usinfo.state.gov 10 January 2003

QUESTION: Can you bring us up to date on Venezuela, the situation both with negotiations and also the situation as to availability of the --the oil issue?

MR. BOUCHER: I think with regard to discussions and negotiations, I'd just say that we've been consistently supporting efforts to reach a peaceful, democratic, constitutional, electoral solution to the ongoing political crisis. We believe that the national dialogue led bythe Organization of American States is Venezuela's best opportunity to move beyond the current impasse. Together with Brazil and a number of countries in the region, we're actively engaged through the Organization of American States to buttress support for the Secretary General and for his efforts to facilitate dialogue between the government of Venezuela and the opposition.

So those efforts continue on the ground with our ambassador. They consider -- continue in other capitals of South America, Latin America, where we're talking to other governments. And they continuein terms of the Secretary's contacts or the Secretary General of theUnited Nations and with members of the Organization of AmericanStates.

QUESTION: Anything specific on oil?

MR. BOUCHER: On oil, no, nothing new today. Nothing new or specific today.

QUESTION: I have a few questions on Mexico. I have several topics today.

QUESTION: Can we do a few more on Venezuela?

MR. BOUCHER: Let's finish up with Venezuela, then.

QUESTION: It's on Venezuela, too.

MR. BOUCHER: Oh, it's Mexico/Venezuela?

QUESTION: Yeah, sorry.

MR. BOUCHER: Okay, go ahead.

QUESTION: Please go ahead. I have three different questions.

QUESTION: No, go ahead.

MR. BOUCHER: Go ahead.

QUESTION: I understand that the Mexico and Chile are leading this coalition that the United States is trying to put together and I also understand that Lula does not agree, President Lula does not agree with the formation of this new coalition to promote new elections in Venezuela. Any comments on this?

MR. BOUCHER: I think you ought to see where do we come out on this. We had been looking at forming some kind of Friends of Venezuela or Friends of the Secretary General of the OAS group to support his efforts, to bring together a number of countries and strengthen the efforts of the Secretary General of the OAS in Caracas.

We don't have a particular set of countries in mind at this point. We have been talking to the Mexican Government. We've been talking to the Brazilians. We've been talking to others in the hemisphere and especially to Secretary General Gaviria, Secretary General Annan of the United Nations as well, about how an international grouping like this could buttress the efforts of the Secretary General of the OAS.

QUESTION: Does this constitute an expanded role for the US?

MR. BOUCHER: It constitutes another mechanism to support the efforts of the OAS Secretary General. As you know, we've been very active in supporting those efforts. We've been in direct contact with the parties down there. The Secretary himself has talked with Secretary General Gaviria, I think at least once, if not more often. We've had OAS meetings on the subject where the United States played an active role. Our ambassador in Venezuela has been very active. So I would say it's another one of the many active efforts by the United States to support a political solution in a effort led by the Secretary General of the Organization of American States.

QUESTION: Specifically, what would you like for these countries to do?

MR. BOUCHER: Well, as I said, this grouping would really try to strengthen the efforts in Caracas and strengthen the support of the Secretary General on the ground in terms of the contacts with both sides, in terms of the kind of positions that can be developed and considered and put forward. I think let's try to see if this forms, if this comes together, before I try to explain exactly in any more detail what it will do.

QUESTION: If this has been asked already, I apologize, but when and why did you guys change your mind?

MR. BOUCHER: I think we did discuss here before the issue of a friends group, and at that time we rejected the idea. It was, I think, to some extent a different idea. We felt that the effort and if -- the previous one. If you look back at what I had said at the time, I think I did put some emphasis on the fact that we need to support the efforts of the Secretary General of the OAS. And so the issue here is how can we best support the Secretary General of the OAS and the OAS-led effort. And as the ideas come back again, in terms of formation of a group in direct support of those efforts, it's an idea that we found more useful and supported.

QUESTION: Your understanding of the previous proposal, then, was that it would be a completely separate operation?

MR. BOUCHER: I think at that time intended to be an alternate.

QUESTION: And that was a proposal that was made by Chavez himself?

MR. BOUCHER: I don't remember exactly who it was. It came out around the time of the Brazilian inauguration.

QUESTION: What do you think of the fact of the general strike, which is having ruinous consequences for the Venezuelan economy? Is it time to back off?

