Syndicated News from Brazil
Fri, 24 May 2013 06:19:52 GMT
Brazil Police Arrest 9 for Abusing Indian GirlsABC NewsBrazil's Federal Police say nine people have been arrested on suspicion of sexually abusing Indians girls in the northern state of Amazonas. The force says two women and seven men in the city of Sao Gabriel da Cachoeira are in custody for the alleged ...and more »
Fri, 24 May 2013 00:25:46 GMT
Thu, 23 May 2013 22:39:42 GMT
Fri, 24 May 2013 09:37:43 GMT
Thu, 23 May 2013 02:11:18 GMT
New York Times
Despite Risks, Brazil Courts the Millisecond InvestorNew York TimesBut in Brazil ? as well as in other developing economies like Chile and Mexico ? exchanges are actively courting high-speed traders without much resistance from their regulators. The appeal is that the traders can execute thousands of trades a second ...
Fri, 24 May 2013 03:16:52 GMT
Thu, 23 May 2013 23:18:14 GMT
Fri, 24 May 2013 07:39:54 GMT
Fri, 24 May 2013 00:07:14 GMT
Brazil: mobile signals and mango treesFinancial Times (blog)The push by the government to expand mobile internet access via the spread of smartphones is laudable. Brazil needs the boost to productivity that would presumably accompany such a rise in online activity. Only 45 per cent of Brazilians use the ...
Thu, 23 May 2013 15:18:31 GMT
Massive Fuel-Depot Fire Breaks out in...ABC NewsMassive Fuel-Depot Fire Breaks out in Brazil. RIO DE JANEIRO May 23, 2013 (AP). Share. 0. A massive fire broke out Thursday at a fuel depot on the northern outskirts of Rio de Janeiro, sending bright orange flames leaping high into the air and thick ...
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Results 1 - 10 of Headlines for Brazil
Tuesday, October 29th, 2002
: RCN Administrator
On his fourth consecutive attempt in 16 years, Luiz Inacio "Lula" da Silva finally was elected president of Brazil on Oct. 27. However, his honeymoon could be over before his Jan. 1 inauguration. If the markets don’t like his economic team and programs, both of which have yet to be announced, it could plunge Brazil into a financial crisis.
Brazilian President-elect Luiz Inacio "Lula" da Silva attracted festive crowds during a visit to Brasilia following his electoral victory last weekend. However, foreign lenders and investors were unimpressed with da Silva’s appointment of a "political coordinator" tasked with choosing the incoming government’s transition team, and Brazil’s currency has continued to weaken as a result, pushing the country closer to a devastating debt crisis.
Stratfor forecast several months ago that, regardless of who was elected Brazil’s next president, the country likely would confront a financial crisis in 2003 that would require the new government to restructure its debts. On Oct. 16, we reaffirmed that a financial crisis in Brazil is inevitable, but noted that the timetable for its eruption was shrinking, as international lenders and investors reduced their exposure more rapidly than we had anticipated several months earlier.
Stratfor also predicted that da Silva’s statements and actions during the two-month transition period leading up to his inauguration would determine whether Brazil hurtles rapidly toward default or whether the new government will have enough time in 2003 to get its bearings and start negotiating a voluntary debt-restructuring process with creditors.
Three days after da Silva was elected with 63 percent of the vote, our forecast of how the markets would react appears to be on target. Royal Bank of Scotland said the president-elect’s selection of Antonio Palocci, who coordinated the campaign program of da Silva’s Workers Party’s (PT), as "political coordinator" of the new government’s transition team "disappointed the markets."
Also, an analyst at J.P. Morgan said Brazil’s hard-currency bonds "are becoming vulnerable to the transition process," according to news reports. This is a diplomatic way of stating that Brazil’s risk of default is growing as the real’s slide continues.
Recently, two Brazilian economists calculated that a 25 percent devaluation of the real increases Brazil’s debt load by the equivalent of 8 percent of GDP. Since da Silva’s election, the Brazilian currency has lost more than 4 percent of its value, according to news reports.
Despite such warnings, da Silva said Oct. 29 that the two-month transition would be the best in the country’s history, according to the daily O Estado de Sao Paulo. However, his effusive mood could vanish rapidly if Brazil’s financial crisis grows worse before his inauguration.
The most critical economic issue he must confront is Brazil’s looming debt crisis. The country has a combined domestic and external debt of approximately $350 billion, according to different sources, including the Brazilian federal government and private estimates.
Of that amount, Brazil’s net external debt at the end of second quarter 2002 was about $172 billion, which is equivalent to about 40 percent of GDP and 330 percent of annual exports, according to the Institute of International Economics (IIE) in Washington. The private sector’s share of the total external debt is about $120 billion.
Overall, the public sector’s debt is equivalent to 58 percent of GDP -- compared with only 30 percent in 1994, when lame-duck President Fernando Henrique Cardoso was first elected. Moreover, as of August, about 42 percent of Brazil’s public debt was linked to the U.S. dollar, another 8 percent was linked to inflation and 37 percent was linked to the Brazilian Central Bank’s overnight interest rate.
Since 80 percent of the public sector’s debt and 70 percent of the country’s total debt is domestic, a default would devastate Brazil’s economy for years. The financial system would be crippled, credit would vanish and the economy would be plunged into a deep recession that would cause a huge jump in unemployment and poverty, as well as demolish da Silva’s popularity in record time.
Stratfor argued Oct. 16 that da Silva’s options were limited to defaulting or continuing to work with the International Monetary Fund, in which case it might be possible to restructure the country’s debts in an orderly manner instead of falling into unilateral default, as Argentina did nearly a year ago. However, an orderly and voluntary debt-restructuring process, in which the government gets lower interest rates from both foreign and domestic creditors, would require the appointment of a top-notch economic team at the Central Bank, Finance Ministry and Planning Ministry.
The longer da Silva waits before making public the names of his economic team, the more likely it is that Brazil will topple into default sooner rather than later. By the same token, if da Silva’s economic team fails to meet the market’s expectations, the real will continue to plunge and Brazil’s debt crisis could erupt in full force before he is inaugurated or very soon after he assumes the presidency.
