news.ft.com By Jonathan Wheatley in Sa~o Paulo Published: February 16 2003 22:04 | Last Updated: February 16 2003 22:04

The owners of Gazeta Mercantil, Brazil's biggest financial daily, were close to an agreement on Sunday to sell 50 per cent of the newspaper to a Brazilian businessman, a source close to the talks said.

Under the deal, which may be announced on Monday, German Efromovich, whose interests include a shipyard and an air taxi company, would take a 50 per cent stake in Gazeta Mercantil, possibly through the formation of a new company together with Gazeta Mercantil's owners, led by Luiz Fernando Levy.

Gazeta Mercantil has long been in similar talks with Recoletos, the Spanish media group controlled by Pearson, which also owns the Financial Times. It has also held talks with Brazilian and US media companies. Negotiations are said to have foundered on the question of majority ownership.

Gazeta Mercantil has come under increasing pressure from debt in recent years. Staff have gone unpaid for months at a time, and payments to suppliers have been delayed, along with taxes and social security contributions. The company's net debt is said to be of the order of R$150 million ($41 million). Mr Efromovich is understood to have offered about R$80 million for fifty per cent of the company.

Mr Efromovich's bid may yet be challenged by Nelson Tenure, another Brazilian businessman who recently took control of Jornal do Brasil, a Rio de Janeiro-based daily. Last year Mr Tenure took over an unpaid debt owed by Gazeta Mercantil to Bank of America. He claims that Gazeta Mercantil's default on the debt gives him the right to control of the newspaper.

Consolidation of Brazil's media industry is expected to continue following the approval last year of a law allowing Brazilian and foreign companies to own up to 30 per cent of media groups. Ownership had previously been restricted to Brazilian private citizens.

Another Spanish group, Promotora de Informaciones, publisher of daily newspaper El Pais, is said to be interested in buying Brazilian assets, as are the Cisneros Group of Venezuela and Rupert Murdoch's News Corp.

www.forbes.com Reuters, 02.16.03, 3:50 PM ET

CARACAS, Venezuela, Feb 16 (Reuters) - Venezuelan President Hugo Chavez on Sunday proposed setting commercial bank lending rates for the first time in nearly a decade, following the creation of currency and price controls earlier this month. Chavez said commercial bank lending rates should not exceed 30 percent. He also asked the Central Bank to slash interest rates to help Venezuela's poor, who he said were not offered affordable credit. "I would fix lending rates at a maximum of 30 percent," Chavez said during his state-sponsored Sunday television program "Alo Presidente." "I want rates to be fixed. I want interest rates to be cut and I want the BCV (Venezuelan Central Bank) to fix interest rates," he said. Commercial banks angered the populist president in December by slashing operating hours to support an opposition strike meant to force Chavez from power. The strike continues in Venezuela's vital oil industry, strangling an economy reeling from a 8.9 percent contraction last year. Any decision on fixing rates would have to come from the Central Bank, which is in theory independent but has supported Chavez' recent initiatives -- including currency and price controls strongly opposed by the private sector.

news.ft.com By Richard Lapper, Latin America Editor, in New York Published: February 16 2003 20:43 | Last Updated: February 16 2003 20:43

Ecuador will be a "staunch ally" of the US in its struggle against terrorism, drug trafficking and corruption, the country's radical new president told the Financial Times.

Lucio Gutiérrez, (pictured) a left-leaning former army officer who won last November's presidential elections after mobilising support from Ecuador's sizeable indigenous minority population, also promised fierce fiscal austerity and said he would lead efforts to clean up Ecuador's reputation among foreign investors.

"We are very interested in turning the page of errors and mistakes, of not fulfilling agreements, of finishing with this label of Ecuador being one of the most corrupt countries in the world," Mr Gutiérrez said last week during a visit to New York and Washington.

A critic of the US and globalisation in the past, Mr Gutiérrez has been compared to Hugo Chávez, Venezuela's iconoclastic populist leader. Like Mr Chávez, he led a military coup before winning elected office. But in his first few months in government he has proved to be a more pragmatic leader than his Venezuelan counterpart, who is embroiled in a deepening political and economic crisis.

During his visit Mr Gutiérrez met President George W. Bush and the International Monetary Fund, signing a letter of intent for a $200m loan that should unlock a further $300m in credits from the multilateral lending agencies.

He said Ecuadoreans had not been happy when their currency was replaced with the US dollar three years ago. But "dollarisation" was a "legacy" his government had inherited and it would press ahead with economic adjustment and seek to improve competitiveness by investments in education and technology.

The budget envisages a primary surplus (excluding debt interest payments) of 6.4 per cent of GDP, compared with 4 per cent in 2002.

