www.tuscaloosanews.com South American travel diary On the Web

By Sylvere and Martha Coussement February 13, 2003

• WEEK THREE: Sharing our room with lizards and tree frogs • WEEK TWO: Nice, unusual barge ride • WEEK ONE: Off to a good start

Related photo galleries:The Coussement Travels

PIRIPIRI, Brazil -- We had planned to report this week on our hunt for opals and the resort city of Fortaleza. It has been a busy and exciting time so we have decided to break this report into two columns. Changing plans is not unusual while traveling in South America. Although we try to firm up where to go and what to see, plans are often derailed by the unknown or “the local knowledge" that we glean from people we meet. There is so much to see that, unfortunately, time will not allow us to experience all that we would like. Some of the uncertainties are in the form of road conditions and the lack of road identification. It is dangerous to travel at night, because of the roads, the numerous stray animals and robbers. We always plan alternate stops in order to secure ourselves and the car before dark. As a last resort, should a breakdown or impassable road prevent this, we carry sufficient equipment and supplies to spend the night in the bush. Other little issues show up to create more fun. How about a young female cat who comes into heat earlier than expected? Talk about howling! Also this week Mia, one of our fox terriers, seems to have contracted a tropical disease. We are happy to report that the veterinarian services here are excellent, and she is on the mend, while the cat was “fixed" on Monday. A comment on the equatorial heat and humidity while all of you shiver in Alabama. Five days into our trip, we started feeling the full effects of this region. Well, almost all of our family, except, of course, for Flamenca, our Venezuelan cat. The natives that we meet and see never seem to perspire. On the other hand we need only take a few steps away from the air conditioning to be quite wet. The sun's intensity is strong, to say the least. Our little car attracts a good deal of attention, since Buicks are not distributed in this country. I describe the size as ëlittle' with tongue in cheek. The cost of gasoline in Brazil is high (nearly $3 per gallon at the present time) and the quality is poor (they use as much as 26% alcohol in their mix), so gas mileage suffers by as much as 20 percent. The auto industry of Brazil has adjusted by marketing cars much smaller than ours and which are far more economical to operate. Our car has been serving us well with little maintenance in the 2,800 miles that we have driven on this trip. We give credit, in part, to Jack Leigh and his technical people who advised us on its preparation and spare parts list. Our drive from Sao Luis to the small town of Piripiri, in the state of Piaui, was without mishap, but punctuated by complaints of frustration from our cat. Using this town as our staging point for the opal mining region, we selected what was reported as the best lodgings in town. It is a good thing we did not select the worst. Although very clean, insect control is not an affordable option for these folks. Fortunately we carry spray cans of insecticide for just this use. By morning, our room and hallway looked like an insect battlefield. The little town of Pedro Segundo (population 21,000), in the hills of Serra dos Matoes, is the center of the only opal mining in South America. There are 30 active mines, all mined by hand, and the quality of the opals are rivaled only by those of Australia. They are manually cut and polished to draw out the very best of a particular gem. The brilliance and colors of the stones dazzled us. The jewelry design and quality were outstanding and the prices very good. We had good luck and made contact with a gentleman who is the premier dealer in opals for this region. Juscelino Sousa and his group at Opalas Pedro II were selected to craft a large mosaic representation of the map of Brazil made up of opals. This was an inauguration gift from his state to the new President of Brazil, Lula de Silva. Speaking of prices, now is the time to travel in Brazil. With the current strength of the dollar, very good lodging can be found for $25 per night, and good meals as low as $2 per person. Upscale dining will generally top off at $20 for two including cocktails and wine. The history is rich, the beaches magnificent, and the people are friendly and warm. All of this country is a great tourist destination, whatever area is chosen. Next week: Fortaleza and the dichotomy of the northeastern Brazilian culture.

www.bayarea.com Posted on Thu, Feb. 13, 2003 Associated Press

RIO DE JANEIRO, Brazil - Soaring fuel prices pushed inflation to 2.25 percent in January, the biggest jump for the month since 1995, the government said Thursday.

January's rise in consumer prices was higher than the 2.1 percent jump in December and above the 0.52 percent increase in January 2002, the IBGE statistics institute said.