Standard & Poor’s Corp., which has a negative outlook on its B+ rating for Brazil, said Oct. 28 that "positive signs" it seeks from da Silva include "the formation of a strong technocratic economic team, the rapid development of an effective economic program and the negotiation of sturdy political alliances."
However, if da Silva does the things lenders and investors are expecting in order to calm the markets and ease fears about Brazil’s future economic policies, he runs the risk of losing important support from within his own party. In fact, hard-line PT officials already are demanding jobs in the next government and a break with the centrist political coalition that elected da Silva.
Da Silva’s political dilemma is that he cannot govern effectively without negotiating with the center and right in Congress, where the PT holds only 14 of 81 senate seats and slightly more than 90 out of some 500 seats in the chamber of deputies. Moreover, the party’s gubernatorial candidates won only three of 27 state elections, and in every state da Silva outpolled other PT candidates by large double-digit margins, which indicates that popular support for da Silva does not extend to his party.Results Page:
Sunday, September 22nd, 2002
: RCN Administrator
Brazil’s Justice Ministry is trying to make a federal case against jailed drug trafficker Luis Fernando da Costa, better known as Fernandinho Beira-Mar, so he can be imprisoned in a military penitentiary on the island of Ilha das Cobras. The Brazilian government hopes that isolating Beira-Mar will disrupt his alleged control of the illegal narcotics trade in Rio de Janeiro and break his ties to corrupt state police and prison officials in the Bangu 1 and 2 prison complex where he is now jailed.
If the Justice Ministry can find legal grounds to transfer Beira-Mar, it may be possible to finally neutralize the man who has been described as Brazil’s most notorious drug trafficker. But this likely will have no effect whatsoever on Rio de Janeiro’s bustling illegal narcotics industry, and it will not seriously disrupt the international arms- and drugs-smuggling syndicate for which Beira-Mar works.
Instead, once he is taken out of circulation, other ambitious professional criminals allied with the Red Command -- an organized crime gang created in the 1960s during the military dictatorship -- will quickly take over his drug-trafficking activities in Rio de Janeiro. They most likely will have the active cooperation of corrupt state and military police officials who moonlight as intelligence and security operatives for drug gangs that rule large chunks of Rio.
Since his April 2001 arrest in southern Colombia, Beira-Mar has been depicted by some Brazilian news media and government officials as perhaps the country’s most powerful and dangerous international arms and drugs smuggler. However, several Brazilian police and congressional investigations dating back to 1999 describe him as a second-tier distributor who works for far more powerful crime bosses who are deeply entrenched in Brazil’s police, judicial and political institutions.
For instance, an intelligence report issued in 2000 by Rio de Janeiro’s secretariat of public security identified Beira-Mar as a "second-level executive" known in the Brazilian criminal underworld as a "matuto," or hillbilly. Rio’s "matutos" are responsible for narcotics distribution at the wholesale and retail levels and report back to higher-ranking "capi" -- or bosses -- that the intelligence report did not identify.
This report was issued four years after Beira-Mar escaped from prison in 1996 and fled to Paraguay, where he allegedly hooked up with corrupt police and military officials to smuggle arms to the Revolutionary Armed Forces of Colombia (FARC) rebel group in exchange for cocaine.
A separate report issued in 2000 by a special federal congressional committee, charged with investigating organized crime and drug trafficking in Brazil, identified by name 824 people in 15 Brazilian states who allegedly belonged to a national "crime syndicate" engaged in drug trafficking, arms smuggling, tax evasion, money laundering, fraud and contract murder. The 1,198-page report named scores of Brazilian mayors, judges and police officers, as well as two former state governors, two members of the national Congress and 15 state legislators.
The congressional report also accused military, police and government officials in Suriname, Bolivia and Paraguay of corruption, including Gen. Lino Oviedo, who currently stands a good chance of winning Paraguay’s next presidential election. Only a handful of the individuals named in the report were targeted for prosecution, but between eight and 30 of the witnesses who gave sworn depositions to the congressional committee were murdered after it was published, according to Brazilian police sources.
The congressional investigation also described in detail how organized crime has penetrated Brazilian judicial and government institutions, as well as municipal, state and federal law enforcement, to such an extent that Brazilian criminologists say a "parallel state" has emerged in many areas of the country. In many cases this means that organized crime syndicates have assumed de facto state functions like taxing businesses, enforcing security, dispensing justice and providing salaried jobs with pensions and life insurance benefits to gang members.
Organized crime gangs also close down streets, public schools and private retail stores at will in major Brazilian cities. For instance, after Red Command members murdered their rivals in Bangu prison on Sept. 11, the Third Command criminal gang decreed a one-day mourning period and ordered all public schools closed in the area of Rio de Janeiro that it controls.
Other Brazilian state and federal reports single out Espirito Santo as a state where organized crime has gained significant control of government, judicial and police institutions. Espirito Santo’s capital city of Vitoria is the home of a 38-year-old quasi-clandestine organization that calls itself the Scuderie Detetive le Cocq.
The Scuderie was established in 1964 in Rio de Janeiro, where it functioned for decades as the public arm of death squads that killed petty criminals and critics of the military government. When democracy was established in the country in 1985, the group lost much of the political protection it had enjoyed under the military dictatorships. As a result, in the late 1980s, the Scuderie moved its base of operations to Espirito Santo, where today it controls arms- and drug smuggling, protection rackets and illegal casinos and also carries out contract killings for business and political clients, according to Brazilian federal and state crime investigators.
The Scuderie is officially registered as a benevolent philanthropic foundation, and its more than 4,000 known members include judges, senior state and military police officials, prosecutors, armed forces officers, leading business executives and elected public officials. The group is so influential nationally that several of its members form part of the current government’s ruling alliance, according to Brazilian news reports.
Brazil’s spiraling crime wave will be a driving force in October’s national elections, where besides choosing a new president, voters will elect governors for all 27 states and all federal and state legislators. A March 2002 national survey by Datafolha ranked crime as the second-most important issue after unemployment. Moreover, all of the candidates are promising harsh "zero tolerance" polices for battling crime in Brazil.