MR. BOUCHER: I don't think we can tell one side or the other what their tactics should be, other than to say they should be peaceful, other than to say they both need to work closely with the Secretary General of the OAS, and to make clear that we do understand that the cost of the Venezuelan people and the hardship and difficulties to them has been great and that both sides should do what's in the interest of the Venezuelan people, which is to work with the OAS and to come to a negotiated solution. I'd remind you that we've also made clear the government has a particularly -- a particular responsibility for maintaining peace and avoiding violence.

Ma'am.

QUESTION: Venezuela, also. The United States has been working very much with several countries to resolve this matter peacefully. It seems that there's not solution on behalf of -- alternative solutions for Chavez. Is this becoming, strategically speaking, a problem for the United States now that you are facing the situation with Iraq and North Korea?

MR. BOUCHER: I would say that the evidence indicates that we're able to handle these situations at the same time. In fact, not only to handle the crises and the difficulties in the world, but also to proceed on broader agendas like free trade and democracy and fighting AIDS and reaching water agreements with Mexico. So no, it's not a strategic complication in that sense. It is a matter of considerable emphasis now for the United States and for the Secretary of State to follow this situation in Venezuela. Obviously, the turmoil down there does affect our interests. The effect on the oil markets, the effect on the region is great, and the fundamentals of the region, the Democracy Charter and supporting democracy in the region, is very important to us. So it is a si tuation where we do think that all the countries of the region have a very strong interest, strategic interest, in making sure that there is a democratic outcome.

QUESTION: Phil, if I may, please, I have two more questions.

(Laughter.)

QUESTION: I mean Richard. Sorry.

MR. BOUCHER: No, these are for Phil.

(Laughter.)

economictimes.indiatimes.com INDRANI BAGCHI TIMES NEWS NETWORK [ SATURDAY, JANUARY 11, 2003 04:13:57 AM ]

NEW DELHI: When Vajpayee invited the Singapore prime minister, Mr Goh Chok Tong to India last year, Mr Goh put in a rider. “Lets sign a free-trade agreement,� he said, “and I’ll come for the signing.� Not one to miss the opportunity, Mr Vajpayee is reported to have said, “Done�.

In April, then, India and Singapore will be signing a free-trade agreement that has been dredged out of the garbage heap. By the end of this year, India will have signed a similar agreement with Thailand.

During last year’s India-Asean summit, Mr Vajpayee offered a free trade agreement with the Asean in the next decade. The Mexican foreign minister, Mr Jorge Castaneda, who was here last month with an olive branch, to make up for a faux pas his UN ambassador had made, he too offered a free-trade agreement to the prime minister, which Mr Vajpayee readily agreed to.

India is negotiating with Mercosur for a similar pact, while a deal with South Africa is moving out of the drawing board and into the decision stages. And Brazil’s new president, Mr Lula, has India in his radar screen as one of the four countries for trade pacts.

And then there is the big whopper: a free trade agreement with the US. It was proposed by Senator Sam Brownback recently and hailed enthusiastically by the business community.

It remains to be seen whether the government finds the idea as attractive. For the present, however, several task forces are in action: with Singapore, Thailand and the Mexico panel will be meeting shortly.

Is India suddenly discovering the world, you wonder, after years crouched in a protectionist shell? The mindset is clearly changing and free trade as a tool of economic diplomacy is gaining ground in the MEA at least, largely the effort of a foreign minister with a finance background.

But the changed outlook is also a comment on India’s zero achievement in securing bilateral free trade agreements, all the rage in the international arena.

Whatever the reservations of the mandarins of the commerce ministry, India is beginning to realise that it will virtually fall off the map of global trade if it does not get its act together and cobble together some effective bilateral trade agreements with certain key countries.

The multilateral arrangement, WTO, is going nowhere, getting clogged with too many countries, too many issues and too many disputes. Therefore the “quad� (US, EU, Canada and Japan) are working furiously on bilateral arrangements to speed up trade.

Robert Zoellick, USTR, is racing with crusading zeal through nations as varied as Chile and Singapore to tie up free-trade arrangements that are more forward looking than the WTO.