In the past 12 months, prices measured by the key IPCA inflation index have risen 14.47 percent, compared to 12.53 percent in 2002, the institute said.

Fuel prices were the main culprit, rising 8.82 percent in January, while bus fares climbed 5 percent, the IBGE said. Food prices rose just 2.15 percent, compared to 3.91 percent in December.

The prospect of higher fuel and transport costs in the event of a U.S.-led war against Iraq could force the government to raise interest rates to keep inflation in check. The government hopes to limit inflation to 8.5 percent this year.

Many economists expect the central bank to raise its prime lending rate when its monetary policy committee meets next week. The rate now stands at 25.5 percent.

Higher interest rates would slow an already sluggish economy and could hamper the government's plans to create jobs, a top priority of leftist President Luiz Inacio Lula da Silva.

The government hopes the economy will grow 2.8 percent this year, up from an estimated 1.45 percent in 2002.

english.pravda.ru 10:00 2003-02-13

The project to create a continental market benefits only the US largest corporations

In November this year, the Southern US city of Miami will hold a new conference on the future of the Free Trade Area of the Americas - FTAA or ALCA in Spanish -. The intention of the US officials is to put more pressure on Latin American representatives to speed up the integration process.

US diplomats in Latin America are entitled to urge local Governments to have a favorable view on the question and adopt an active policy on the process. However, more and more voices inside and outside USA are rising against what the Brazilian President Lula Da Silva once considered "mere annexation" by Washington.

Notwithstanding, little has been explained on what really FTAA means and who benefits from the treaty. In practical terms, the FTAA is an extension of NAFTA to all Latin America from Guatemala to Argentina.

The program as it is today has five main characteristics. The main concept is Freedom of Trade, which means that all the countries will lift up limits to the import of goods. Analysts consider that it will have a serious impact on Latin American economies, as they will be compelled to produce only agricultural products.

Another key issue is the free access to the national markets. It means that goods and capitals will be considered nationals in any country member of the agreement, no matter where do they come from. Therefore, local Governments won't be allowed to promote local industries and to benefit them on public purchases.

The freedom of trade includes basic services, such as health-care and education. It means that in those areas, the public sector will be entitled to act only in the same way as the private corporations do it, to ensure fair competitive rules.

Additionally, national governments' decisions will be subject by warrants to the foreign investors. If one investor considers that a governmental regulation violates its interests, can prosecute those authorities before an international court. Such organism is to be composed by trade experts entitled to rule secretly. This seriously affects the national sovereignty of the State, as it will be unauthorized to rule on the benefit of the public.

In the opinion of Tom Hayden, Former State Senator of California and a well-known anti-globalization activist, the FTAA is a "NAFTA expanded". As NAFTA has failed in Mexico, driving up unemployment and finishing with country's middle class, there is no reason to think that the FTAA will succeed in the rest of the countries.

While serving in the California's Legislature, Hayden experienced NAFTA institutions: "I was chairman of the Natural Resources Committee of the California Senate. We had a gasoline additive that was leaking from the underground tanks to the drinking water. So I carried legislation to stop it. Eventually the California State stopped it. Then, the multinational company based in Canada went to the WTO asking for a $ 900 million compensation, which was their estimate of the profits they would lose from California trying to protect its water supply."

Therefore, the State could not sue the company for the poisoning of the water, but they could sue California for the lost of their profits from pollution. The case went to a WTO court, where three judges were appointed: one from Canada, one from Mexico and one from the USA. Hearings are secret, no reporters are allowed and no appeals can be made. The conclusions are yet to be released.

This sole example explains how FTAA or ALCO may work once established. Only benefits for the multinational companies and not a single word on cultural or politic integration, democracy or human rights. A n advance of the multinationals against people's interests.

Hernan Etchaleco PRAVDA.Ru Argentina

www.taipeitimes.com LIBERALIZATION: The US moved to open certain protected industries to foreign competition, but Latin American nations say there are sticking points

BLOOMBERG Thursday, Feb 13, 2003,Page 12

The US proposed to end duties on apparel, textiles and other manufactured goods from the rest of the Americas as a step toward freeing trade in most of the Western Hemisphere. The tariffs would be removed by 2015.