However, the next Brazilian federal government’s efforts to crack down on crime will confront multiple obstacles. For example, federal attempts to reform the country’s police and judicial institutions likely will be blocked in the Senate, where many senators are former state governors, with longtime ties to state and military police and judicial entities that consistently have opposed law enforcement reform initiatives in recent years. Also, since state governors are responsible for judicial and law enforcement institutions in their states, they, too, will likely oppose federal reform efforts that could threaten their power.
Brazil’s crushing poverty also will hinder federal government efforts to reduce violent crime. A third of Brazil’s 170 million inhabitants live on less than $1 a day, and one-fifth of the population is illiterate, according to government and private estimates. The daily hardships endured by millions of poor Brazilians ensure that the country will continue to suffer rising violent crime rates for many years.
Finally, the local, state and national alliances between crime syndicates and corrupt police, crooked judges and dishonest public officials ensure that street criminals like Beira-Mar may rise and fall like dominoes, but higher-ranking bosses like those who belong to the Scuderie will continue to run their criminal rackets with impunity, regardless of whom voters elect to govern Brazil.
Wednesday, September 11th, 2002
: RCN Administrator
Brazil is calling for an "integration" of its national defense doctrine with that of Argentina. The goal is to build a common South American defense policy based mainly on preventing the United States from establishing a permanent military presence anywhere in the region. If Argentina accepts the proposal, it could undermine U.S. efforts to build hemispheric military support for battling regional rebels and drug traffickers.
Brazil’s government is quietly lobbying political and opinion leaders in Argentina to accept a proposal for "total defense integration" between the two countries, Buenos Aires daily Clarin reported. By "integration," the Brazilians mean the adoption of a common regional defense doctrine but not the actual merger of the armed forces of both countries.
If Argentina accepts the proposal, Brazil intends to use it as a cornerstone to build a larger regional defense alliance, with the objective of establishing a permanent demilitarized zone in South America, Clarin reports. If enough countries sign on to such a plan, it could mean that no military forces from outside the region would be allowed permanent station in most of South America.
The Brazilian proposal also would commit Argentina, and any other countries in the region that buy into it, to respect the principles of national sovereignty and non-interventionism in the internal affairs of other nations. In essence, any participating country would be off limits to extra-regional forces. This would suit Brazil’s needs perfectly.
Brazil does not want to involve itself in the troubles of Colombia and other neighboring countries, but it also doesn’t want other governments -- especially Washington -- to gain a permanent military presence in South America. Brazil is concerned that escalating U.S. military aid to Colombia is only the first step in a much greater U.S. geopolitical strategy to gain access to the Amazon region’s vast natural resources.
Aldo Rebelo, president of the defense commission of the Brazilian chamber of deputies, underscored these concerns when he said in Buenos Aires recently that it would be "a tragedy to have U.S. soldiers in South America," Clarin reported. Brazil is a fierce critic of Plan Colombia, the U.S.-backed assistance package that, among other things, funds Colombian counterdrug battalions that are trained by U.S. personnel.
Brazil is also bitterly opposed to the Bush administration’s efforts to expand U.S. military aid to Colombia to fight the Revolutionary Armed Forces of Colombia (FARC) and National Liberation Army rebel groups. In fact, Brazil repeatedly has rejected pleas by the Colombian and U.S. governments to participate in a coordinated regional military coalition to fight Colombia’s rebels and drug traffickers. Argentina has been more supportive of Plan Colombia and U.S. counterdrug and counterterrorism aims in Colombia, at least rhetorically.
Besides reflecting worries about possible U.S. intentions, Brazil’s proposal to Argentina is an indication of the enormous improvement in relations between the two countries over the past 12 years. This change was largely due to the political and trade integration mechanisms built into the South American Common Market (Mercosur), the customs union that includes Brazil, Argentina, Paraguay and Uruguay as full members plus Chile and Bolivia as associate (non-voting) members.
Before Mercosur was created more than a decade ago, Brazil’s national defense doctrine focused on the country’s southern frontiers. Since the 1870 Paraguay war, Argentina had been perceived as the greatest external threat to Brazil’s national security. However, over the past decade, Brazil’s national security focus has shifted from the south to the north, with an eye primarily on Colombia and the United States.
While Brazil-Argentina relations improved during the 1990s, the northern Brazilian frontier with Colombia became increasingly unstable as the drug-fueled civil war in that country escalated and began spreading to neighboring countries, including Brazil. The Brazilian government responded to the threat by redeploying its military forces from southern Brazil to the northern Amazon region.
Five years ago about 11,000 soldiers were based in the Amazon region along Brazil’s frontier with seven neighboring countries. Today more than 23,000 Brazilian soldiers are based within the Amazon, and 3,000 more will be deployed into the northern Amazon in coming months. However, even 26,000 soldiers are woefully inadequate to the task of securing and protecting the 2.12-million-square-mile Amazon region from being invaded.
Brazilian defense experts say they believe the FARC is turning Colombia’s southern border with Brazil into a strategic rear guard area to rest and resupply FARC forces and to smuggle drugs out of Colombia in exchange for weapons smuggled into the country from Brazil. These sources said the FARC also has at least 300 fighters permanently camped less than 30 miles from the Colombian border with Brazil.
It’s not clear how Argentina will respond to Brazil’s proposal. Argentina’s political turmoil caused by its debt default last year has not subsided, and the country’s economy remains a shambles. A recent poll shows that President Eduardo Duhalde has a popularity rating among Argentine voters of only 6 percent, the country’s political leadership is jockeying for advantage in party primaries and general elections scheduled over the next six months, and the government has made no progress at all in locking in a financial aid package from the International Monetary Fund.
The Brazilians understand that right now there’s no one in Argentina they can truly negotiate with. However, they are pitching the idea of integrating national defense doctrines to Argentine opinion leaders now, with the aim of building political and popular support for the idea before Argentine voters choose a new president in the first half of 2003. This could have very negative effects on hemispheric U.S. efforts against drug and rebel groups.