Where does India fit into this trading matrix? Nowhere actually. SAARC is virtually a dead letter, while India is concentrating its energies on economic arrangements by keeping Pakistan out.

This means an extra interest in BIMSTEC, which feeds into Asean, while New Delhi is in the throes of an FTA II with Sri Lanka. Nepal and Bhutan get economic concessions anyway, so India’s next target country in the region is Bangladesh and some big ticket concessions can be expected soon.

An FTA with Sri Lanka was almost derailed by protectionist lobbies here, other countries will face a great deal more scepticism. Therefore, the government is looking at a new way of making these FTAs more palatable.

First, the tariff harmonisation will have longer lead periods. Second, India will be hawking its services to tie up R&D and outsourcing projects under the rubric of an FTA. Singapore is not unwilling. The FTA will be named comprehensive economic co-operation agreement rather than a straightforward FTA.

The way a Mexico or South Africa FTA is being sold within the government is by pointing out the advantages of securing other markets, the US and southern Africa/SADC, respectively.

The Indian government reckons that in sectors like textiles or pharmaceuticals, Indian companies would benefit hugely by an FTA with Mexico.

Singapore will be the test case, because, with zero tariffs, Singapore and India will not only have to resolve issues of local origin but even issues like accessing the rest of Southeast Asia.

According to Indian officials, Southeast Asia is ripe for the picking, because these countries want a counter to China which is not only the factory of the region but also the largest market.

Only India’s size can make it comparable. Does India have what it takes? Watch this space.

www.forbes.com Reuters, 01.10.03, 1:40 PM ET

SAO PAULO, Brazil, Jan 10 (Reuters) - Brazil's second largest private bank, Banco Itau <ITAU4.SA> (nyse: ITU - news - people), said it sold $125 million in 11-month Eurobonds on Friday, more than twice the initial amount offered.

The bonds were sold at a coupon of 6.25 percent, offering a yield of 6.375 percent, the bank said in a statement. The sale was conducted by Itau's agency in Grand Cayman.

Itau added it will use the funds, which are expected to be received on Jan. 17, as export financing and to beef up its cash flow at the Grand Cayman unit.

With the sale, Itau becomes the latest in a wave of Brazilian banks to capitalize on rebounding investor confidence in Latin America's largest economy since President Luiz Inacio Lula da Silva took office on New Year's Day.

Earlier Friday, one of Itau's main competitors, Unibanco <UBBR4.SA>(nyse: UBB - news - people), sold a $100-million one-year bond, while Banco Safra issued a $150-million six-month bond, raising $50 million more than initially expected.

In all, six Brazilian banks have now sold bonds in international markets so far this year, totaling $875 million.

International capital markets largely shut their doors to Brazilian companies in the middle of last year amid worries the the left-leaning Lula would win presidential elections in October and bungle the economy.

But since winning the election, Lula has repeatedly pledged to stick to austere fiscal policies, winning the former union boss applause from investors who once doubted his commitment to sound economics.

www.forbes.com Reuters, 01.10.03, 1:14 PM ET

SAO PAULO, Brazil, Jan 10 (Reuters) - Brazil's Central Bank sold $284 million in domestic debt of $600 million on offer on Friday, its second auction since President Luiz Inacio Lula da Silva took office on New Year's Day.

The securities are part of $1.8 billion in government debt linked to the dollar coming due next Thursday, meaning the bank has already rolled over 74 percent of that amount. It sold $1.03 billion earlier in the day.

In the second auction, the bank sold debt maturing in October and April 2004, agreeing to pay interest rates of 13.77 percent and 13.50 percent respectively.

In the months preceding Lula's election win in October, investors balked at buying government paper for fears that a victory by the one-time radical union boss might nudge the country toward a default, prompting some to demand interest rates as high as 50 percent to buy government debt.

Since then, Lula has repeatedly pledged to honor contracts and maintain tight fiscal policies, encouraging wary investors to line up to buy domestic debt notes again.

www.forbes.com Reuters, 01.10.03, 12:19 PM ET   By Susan Schneider

NEW YORK(Reuters) - After a year of turmoil sown by Argentina's financial meltdown and Brazil's election shivers, Latin American debt issues have flowered in recent days as fresh turn-of-the-year funds and budding hopes for Brazil's new leader infuse the market with cash.

