations -------------------------------------------------- TV Azteca, which is seeking to rebuild investor confidence following its purchase of a stake in the money-losing wireless phone company, Unefon SA, has seen a 10% increase in its stock since February 4, reports Bloomberg. The report says that the boost came after the Company, Mexico's second-largest broadcaster, told analysts in briefings that it would report that sales rose and costs fell more than expected in the fourth quarter. Matthieu Coppet, an analyst at UBS Warburg in New York, who was briefed by telephone disclosed that TV Azteca will report that sales rose 2.3% to MXN2.0 billion, or US$190 million, based on the average exchange rate during the quarter. Coppet said that substituting reality TV for soap operas lowered programming costs to lift earnings before interest, taxes, depreciation and amortization, or Ebitda, to MXN1.1 billion. That compares with MXN945 million a year ago. TV Azteca said net income fell to MXN640 million, from MXN675 million, on higher financing costs, analysts who were briefed said. Adjusted for accounting changes, Johnson calculated that net income was MXN502 million. "The Ebitda margin of 56 percent is extremely high," said Coppet, who has a 'buy' rating on the stock. "In a sense, the Mexican business is a cash cow." Coppet expects costs to rise again in the coming quarters as the company invests more in soap operas. Meanwhile, TV Azteca's earlier announcement that it would use cash to reduce debt and issue dividends to shareholders had encouraged investors that TV Azteca wants to bolster investor confidence, said Christopher Palmer, who manages about US$225 million of Latin American funds at Gartmore Investment Management in London, including TV Azteca stock. CONTACT: Bruno Rangel (Investors) Tel: +5255-3099-9167 Email: jrangelk@tvazteca.com.mx or Rolando Villarreal Tel: +5255-3099-0041 Email: rvillarreal@tvazteca.com.mx Tristan Canales (Media) Tel: +5255-3099-5786 Email: tcanales@tvazteca.com.mx Web site: http://www.tvazteca.com.mx UNEFON S.A. DE CV Head Office EdificioA Puriferico Sur 4119 Fuentes del Pedregal Mexico DF Mexico 14141 Tel: +52 8582 50000 Fax: +52 8582 5052 Web site: http://www.unefon.com.mx/ Contacts: Engr Moises M. Saba, Chairman Pedro L. Padilla, Vice Chairman ================= N I C A R A G U A ================= ENITEL: Government To Sell Remaining 49% Stake This Year -------------------------------------------------------- Nicaragua's incumbent telco Enitel is to become a fully privatized company this year if the government proceeds with its plans to sell off its 49% stake in the Company. Citing Enitel's CEO, Carlos Ramos, Nicaraguan daily La Prensa reports that the stake has been valued at US$50 million. Enitel became partially privatized in 2001 when the Swedish- Honduran consortium Megatel bought the government's 40 stake in the Company. Sweden's Telia Swedtel and Honduran electricity company EMCE paid US$33 million for the stake and will pay US$10 million each year through mid-2005 to pay for a five-year management contract. Before privatization, the international accountancy Pricewaterhouse Coopers valued Enitel at around US$200 million - meaning the 40% stake acquired by Megatel should have been worth US$80 million, and the government's stake almost US$100 million. According to Mr. Ramos, Enitel's operating efficiency has improved since privatization, thanks to Megatel's efforts. ======= P E R U ======= VOLCAN: Annual Loss Widens Despite Profits In 4Q02 -------------------------------------------------- Peruvian zinc miner Volcan Cia. Minera S.A. posted net income of PEN8.8 million (US$2.5 million) for the last quarter of 2002. In comparison, the Company lost PEN15.9 million in the same period in 2001. The results were filed in the Lima Stock Exchange. Since 2000, the Company has not posted an annual profit, said the report. This year, the Company's losses went up to PEN40.7 million from PEN35.2 million in 2001. Bloomberg attributed the Company's improved performance in the fourth quarter on the foreign exchange rated and an extraordinary gain. A 3.3% increase in the Peruvian Sol in the fourth quarter gave the Company a PEN20 million gain. In the year before that, currency loss was posted at PEN900,000. Bloomberg explained that the Company's debts are dollar-denominated, so an increase in the local currency reduced the book value of its debts. Luis Bravo an analyst from Centura SAB brokerage said the Company recorded PEN20 million extraordinary gain that was "linked to the November