Wednesday, August 14th, 2002
: RCN Administrator
South-eastern Germany is facing a catastrophe as flood waters surge downstream from the Czech Republic, causing the Elbe river to burst its banks. In the city of Dresden, waters are rising at around 20 centimetres per hour and many of its bridges have become impassable. The latest surge of water has already hit towns in the north of the Czech Republic, where barges have broken loose and are careering downstream. But the situation in Prague has eased after fears on Wednesday that the Vltava river would burst through flood defences.
The architectural treasures of the Old Town were spared, but the Czech capital is now faced with a clean-up bill of hundreds of millions of dollars. Now the Slovak capital, Bratislava, is under threat as the swollen waters of the Danube river head its way.
The BBC’s Tristana Moore in Dresden says the Elbe has reached levels eight metres above normal and is expected to rise to levels not seen for more than 100 years. Waters have poured into the Zwinger Palace art gallery, where precious paintings, including Rembrandts, have been moved to upper floors. Emergency workers are trying to pump clear the buildings’ cellars. Nearly 200 patients from the intensive care unit of the local hospital have been evacuated by air and land to hospitals in other cities across Germany. Surges in the Elbe have already reached the north Czech town of Usti nad Labem, where thousands of people have been evacuated.
Five barges have broken loose from their moorings in the Czech border town of Decin and are heading towards Dresden, sparking fears of serious damage to bridges on the way. The authorities are expecting the waters to continue to flood northwards, and there are already reports that Brandenburg is under threat.
On Wednesday, Chancellor Gerhard Schroeder visited the flooded town of Grimma in Saxony, and promised federal aid for the stricken areas - many of which are in the former East Germany.
At least 12 people have been killed across Germany.
Austrian disaster. A state of emergency is in force in the Slovak capital, Bratislava, where people have been evacuated as the Danube reaches its highest levels there for a century. Soldiers have been deployed and the situation is being monitored by helicopter. The river has already wrought havoc in Austria, where some cleaning up efforts have already begun.
Prague’s Old Town was mainly spared, despite fears. "This is the worst natural disaster to have hit Austria in living memory," Chancellor Wolfgang Schuessel said, promising 650m euros ($640 million) in state aid. Seven people in Austria died in the floods.
There are still concerns that waters from south Bohemia, in the Czech Republic - where rivers and small lakes have burst their banks across a wide area - could flow across the border, submerging Austrian towns once again. Prague respite .
People in Prague are now coming to terms with the scale of the clean-up operation required.
People are working frantically to minimise the damage to the National Theatre building, pumping water out of its flooded basements.
The Vltava river began to recede overnight without flooding the Old Town, but the city’s mayor, Igor Nemec, has warned the tens of thousands of people who have been evacuated not to return to their homes yet. He says electricity and sewerage must be reconnected before homes will be safe again. That has left many facing a fourth night sleeping on the floors of the city’s schools.lmost 10% of the city has been inundated, making it the worst flooding in 200 years.
Floods have devastated towns and villages right across the Czech Republic. More than 200,000 Czechs have had to leave their homes and at least nine people have died.
Tuesday, August 13th, 2002
: RCN Administrator
United Press International reports that organizers of a recent "cultural-political" festival in Jordan called off the event because the government barred eight of 12 scheduled speakers from participating. Saudi cleric Sheikh Salman al-Odeh reportedly was detained and deported 90 minutes before he was to deliver a lecture on "Jihad and Terrorism." Other detainees included Yemenis, Tunisians and Palestinians.
The conference and the crackdown coincide with the presence of U.S. Marines training with Jordanian forces in an annual exercise known as "Infinite Moonlight." The Jordanian government has energetically tried to claim that the U.S. forces would not be permitted to operate out of Jordan against Iraq in the event of a war, and that the exercise was simply a routine and regularly scheduled training event.
The problem for Jordan is that this is not the news coming from Washington. Advocates of an invasion of Iraq -- aware that a single-front strategy based out of Turkey is much less desirable than an attack on two fronts -- have been actively signaling that plans for an attack include the use of Jordan-based resources.
For example, Agence France-Press reported Aug. 13 that the U.S. Navy is contracting two commercial ships to move military hardware, "including Bradley fighting vehicles and helicopters," to Jordan and an undisclosed Red Sea port. In a briefing, U.S. Central Command spokesman Frank Merriman gave the government’s official story, saying, "We consider this just a routine shipment" involving the transfer of equipment from Europe to the Middle East.
But nothing involving the movement of infantry fighting vehicles to Jordan can be construed as routine. There is no link between "Infinite Moonlight" and the transfer, since even if the chartered vessels were available and loading commenced immediately, they would not be in the region in time for the exercises. However, the U.S. government wants it known that it is in the process of building its forces in preparation for an attack on Iraq, and that it will be positioning the equipment in Jordan.
Jordan’s official policy is that it does not support and will not participate in a war against Iraq, even while the United States is publicly making it very clear that it has secured Jordanian cooperation. This increases domestic pressure on the country’s Hashemite monarchy, which is reacting by cracking down on what it regards as foreign agitators.
By extension, the government also is taking on the domestic opposition that is linked to such agitators. Since the U.S. military clearly wants to use Jordanian territory but also wants to minimize instability in that country, the question is: Why is it going out of its way to publicize the buildup in Jordan?
The Bush administration is clearly under pressure in two ways. First, it needs to show that it is not completely isolated in the Arab world in its plans to attack Iraq. It badly needs to demonstrate the existence of a willing Arab partner, and it is willing to do so regardless of the pressure this puts on Jordan.
Second, it needs to show that it has a credible military option even if the Saudis and Kuwaitis refuse to participate in a war on Iraq. If the U.S. military attacks strictly from the north, there is some possibility that Iraq might strike at Jordan. As a key ally and buffer between Iraq and Israel, the United States can’t risk this.
More important, the U.S. military will face the danger of SCUD missile launches from western Iraq as it did in 1991, and it needs Jordan as a base for suppressing the SCUDs. Since the feasibility of the Iraqi plan is coming under heavy scrutiny in the Pentagon and Congress, letting everyone know that Jordan is in is critical.
Jordan has a number of reasons for supporting U.S. policy. The most important is that the government is deeply concerned by both the rising influence of radical Islam in its long-time antagonist Saudi Arabia and the radicalization of the Palestinians.