Mr Gutiérrez said his supporters had agreed to back controversial increases in petrol prices and electricity rates. He also said there was broad-based support for a continued US military base in the port city of Manta that is an important part of US operations against drugs trade in the region.

Mr Gutiérrez said it was now important to show results in terms of jobs and investment.

"We have prepared the land. We have sown the seeds, but now we have to harvest. If we don't give people a response . . . we are going to have problems."

Analysts suggest that the absence of a firm congressional majority could prove to be a serious difficulty. According to Ecuador Focus, a Quito-based newsletter, "his political ambitions could soon face some harsh political realities."

Ecuador has agreed to refer a $200m tax dispute with Occidental Petroleum and other foreign oil companies to international arbitration, said Mr Gutiérrez.

The tax dispute arose when tax authorities unilaterally suspended rebates to international oil companies of value added tax in 2001.

www.financeasia.com By Jame DiBiasio 17 February 2003

Even a swift, successful war in Iraq will have negative consequences for Asia, although China and Hong Kong have a better capacity to absorb a shock, according to analysts speaking at a panel sponsored by the Asia Society in Hong Kong.

A war will lead to some degree of economic slowdown in the West, which will hurt foreign direct investment in China. But companies everywhere, although investing less overall, will also look to cut costs and shift production to China, says Don Hanna, head of economic and market analysis at Citigroup/Salomon Smith Barney. So while FDI reductions are expected, they will be less than global falls in investment. Moreover China's internal consumer story is sheltered from the global economy.

Beyond that, however, most of the analysis is disturbing.

Peter Best, head of oil and gas equity research at CSFB, outlined several themes, not so much to predict oil prices as to assess the drivers behind them.

First, he notes the world already faces an oil problem, even without a war. OPEC has become an effective cartel, while developed countries have experienced lower inventories than they had in 1991. As a result, prices have risen. Moreover big petroleum companies such as Shell and BP have been unable for various reasons to increase production. Crude prices are now $36 a barrel, and a war will spike them to $40. The question is what follows: a price decline with lower demand and new production - or a sustained shortage? He also notes Venezuela may remain offline for some time to come.

Second, he says Asia is the world's biggest net importing region. Over 60% of its oil supplies as a region are imported, and most of that comes from the Middle East.

Third, this is not a short-term problem, but one that will worsen over the next 10 years. This is the flip side to Asia's (and especially China's) high growth rates. China is now around the eighth largest consumer of oil; Best expects it to become the second, after the United States. Meanwhile Asia's home-grown supply of oil is dwindling. As a result Asia's imports of oil will double by 2010 - requiring more oil than the Middle East currently produces.

Best says exposures to oil price rises vary across the region. Japan, despite its dependence on imports, is energy efficient and has a large stockpile, so he says it can ride out volatility. Australia, Indonesia and Malaysia are cushioned because they are also oil producers. China, also a producer, is vulnerable, as it has no reserve, and its growth means exports will grow 400% by 2010, making it as big an importer as Japan.

Taiwan, Korea and Thailand are all importers and have no stockpiles and are inefficient users.

Richard Hancock, Singapore country manager at security and risk management specialist Hill & Associates, says a war is likely to increase the prospects for terrorism in Asia. The length of the conflict, and its portrayal in the media, will shape the extent to which extremists will garner active support among the general population. “Any terrorist group requires a support base,” he observes. A prolonged war with civilian casualties increases the likelihood terrorists can find succour - shelter, information, supplies - in the region.

He also predicts an upsurge in anti-Western demonstrations that could get ugly. “During the Jakarta riots in 1998, Westerners felt they were spectators to events - but the next time they could find themselves the focus.”

Southeast Asia will get rocky. Both the Philippines and Indonesia, as well as Pakistan, have groups capable of getting weapons and making bombs, as well as anti-Western movements beyond the law. Many countries in Southeast Asia suffer from weak anti-terror laws or infrastructure: the ability of Singapore to nip attempts by extremists to bomb US and other Western targets is not universal.

Hanna said most evaluations assumed the war will be a general repeat of the 1991 conflict: short and sweet. This would mean a six-week firefight accompanied by oil at $40 a barrel for three months. But he says there is a possibility that these outlooks are too rosy.

The extent of an oil price spike and its duration depends on whether Iraqi and regional oil refineries are destroyed, as well as the willingness of OPEC members such as Saudi Arabia to increase production. Asia is particularly vulnerable: while US imports of oil equate to 1% of its GDP, Asian imports range from 3-5% of GDP. The Philippines, Korea, Taiwan and India are particularly exposed.