sale of stockpiles", to Pan American Silver Corporation of Canada. He had anticipated the Company to report a US$700,000 loss in that period. In the meantime, revenues went down by 12%, to PEN128 million soles. According to Mr. Bravo the Company needs zinc prices to be at least US$850 per metric ton to be profitable. During the period concerned, zinc was traded at only US$786 per metric ton in the London Metal Exchange. CONTACT: COMPANIA MINERA VOLCAN Av Gregorio Escobedo 710 Jesus Mara Lima, Peru Tel: +51 1 219-4000 Fax: +51 1 261-9716 Contact: Mr. FMG Sayan (Francisco), Chairperson ================================= T R I N I D A D & T O B A G O ================================= BWIA: No Further Reductions in Barbados Staff --------------------------------------------- Cash strapped British West Indies Airways (BWIA) said it has no plans of trimming its staff in Barbados, relates local paper the Barbados Nation. BWIA chief executive Conrad Aleong confirmed that only one employee from Barbados was retrenched, compared to more than 600 from Trinidad. Beatrice Carrington, the airline's vice-president for sales and marketing, BWIA employs 50 baggage handlers, 11 people in reservations, seven duty officers at the airport, four people in sales and another four in worldwide marketing. "Barbados is very strategic to BWIA's operations. Trinidad is the home-base but our commercial headquarters are here in Barbados," said Mr. Aleong, adding that Bridgetown was an important center in the airline's operations and they were committed to Barbados. The airline had not reduced its operations in Barbados even after the September 11 attacks caused a massive decline in the global airline industry. Barbados' Minister of International Transport Noel Lynch said that t he airline has made no financial commitments to the country, but would continue to give marketing support. CONTACT: British West Indies Airways Phone: + 868 627 2942 E-mail: mailto:mail@bwee.com Home Page: http://www.bwee.com/ Contacts: Conrad Aleong, President and CEO (Trinidad) Beatrix Carrington, VP Marketing and Sales (Barbados) Paul Schutz, CFO (Trinidad) BWIA: Grounded Planes Exacerbate Losses --------------------------------------- Trinidadian airline BWIA is troubled by two turbo prop planes its has grounded. According to the Antigua Sun, BWIA is saddled with the unwanted burden of having to pay the leases on the planes even though they're not airworthy. The local paper cites sources in the industry, saying that one of the planes costs BWIA about US$90,000 per month, and another US$110,000 for the other. The sources further said that the market values of the two planes are in the range of US$50,000 to US$65,000 per month. BWIA, which reported a 2002 net loss of US$28 million, is hard- pressed to find other operators to assume the leases on the two planes. ================= V E N E Z U E L A ================= * Venezuela Sells $32M Of Bonds To Dodge Liquidity Squeeze ---------------------------------------------------------- Venezuela sold VEB52 billion (US$32 million) of bonds, according to the country's central bank. A Bloomberg report said the move is part of the country's efforts to avoid a cash crunch as about VEB200 billion of three-year bonds came due yesterday. The securities sold, which offer a yield of between 31% and 36%, would mature between 161 and 342 days. The country faces about VEB4 trillion of domestic debt coming due this year. On Friday, the government also sold about VEB16 billion of 89-, 152-, and 215- day bonds to yield between 39.6% and 43.5%. Venezuela swapped about 34% of bonds offered when it sold US$2.7 billion in domestic debt last year and another US$283 million last month to reduce its budget deficit, the report reveals. Benito Berber, an analyst from IDEAglobal said, "Banks will continue to buy debt from the government since it's their most important client. But political instability has led to a big decrease in the maturity of the debt the government is placing." Political unrest in Venezuela reduced government revenue as workers for state oil company PdVSA participated in a strike aimed at deposing President Hugo Chavez. Earlier reports said that oil production was slashed by as much as 90%. Venezuela is the world's fifth largest oil producer. *********** 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 2003. 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 members of the same firm for the term of the initial subscription or balance thereof are $25 each. 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