King Abdullah’s father Hussein had to fight to save his throne from a Palestinian uprising in 1970. Palestinian radicals have never forgiven the Hashemite government either for Black September -- after which Hussein’s military launched a successful campaign against the Palestinians, driving them out of Jordanian territory -- or for the royal house’s long-term relationship with Israel.
Jordan is counting on the United States to get these forces under control and sees the fall of Iraqi leader Saddam Hussein as a vital step. Unlike in 1990, when the Jordanians flirted with Hussein, Jordan has no choice now but to side with the United States.
On the other hand, Jordan would prefer this relationship be much more covert. While security forces have been extremely effective in controlling opposition, as the cancellation of the festival shows, the government is aware that the opposition could reach a threshold that cannot be suppressed. In the long term, it wants radicalism crushed. In the short term, it would like it suppressed quietly.
But Washington cannot silently stand by. It must demonstrate that it has allies, even if to some extent it has to increase the risk to those allies. Washington is calculating that the value of publicity over Jordan’s participation is greater than the risk. King Abdullah certainly hopes the United States is right, since he clearly cannot control what Washington is saying and does not want to opt out.
Monday, August 12th, 2002
: RCN Administrator
The Brazilian government plans to become a lender of last resort to exporters that have been cut off from commercial banks in the country, Bloomberg reported Aug. 12. Many such banks have stopped providing export finance credits, generally considered one of the safest forms of lending, which has forced some exporters to scale back production and curtail exports from Brazil.
The government’s decision underscores the depth of Brazil’s current economic and financial distress, which led Morgan Stanley this month to revise its 2002 growth forecast for the country from 1 percent to a mere 0.6 percent. Bruised by Argentina’s recent economic collapse, and with warning signs growing in Brazil, foreign banks are retrenching. Domestic banks, facing growing capital flight and saddled with depreciating government debt, are also less willing to lend. A full-scale credit crunch could be in the making.
Brasilia cannot afford for exports to dry up and has little choice but to sink government funds into an export-credit regime. This new demand on government finances will cut into reserves needed to defend the currency and stem the tide of negative investor sentiment. Meanwhile, a more general lack of bank lending will deepen Brazil’s economic woes at a time when its economy is struggling mightily to sidestep recession.
Exporters normally rely on credits to cover their costs until they receive payment on their sales. Export credits are backed by those sales and are thus a relatively safe lending instrument with short-term repayment requirements. Brazilian exporters need to borrow about $20 billion to $30 billion against the value of their shipments every six months, a Brazilian banking executive told Bloomberg.
Those credits keep exports of everything from agricultural products to automobiles flowing out of Brazil at an annual rate now topping $67 billion. Exports bring much needed foreign currency into the country and are an especially important part of its economy now, as domestic consumer and business confidence remain in the doldrums.
Exporters should be thriving due to the rapid devaluation of the Brazilian real -- which has lost 20 percent of its value since May -- since devaluations make exports cheaper abroad compared to competing products. But despite the relative safety of export credits and the price competitiveness of Brazilian exports, nervous banks in the country are turning off the lending spigot.
Most banks have quietly cut off lending to exporters, the head of corporate banking at Standard Chartered Plc’s Brazilian unit told Bloomberg, while some (such as FleetBoston and Bank of America) have openly admitted to cutting back on lending in Brazil to limit their risk.
Foreign banks are understandably skittish after suffering huge losses in Argentina, and recent news is only increasing their determination to limit their exposure in Brazil. On Aug. 12, Moody’s Investors Service lowered by one notch the rating on Brazil’s foreign currency bonds and notes, putting it five levels below investment grade, on par with Nicaragua and Honduras.
Capital flight is also rising dramatically as the real loses value -- Brazilian bank transfers abroad doubled since June to $1.25 billion in July, Bloomberg reported July 13. Growing capital flight has even spurred speculation about future capital controls. Many foreign banks -- already heavily exposed in domestic public and private debt -- will prefer to wait things out, at least until after the fall elections, before putting more money on the line.
Domestic banks also have reasons to pull back from the lending market. Most, especially the country’s top three domestic commercial banks, are heavily leveraged in Brazilian government securities. For Brazil to avoid a full-blown financial crisis, domestic banks will have to agree to roll over a large portion of debt coming due over the next six months. This refinancing ties up funds, leaving banks with less to lend.
Domestic banks also are keeping a wary eye on capital flight and will lend very conservatively to avoid being stuck with inadequate reserves on top of declining bond values and increasingly questionable loan portfolios.
With banks shutting off credit, the onus has fallen on the government to close the gap. But Brasilia has its own considerable problems, chief among them being billions of dollars worth of rapidly maturing debt and a currency in free fall. Both require the government’s immediate attention -- and money.
With so many demands on its $27 billion in net international reserves, the last thing Brazil needs is to make a choice between defending the currency, meeting its debt obligations and lending to exporters. For now Brasilia will choose to do all three, in the hope that the $30 billion International Monetary Fund loan package announced last week will provide sufficient cushion. But unless it can convince banks to start lending again, that cushion could evaporate quickly.
Thursday, August 8th, 2002
: RCN Administrator
Brazil is set to receive a $30 billion loan from the International Monetary Fund. This will be the largest bailout any country has ever received from the fund. Although this will help Brazilian President Fernando Henrique Cardoso end his presidency on a positive economic note, the approval of Trade Promotion Authority for U.S. President George W. Bush could undermine many of Brazil’s goals.
With only a few months left in power, Brazilian President Fernando Henrique Cardoso is working hard to secure his legacy and ensure that Brazil’s next president will continue his core economic and foreign policies. For instance, Cardoso just secured a $30 billion loan from the International Monetary Fund to help restore investor confidence in the country’s battered financial markets.
The $30 billion loan, -- adding to the $33 billion the IMF has granted Brazil already since 1998 -- announced Aug. 7, is the largest bailout any country has ever received from the IMF. However, both Cardoso and the IMF hedged their bets.