Should oil facilities be destroyed, in a worst case, Hanna sees oil priced at $80 a barrel through 2004, which will cut importers' GDP growth by 2-3%. So in the worst case, US economic growth would not be 2.5% but -0.5%. The benign scenario would have US GDP growth fall to 2.0% for a few months, and then rise on the back of fiscal stimulus and improved sentiment.

It would be worse for Asia, however, as it is dependent on US economic activity. Malaysia, Singapore and Hong Kong are open economies: trade accounts for more than 100% of their GDP. Other Asian countries' trade accounts for up to 50% of GDP. This is quite different to Japan or America, where trade is around 10% of GDP. Hanna notes, however, that Hong Kong is less vulnerable, despite its open economy, because so much of its trade flow is based on China. “Hong Kong is left with a cushion,” he says.

It's not all doom and gloom, either. Hanna notes that Indonesia and to an extent Malaysia, for all their weaknesses, would gain from higher oil prices. He reckons each dollar rise in the price of oil equates to $150 million more in exports. This would result in a strong fiscal improvement for Indonesia. But Hanna frets the offset would not compensate for trade losses for Malaysia. The Philippines, he adds, loses on all counts.

Moreover, all countries will suffer from changes to capital flows, Hanna says. Already risk premiums are rising, which leads to higher interest rates on sovereign bonds, which makes capital-raising expensive and stymies growth. Stock markets will also suffer - a really big problem for the US, where so many people own equities, but also for markets such as Malaysia's which have relatively higher valuations.

He also warns tourism's service flows will decline throughout Southeast Asia, particularly in Malaysia and Thailand.

Governments do have ways to counter these effects, Hanna says, by pursuing fiscal stimulus programmes. This is easier in North Asia: he notes Korea and China already are running fiscal surpluses. Hong Kong has been worried of late of deficits but has room to spend its way out of trouble, as have Singapore and Thailand. Indonesia cannot afford this option, but has the higher oil price. The Philippines' deficit is too far out of hand, however.

Lastly, Hanna foresees weaker exchange rates across the region. Even if higher oil prices spark inflation, he doubts central banks will tighten policy and raise interest rates. Such a move wouldn't take care of the problem of an oil shortage, and besides, inflation rates are already so low that it's not seen as a problem, for now.

Note that many of these observations are accounting for a middle-of-the-road outcome to the war. A best-case scenario would mean a short-lived spike in oil prices, followed by high growth in the US.

But to realize this requires a short war; the discovery of a ‘smoking gun' involving a weapon of mass destruction that is targeted at a neighbouring Muslim country; a stable post-Saddam Hussein Iraq; European investment in the new Middle East and participation in peacekeeping; and a focus on resolving the Israel-Palestine conflict. The extent to which these outcomes are not realized will determine how badly Asian economies suffer.

www.barbadosadvocate.com Web Posted - Sun Feb 16 2003 By Petal Smith

GOVERNMENT has been careful to shield the public as far as possible from the effects of the increasing oil prices which were triggered by the pending Gulf war and the protracted strike in Venezuela. Speaking against the backdrop of increases in energy prices yesterday, Parliamentary Secretary in the Ministry of Economic Development, Senator Tyrone Barker, said government has been trying its best to contain the increases.

He pointed out that other Caribbean countries like Jamaica and Guyana have already had sharp increases in the price of fuel.

Speaking to the Barbados Advocate yesterday, Senator Barker said that even with this increase, the price for gasoline was less than it was ten years ago. He noted that the price of gasoline in 1997 was $1.54 per litre, and that price, he said was reflected since 1993 to 1994. “The excise tax was 90 cents out of the $1.54. We have reduced the tax by 25 cents per litre, that is almost $1 per gallon,” he said.

The Parliamentary Secretary said for every cent in the reduction of tax, government was losing approximately $1million on gasoline and about $750 000 on diesel.

“The reduction of 25 cents in gasoline will cost the treasury every year about $25 million on gasoline alone. Also, the tax for diesel went down even further by 33 per cent per litre,” Barker said.

He said because diesel is more of an industrial fuel, a massive cut on tax has being put in place. “In October of 1994, one of the first things we did was to remove the tax on imports to both the manufacturing and fishing sector.”

Furthermore, because of the impact of the fuel price on electricity, Government took a decision in 1998 to completely remove tax on fuel oil, “so we have done a lot to maintain the price of fuel at a level which will allow the industry to flourish”.

Senator Barker added: “We recognise the importance of the cost of fuel on production and we have taken concrete steps in the last eight years to lower the price.” He said if the full tax was levied on the fuel, consumers would have to pay an increase of 25 cents per litre for fuel.