The proposal, while opening some protected industries in the US to increased foreign competition, doesn't address shields for US sugar, cotton, citrus and peanut producers, which many Latin American countries say must be considered for a Free Trade Area of the Americas agreement to be completed on schedule by 2005.

US Trade Representative Robert Zoellick said the most sensitive agricultural issues must be dealt with globally, in negotiations at the Geneva-based WTO. Today's proposal still shows the US is serious about taking on domestic interests to help move the Americas trade accord ahead, he said.

"The US has created a detailed road map for free trade in the Western Hemisphere," Zoellick said at a news conference.

"We've put all our tariffs on the table, and we now hope our trading partners will do the same." The proposed free-trading area has support from corporations such as Citigroup Inc, Procter & Gamble Co and Kellogg Co that are counting on an expanded market for financial services and consumer goods. Caterpillar Inc, the world's largest maker of earth-moving equipment, said it stands to save more than US$13,000 in duties on each grader it exports to Latin America.

The US proposal calls for 65 percent of manufactured goods to enter the US duty-free upon completion of an agreement. The rest are to be phased in over periods of up to 10 years.

The US, Canada and Mexico have been part of the North American Free Trade Agreement (NAFTA) since 1994. Chile and the US signed an accord this year.

Negotiations on the Americas accord began in 1994 with the aim of eliminating trade barriers and setting trade rules in 34 countries. Only Cuba is to be excluded. The hemispheric market encompasses more than 800 million consumers and a trillion dollars in annual commerce.

Zoellick cited a 2001 study from the University of Michigan that said an average US family of four can expect to save about US$800 a year through tariff cuts if the talks succeed.

Some US trading partners are more apprehensive. So is the US textile and apparel industry, the first to lose protection under the George W. Bush administration's proposal.

Brazil's new president, Luiz Inacio Lula da Silva, has said the US wants to use the agreement to "annex" Latin America.

The US and Brazil are chairing the negotiations.

"Agriculture is the principal obstacle to any trade agreement, because it's really the main thing developing countries like Brazil can sell," Jose Augusto de Castro, president of the Brazilian Foreign Trade Association, said.

US duties on imported textiles and apparel are to end five years after the completion of negotiations on an accord, Zoellick said. Other counties will have to offer the same duty-free access to US-made textiles and apparel.

"This goes to one of the points we hear from our apparel industry," he said. "They're willing to compete if it's a level playing field."

www.sfgate.com CRAIG KARMIN, The Wall Street Journal Wednesday, February 12, 2003

(02-12) 06:16 PST (AP) --

At a time when many U.S. companies are struggling to meet sales targets at home, a once-reliable market abroad suddenly looks much less hospitable: Latin America.

American multinational corporations in the 1990s earned billions of dollars from their subsidiaries based in South America and Mexico, as countries there enjoyed periods of high growth and attracted investment from hundreds of U.S. companies. But after recording a meager profit in the region during 2001, U.S. companies reported a loss of $500 million in South America through the first nine months of 2002, their first loss in the region in more than a decade.

Although Latin American economists suggest that 2002 may have marked the worst of the region's downturn, few are predicting much of a recovery this year -- or any meaningful profit rebound for most of the U.S. subsidiaries based there.

"Latin America will continue to be a drag on U.S. earnings in 2003," says Joseph Quinlan, global economist at Johns Hopkins' Center for Trans-Atlantic Relations in Washington. "That's something analysts may not have fully factored in."

A number of U.S. companies already have indicated that Latin America's economic turmoil and currency depreciations weighed on last year's earnings. In the telecommunications industry, BellSouth Corp. said that 2002 earnings from 11 Latin American countries fell 24 percent to $2.2 billion from a year earlier, while AT&T Corp. said last month it was taking a $1.1 billion charge related to its Latin American unit, which AT&T is in the process of selling. Energy company AES Corp. cited Brazil's energy rationing and currency devaluation in announcing a $1.3 billion write-down.

Some U.S. firms, sensing that profitable opportunities in Latin America are diminishing, have been reducing their exposure after years of beefing up investment. J.P. Morgan Chase & Co. last week said it plans to sell its Brazilian money management operations to Banco Bradesco, a Brazilian bank; Bank of America Corp. also said a few days ago that it is exiting capital-markets operations in Argentina and Brazil.