Although the 15-month deal gives Brazil’s government extra cash to avert an economic crisis, only $6 billion of the IMF loan will be disbursed before the end of 2002. The remaining money would be disbursed only in 2003 after Cardoso’s presidency ends and is contingent on Brazil’s next government continuing "a policy strategy that will underpin macroeconomic stability and bring Brazilian economic growth closer to its potential over the medium term, [and] preserve low inflation and external sustainability," IMF Managing Director Horst Koehler recently said.
The Brazilian Central Bank also will be allowed to reduce its net international reserve floor -- stipulated under Brazil’s current agreement with the IMF -- from $15 billion to $5 billion, which will free up additional funds to defend the country’s currency.
The agreement could help stabilize Brazil’s currency and bonds before the October presidential elections and ensure that Cardoso ends his presidency positively, with a stable economy poised to resume growth under a new government in 2003. A continuation of Cardoso’s economic policies by the next government would be well received by international investors and would enhance his stature as Brazil’s leading statesman.
However, if the IMF’s conditions are not met and the remainder of the loan is suspended, the next government would catch most if not all of the political and popular blowback from the severe economic downturn that would be triggered by a reversal of free-market policies and suspension of IMF assistance.
Similarly, Cardoso recently has been trying to strategically position Brazil to engage the Bush administration in negotiations to create a hemispheric Free Trade Area of the Americas (FTAA). With the U.S. Congress recently giving President George W. Bush Trade Promotion Authority, allowing him to negotiate free trade deals with other countries that Congress cannot amend, U.S. trade negotiators have acquired considerable political leverage they can utilize bilateral and regional trade talks in Latin America.
On the other hand, this also means Brazil has lost negotiating leverage. TPA heightens the chances for Latin American governments to negotiate trade deals with the United States. If other members of the South American common market (Mercosur) like Uruguay and Argentina seek bilateral trade deals with the Bush administration, as their governments likely will over the next 12-18 months, this could undermine core Brazilian foreign policy goals of expanding Mercosur and signing a trans-Atlantic trade agreement with the European Union before committing to anything in hemispheric trade negotiations with the United States.
As a result, at a July 27-28 summit of South American presidents in Ecuador, and again during a recent trip by U.S. Treasury Secretary Paul O’Neil to Brazil, Cardoso also declared that Brazil would sign an FTAA agreement only if the U.S. government eliminates tariff and non-tariff barriers to agricultural products and reforms its anti-dumping laws. The other 11 presidents who participated at the summit in Ecuador unanimously endorsed Cardoso’s insistence that the U.S. government has to implement some major trade reforms before an FTAA can be signed.
Cardoso’s position is legitimate from a Brazilian and Latin American perspective. Although U.S. policymakers tirelessly preach the virtues of free trade and democracy throughout the region, many Latin Americans perceive a double standard when the Bush administration endorses huge increases in agriculture subsidies and uses anti-dumping statutes to block Latin American steel products from the U.S. market.
However, Cardoso’s challenge to the Bush administration also reveals a deeper understanding of how local U.S. politics can hinder or advance U.S. trade policy. By staking out the position that Brazil will not commit to an FTAA before the U.S. government makes front-end concessions on agriculture, anti-dumping laws and other trade-related issues that are vital to Brazil and other Latin American countries, Cardoso may be trying to re-position Brazil strategically in order to compensate for some of the negotiating leverage it has lost now that Bush has TPA.
Cardoso is aware that the front-end trade concessions Brazil wants from the Bush administration are among the most sensitive and volatile in domestic U.S. trade politics. Although Bush announced recently that he would use TPA to push for agriculture liberalization at the World Trade Organization, he could have a more difficult time at home beating back special interest groups determined to block liberalizing reforms, especially in the areas of agriculture and anti-dumping statutes.
If the Bush administration agrees in future discussions with Brazil to make at least some of these front-end reforms, like in agriculture, Brazilians would perceive this as an internationally stature-enhancing political victory for their country. It’s likely that many Latin Americans in neighboring countries would agree with this perception.
However, if the Bush administration’s efforts to liberalize agriculture and other trade-related issues get stuck in local U.S. politics, driven by powerful special interest groups determined to preserve longtime subsidies and other protectionist government benefits, bilateral and hemispheric trade negotiations between the United States and other countries in the region might advance more slowly. This would give Brazilian policymakers more time to salvage their cherished goals of expanding Mercosur and signing a trade agreement with the EU before making any binding commitments in hemispheric trade negotiations with Washington.
Wednesday, August 7th, 2002
: RCN Administrator
NEW YORK (Reuters) - Stocks are expected to tick up at the open on Thursday as a $30 billion bailout for debt-ridden Brazil and a benign picture of U.S. inflation lures more buyers into the market after two straight days of gains.
The bailout package for Brazil from the International Monetary Fund ( news - web sites) eclipsed the $20 billion-$25 billion expected by most analysts and ranked as the largest ever from the fund. The massive package helped ease fears Brazil, South America’s biggest economy, might default on its $250 billion public debt mountain.
"The fact there was this IMF package certainly helps the banks exposed to Brazil," said Larry Wachtel, a market analyst at Prudential Securities. "Citigroup and J.P. Morgan are in the Dow, and that’s helping the Dow futures move higher."
The Labor Department ( news - web sites) said before the open that U.S. producer prices declined in July in a report that leaves Federal Reserve ( news - web sites) policymakers with few inflation worries when they meet next week to set interest rates. Hopes have mounted that the central bank will cut interest-rates -- now at 40-year lows -- yet again this year to prop up the economy.
"The Fed has nothing to worry about on the inflation front; whether they will do anything is a question mark," said Paul Cherney, a market analyst at S&P Marketscope. "Markets right now are in a positive mode."
Equity futures eased off their highs, but still pointed to a positive open. The September futures for the Standard & Poor’s 500 rose 7.10 points to 883.10. Futures for the Dow Jones Industrial average climbed 75 points to 8,515, while futures for the Nasdaq gained 6.50 points to 925.50. The Nasdaq 100 pre-market indicator ticked up 0.43 percent.
The Labor Department’s Producer Price Index ( news - web sites), a closely watched gauge of inflation at the wholesale level, declined by 0.2 percent after inching up 0.1 percent in June, defying Wall Street economists’ expectations of a slight 0.1 percent gain.