Chile and Mexico braved the once-rocky market this week for a hefty $3 billion in financing, while two Brazilian banks are issuing a further $200 million. A string of Central American nations are on the docket with expected sales this month, including a $500 million planned sale by Guatemala.

The revival is partly the product of the so-called January effect, said analysts. With the old year behind them, investors on the hunt for higher-yielding assets begin the game anew, meaning they must put their money in the markets if they hope to rack up gains in the new year.

Brazilian President Luiz Inacio Lula da Silva's honeymoon with Wall Street is also helping the Latin American debt market bloom. Where investors once viewed the former union boss as a likely death knell to Latin America's largest economy, Lula's cabinet choices and pledges of fiscal austerity and reforms have turned the tide of sentiment.

"The outlook for the first quarter is one in which people are putting money to work and in which Brazil is at least stabilized politically and fundamentally, which justifies people's short-term confidence," said Christian Stracke, head of emerging markets strategy at research firm CreditSights.

Lula, who ran on the left-leaning Workers Party ticket, took office on Jan. 1.

SCANT SALES IN 2002 The fallout from Argentina's disastrous devaluation and default and the skittishness toward Brazil made for a turbulent 2002 across Latin America.

The debt of market heavyweight Brazil closed 2002 with a loss of 3.4 percent, capping the region's gains at 7.2 percent, according to J.P. Morgan's Emerging Market Bond Index Plus. Russia, by contrast, notched up a lofty 35.9 percent return and Turkey gave investors a solid return of 20.7 percent.

Latin American debt sales suffered in tandem. The volume of issues sank 48 percent in 2002 from 2001 and Latin America made up just 28 percent of emerging market deals last year, a sharp drop from its 48 percent share in 2001, according to industry tracker Dealogic.

But the first days of 2003 show signs of a thaw. Chile's mad dash to the markets on Wednesday yielded $1 billion, a deal Chilean Finance Minister Nicolas Eyzaguirre said had seen demand of $4 billion. Mexico doubled its original plans for $1 billion to secure $2 billion in its sale on Thursday.

In Brazil, where credit to companies shriveled last year because of election fears, Banco Safra and ABN Amro Real, the Brazilian unit of of Dutch bank ABN Amro, are selling $100 million in debt each. Seven Brazilian banks have offered bonds in international markets so far this year.

"Last year there was a lot of issuance involving emerging Europe and emerging Asia. The problem was that there wasn't much issuance involving Latin America," said Arturo Porzecanski, head of emerging markets research and debt strategy at ABN-Amro. "So now when Chile comes with a $1 billion and the first Brazilian bank deals in a long time bubble up to the surface -- and there's talk that Central American or Caribbean countries will be next -- we marvel. We marvel because we've been 40 years in the desert," said Porzecanski.

Other emerging economies also jumped into the markets this week. The Philippines raised $500 million Wednesday in the opening of an existing bond maturing in 2013, while Turkey sold a $750 million 10-year dollar bond Thursday.

"A lot of money has been allocated to the emerging markets -- we hear that just this week about $1.5 billion in new money came into the marketplace -- so therefore issuers are taking advantage of it and trying to soak up the excess liquidity," said Walter Molano, head of research at BCP Securities.

TROUBLES STILL LOOM FOR LATIN AMERICA While the tone is rosier for Latin American issuers, not every would-be debt issuer is in for a smooth ride.

Venezuela is the source of scant cheer among investors, for example, because of a five-week old general strike staged by foes of President Hugo Chavez. The protest, aimed at forcing Chavez to resign or call new elections, has strangled oil production and raised concerns that an increasingly cash-strapped government will not be able to pay its debts.

Argentina, meanwhile, remains a market pariah after defaulting on $95 billion in private debt and an $800 million World Bank loan. Uruguay is still trying to right its economy after being pummeled by the fallout of Argentina's crisis.

Still, if Lula can keep Wall Street's faith, Latin American debt issues will at least have a better chance of success than they did last year. "If the vultures that were circling Brazil from April through September definitely vanish from the sky, all the little animals will come out of their caves," said Porzecanksi.

(Reporting by Susan Schneider; editing by Dan Grebler; Reuters Messaging: susan.schneider.reuters.com@reuters.net, tel: +1 646 223 6319)