Other multinationals have warned that Latin America's economic weakness will continue to hurt earnings throughout this year. Kraft Foods Inc., for instance, recently said that 2003 profits will be hurt in part by depreciating currencies in Brazil, Argentina and Venezuela.

These sort of warnings represent a sharp break from the mostly prosperous years of the 1990s, when Latin America was a reassuringly bankable destination for U.S. multinationals. U.S. affiliate income from the region totaled $5.7 billion in 1990, and climbed steadily to a peak of $14.6 billion in 1997, before falling in 1998 because of the emerging-markets crisis.

During most of that decade, Latin America produced more annual profits for U.S. firms than did U.S. investments in the developing Asian markets. Indeed, the two biggest countries in the region, Brazil and Mexico, generated more earnings for U.S. firms than many European countries.

The recent evaporation of profits reflects a series of recent economic crises in the region, starting in 2001 with Argentina's default on debt and subsequent devaluation of its currency. Concern about Brazil's ability to meet international debt obligations, meanwhile, helped to push its currency down 50 percent against the dollar last year and led to the first loss for U.S. subsidiaries in that country since the 1980s.

Multinationals thought they could at least count on Venezuela, where U.S. companies earned $500 million in the first nine months of 2002. But more recently, a crippling oil workers' strike and political chaos threatens U.S. earnings in Venezuela, too. What's more, the rapidly falling Mexican peso has started cutting into affiliate company profits when translated back into dollars.

Just how much pain U.S. affiliate companies will feel is hard to say. Latin America's gross domestic product fell by 1.1 percent last year, with the economies in Argentina and Uruguay both contracting by 10 percent and Venezuela's by 8 percent, according to Merrill Lynch & Co. At the same time, GDP per capita in the region shrank last year to just $3,200, down from $4,200 in 1998.

"Effectively that means less buying power for U.S. products," notes Pablo Goldberg, Latin America economist for Merrill Lynch.

Mr. Goldberg predicts that economic growth in the region will perk up a bit in 2003, expanding at the rate of 1.7 percent. But he adds that Mexico is expected to count for much of that growth, and if the U.S. economy stagnates this year, U.S. companies shouldn't look for much earnings growth from Mexico or South America.

In fact, Mexico accounted for about one-third of U.S. earnings from Latin America over the past decade as the North American Free Trade Agreement increased economic ties between the two countries. Nafta also has helped transform Mexico from primarily a low-cost production base for multinational companies to an important consumer market for U.S. goods. U.S. foreign-affiliate sales to Mexico in 2000 totaled nearly $63 billion, making Mexico the seventh-biggest market globally for U.S. affiliate sales.

But the recent collapse of the peso threatens to undermine Mexico as a profit center. The peso has tumbled more than 20 percent against the dollar from its high in March 2002, largely on concern that the U.S. economic slowdown will batter the Mexican economy. Already, however, the peso weakness means less revenue for U.S. affiliate companies when translated back into dollars.

In Argentina, the financial crisis turned around what had been $600 million in U.S. profits in 1999 into $2 billion in losses accumulated since the fourth quarter of 2001. While the economic collapse appears to have bottomed, any recovery looks slow and tentative. U.S. subsidiaries, meanwhile, lost a combined $564 million in the second and third quarters last year in Brazil. A surprisingly market-friendly reform agenda put forth by newly elected President Luiz Inacio Lula da Silva helped to boost the stock market and currency in the final weeks of the year. But Mr. Quinlan, the economist, thinks that U.S. firms in Brazil probably still lost money in the fourth quarter.

The profit backdrop looks even worse in Venezuela. Three years ago, as the South American nation pulled out of recession and President Hugo Chavez embraced a series of market-friendly initiatives to attract foreign capital, U.S. investment has been on the rise. The average annual investment in 1999 through 2001 was $2.1 billion, more than triple the amount averaged over the previous four years.

"Lost on investors is the fact that for the past two years, Venezuela has been an earnings backstop for U.S. companies bruised by events in Argentina and Brazil," says Mr. Quinlan. But given the devastating economic effect of the oil workers' strike and widespread street protests, he adds, "that's over."