The department said that excluding a 1.5 percent drop in auto prices and a 1.6 percent decline in light trucks, the overall PPI ( news - web sites) would have been unchanged.
Fewer Americans than expected signed up for state unemployment benefits last week, the government said in another report Thursday that showed a slowly improving U.S. labor market.
The number of initial jobless claims fell by 15,000 to a seasonally adjusted 376,000 for the week ended Aug. 3, the Labor Department said, well below the 397,000 claims reported for the same period last year.
The decline was bigger than expected. Wall Street economists forecast, on average, that first-time claims would inch down to 384,000.
In corporate news, Wal-Mart Stores Inc. , the world’s No. 1 retailer, added another bright note. The Dow component said it expects to meet or even beat its prior earnings guidance for the second quarter and posted a 4.5 percent rise in July same-store sales -- sales at stores open at least a year. Its stock ticked up to $49.20 on Instinet from its close of $48.38.
Consumer electronics retailer Best Buy Co. Inc. on Thursday lowered its earnings outlook for the second quarter, citing declining consumer confidence and flat comparable store sales. Shares sank to $22.86 on Instinet from a close of $30.80.
Citigroup Inc. said on Wednesday after the close it would join other U.S. companies in expensing stock options it gives employees, to restore investor confidence after the Enron scandal. Billionaire Warren Buffett ( news - web sites) backed the move and said it improved his view of the stock, which he does not own.
No. 1 semiconductor maker Intel Corp. confirmed it will not account for stock options as an expense, joining a growing list of high-technology firms that are bucking a growing trend among U.S. companies.
The Walt Disney Co.’s balance sheet is improving, and the company is confident about its current liquidity and debt level, Chief Financial Officer Tom Staggs said on Wednesday after the close.
Local phone company Qwest Communications International Inc. , which recently said it would restate financial results for several years, on Thursday before the open posted a second-quarter loss as slack demand hurt sales of its data services.
A late-session rally pushed stocks higher on Wednesday, lifting the market for a second day as investors piled into beaten-down issues in hopes technology bellwether Cisco System Inc.’s higher quarterly earnings boded well for corporate profits.
The Dow Jones industrial average <.DJI> closed up 182.06 points, or 2.2 percent, at 8,456.15. The average jumped at the open, then slid in and out of negative territory throughout the day. The blue-chip measure rose 2.87 percent a day earlier.
The broader Standard & Poor’s 500 Index <.SPX> was up 17.2 points, or 2 percent, at 876.77, while the technology-laced Nasdaq Composite Index <.IXIC> was up 21.35 points, or 1.7 percent, at 1,280.90. The Nasdaq leaped more than 3 percent at the open after snagging a gain of more than 4 percent on Tuesday.
Stocks had gained on Tuesday on hopes the U.S. Federal Reserve may cut interest rates sometime this year to shore up the economy. The Fed is scheduled to meet next week.
Sunday, August 4th, 2002
: RCN Administrator
The United States and the International Monetary Fund both have signaled new support for Brazil and Uruguay to keep these countries from being dragged down by Argentina’s financial collapse. While this may work for Uruguay, there are no assurances that more funds for Brazil will prevent a forced debt restructuring before the end of 2003 or will help prevent greater difficulties ahead for countries like Venezuela, Colombia and Peru.
The International Monetary Fund said Aug. 1 it is prepared to provide emergency aid to Uruguay and Brazil, which it regards as victims of financial contagion resulting from Argentina’s economic crisis. However, fund officials indicated that an agreement with Argentina, which defaulted last December on its $142 billion foreign debt, is still weeks away because President Eduardo Duhalde’s government has not yet complied with all necessary reforms.
The Bush administration has endorsed the IMF’s rush to aid Uruguay and Brazil while continuing to withhold funds for Argentina. Fund officials in Washington say the IMF believes that by helping these countries now, a much greater regional financial crisis -- especially if Brazil were to default on its $305 billion debt -- will be averted.
Argentina’s economy is too far gone for the IMF to give it any more emergency aid until its government enacts all the reforms the fund has demanded. This is unlikely to happen anytime soon due to the weakness of the unpopular Duhalde regime. However, there still may be sufficient time to rescue Uruguay (and especially Brazil) from default and keep the rest of region’s dominoes from toppling, causing a new Latin American debt crisis.
A new regional debt crisis, almost exactly 20 years after the last one, could have devastating consequences for Latin America’s development prospects as well as for U.S. banks, institutional investors and multinational corporations with tens of billions of dollars at risk in the region.
As a result, the Bush administration is supportive of IMF aid for Brazil and Uruguay with the expectation that such action will defuse investor fears of imminent default in those countries. Washington also wants to contain the spread of a larger regional crisis that could result if the markets perceive that the United States is abandoning South America’s largest economies to an uncertain fate.
The U.S. government agreed Aug. 4 to provide Uruguay with a $1.5 billion bridge loan, after a joint statement from IMF, World Bank and Inter-American Development Bank officials said that the three will increase aid to the country by $800 million. Uruguay’s Congress currently is trying to enact legislation to avoid a default on its international debt and block some withdrawals of hard currency from banks.
Uruguay’s economy may be tiny enough for the IMF to avert a default there at relatively little cost, but there are no assurances that lending Brazil another $20 billion as requested -- on top of the $33 billion it already has been granted since 1998 -- will allow that country to avoid a forced debt restructuring process sometime before the end of 2003. Even if it did avoid a default, it’s unlikely that the additional money will help to prevent greater difficulties ahead for countries like Venezuela, Colombia and Peru.
Among South America’s 12 democracies, only Chile has managed so far to avoid the economic, political and social turmoil sweeping the rest of the region today. Every other country is beset by different degrees of economic, political and social unrest that are affecting growth, investment, employment and governance. At a July 27-28 summit of South American presidents held at the coastal city of Guayaquil, Ecuador, many heads of state blamed their region’s troubles mainly on the Bush administration’s failure to open up U.S. markets and comply with other pledges and commitments to Latin America.
These criticisms contain a kernel of truth. U.S. policymakers have been asleep at the wheel in Latin America during the past eight years, ignoring trade expansion, focusing more on the Colombian drug war and generally paying no attention to anything else in the region. Nevertheless, South America’s current crop of economic and political crises were basically homegrown by governments and ruling establishments that created unrealistically high expectations but never completed the liberalizing economic and political reforms they undertook a decade ago.
With the exception of Chile, the rest of South America’s governments have not done enough to modernize their economies, liberalize labor markets or develop robust export industries during the past decade. State-owned enterprises were privatized and import tariffs were slashed, while prices, interest rates and currency rates were freed from government control during the 1990s.
In addition, South America generally is more dependent on foreign capital sources today than it was a decade ago. The rule of law and property rights in most countries remain tenuous at best and little or no political or financial efforts were made to modernize vital institutions like the financial and education systems, the courts and the public sector.
The economic liberalization policies implemented across South America during the 1990s, especially the sale of hundreds of state-owned enterprises, resulted in higher rates for a host of formerly state-owned products and services now delivered to local consumers mainly by private foreign companies. However, the failure of most of the region’s governments to complete the reform programs begun at the end of the 1980s or early 1990s ultimately undermined what always was shaky popular and political support for free-market reforms.
Slightly more than a decade after free-market policies were first applied broadly in the region, poverty is greater today than it was at the end of the 1980s, and regional unemployment has reached its highest levels in 30 years, according to a recent report by the United Nations’ Economic Commission on Latin America and the Caribbean.
In fact, recent polls indicate that in many countries a majority of voters have lost faith in their presidents, political parties and democratic governance. Moreover, these polls also indicate that many Latin Americans believe free-market policies applied over the past decade are mainly responsible for their current socio-economic difficulties.
Adding to South America’s instability over the next few months, several countries have just elected new presidents or will elect new leaders between now and first quarter 2003. Bolivia’s Congress Aug. 4 confirmed Gonzalo Sanchez de Losada, who advocates strongly pro-U.S. policies, as that country’s new president. On Aug. 7 Alvaro Uribe Velez will be sworn in as president of Colombia with a popular mandate to wage war against the Revolutionary Armed Forces of Colombia rebel group. He also reportedly has tacit Bush administration assurances of expanded economic, military and political aid to help battle guerrillas and drug traffickers simultaneously.
In October, voters will elect new presidents in Brazil and Ecuador, where populist candidates opposed to free-market policies are well-positioned to win presidential victories or gain strong Congressional positions that would allow them to influence future policies. Argentina plans to hold general elections on March 30, 2003, while critics of President Alejandro Toledo in Peru are starting to urge early elections there as well.
Washington is giving its support for tossing Uruguay and Brazil an IMF lifeline, and may possibly reach out to Uruguay, Chile and other countries with proposals for bilateral free-trade agreements now that Congress has approved trade promotion authority for U.S. President George W. Bush -- giving him the power to negotiate agreements that Congress cannot amend. But these efforts are unlikely to halt the near- to medium-term trend in many Latin American countries of reduced voter support for free-market policies.
Tuesday, July 30th, 2002
: RCN Administrator
White House spokesman Ari Fleischer said July 30 that the Bush administration would "continue to support international financial assistance to Brazil." Fleischer’s assurances were in part meant to defuse a diplomatic incident with Brazil’s government caused by U.S. Treasury Secretary Paul O’Neill, who suggested recently that any financial assistance for Brazil or other countries in Latin America might end up in Swiss bank accounts if sound policies are not in place.
Fleischer’s remarks suggest that President George W. Bush likely would support Brazil’s request for at least $20 billion in fresh funding from the International Monetary Fund before Dec. 31, in addition to the $33 billion in credit the IMF already has granted the country since 1998. Such a stance would stand in stark contrast with Washington’s support for the IMF’s tough negotiating position toward Argentina in its requests for assistance.
Argentina defaulted on more than $140 billion in foreign debt last December and subsequently devalued its currency, while Uruguay is expected to default soon. It is possible that the Bush administration is starting to share investor concerns that Latin America could be plunged into a new regional debt crisis if Brazil were to default on its $305 billion debt. These concerns rose after Brazil’s currency and bonds fell sharply for the seventh consecutive day July 30, Bloomberg reported.
There are several reasons why the Bush administration likely will do more to accommodate Brazil’s demands for IMF aid than it has been willing to do in Argentina’s case. For starters, Brazil is much larger economically than Argentina, and U.S. companies and banks have far greater exposure there.
To advance its trade and security objectives in Latin America, the Bush administration also has to improve its current rocky relations with Brazil, which is holding presidential elections this October in which the leading candidate has voiced leftist and anti-free-market ideas. Also, the Bush administration is under strong regional pressure to demonstrate with concrete actions its oft-professed commitment to closer relations between the United States and Latin America.
By supporting an IMF bailout of Brazil, the Bush administration may hope to patch up relations with the country and win points with the rest of Latin America by preventing a debt default that could drag down the entire region for years. However, it’s not clear that Brazil can avert a forced debt restructuring sometime in the next year, even if it does get another $20 billion from the IMF.
The Brazilian real lost 8.4 percent of its value on July 29-30, and so far this year is down 29 percent against the U.S. dollar. Since about half of Brazil’s debt is in U.S. dollars, for each percentage point that the real depreciates, Brazil’s foreign debt service obligations increase by $1.4 billion, Bloomberg reported.
Depending on how it’s calculated, government debt now accounts for between 45 percent and 58 percent of GDP, according to different news reports from Brazil. The government also will need about $45 billion to $50 billion in fresh loans during 2003-2004 to finance its external debt obligations.
If the markets do not recover their lost confidence in Brazil quickly, the government likely will have an increasingly difficult time obtaining at accessible interest rates the fresh loans it needs to cover maturing debt obligations. The outgoing government of President Fernando Henrique Cardoso is paying more than 20 percent interest already for its new borrowings, but interest costs likely will rise even more if the value of Brazil’s currency and bonds continues to fall.
A U.S.-backed IMF bailout of Brazil might be enough to stem the flight of investors for the time being. At best, however, it would only postpone the inevitable.