Sun May 25, 2003 02:24 PM ET By Susan Schneider

NEW YORK, May 25 (<a href=reuters.com>Reuters) - Emerging debt is expected to take its cues again from Brazil in the week to come as investors eye the government's structural reforms and sift through a spate of inflation data for signs the Central Bank might have room to lower sky-high interest rates.

Argentina is also slated to be in the limelight as Wall Street awaits the initial policy decisions of President Nestor Kirchner, who assumes the leadership of the financially battered nation on Sunday.

While investors are unlikely to shift the sanguine view of emerging markets they have held since the turn of the year, they will be watching Brazilian President Luiz Inacio Lula da Silva for signs of progress on his promised overhaul of the tax and pension systems.

Once U.S. investors return from Monday's Memorial Day holiday, they will also eye inflation data to determine if an easing of the benchmark Selic interest rate, now at a four-year peak of 26.5 percent, might be possible at the June meeting of the Central Bank's monetary policy meeting. The rate is widely seen as a chokehold on investment and industrial production.

"We need to continue to see good inflation numbers that will allow the Central Bank to cut rates finally in June or July, and continued progress on the reform front," said Jim Barrineau, vice president in emerging markets research at Alliance Capital Management.

Brazil has spearheaded a bonanza in emerging markets this year. With U.S. interest rates at rock bottom, investors have been looking to other markets for higher yield and Lula's sound fiscal management and reforms have proved to be key draws.

The mix of Brazil optimism and a steady siphoning of funds to emerging markets has helped send Brazilian bond prices a dizzying 41 percent higher so far this year.

Argentina, meanwhile, may prove to be more of a trouble spot. Kirchner, a former governor, must act fast to sew up a long-term deal with the International Monetary Fund and jump start negotiations with investors left in limbo by last year's default on some $60 billion in debt, analysts said.

Kirchner's economy minister, Roberto Lavagna, has said he wants to start IMF talks as soon as possible after the lender withheld approval of a loan review because the outgoing government had not made market friendly reforms it agreed upon.

Still, some analysts expected Kirchner to take a tough line with the IMF as he tries to appease a population forced into poverty by Argentina's economic meltdown.

On Friday, for example, Lavagna said Kirchner would not veto a law that stops banks from repossessing homes, an issue the IMF has said is a concern.

"They have something like $3 billion in repayments coming due to multilaterals that are not extendable," said Suhas Ketkar, senior economist and head of emerging markets analysis at Royal Bank of Scotland. "The pressure will be there to reach an IMF agreement but they will play hardball."

Another focus will be Venezuela, whose bonds have lagged the broader market amid a bitter political standoff between President Hugo Chavez and his foes. In the latest bout of violence, one person was killed and 22 injured after gunfire broke out at an opposition rally in a pro-Chavez district.

The violence came after the government and opposition said Friday they agreed to a political pact to hold a referendum on Chavez's rule, which aims to end the standoff. But investors viewed the the pact with skepticism.

"I think what people are waiting to see is if this referendum is absolutely nailed down. Is it going to happen or can Chavez delay it?" said Barrineau. (Reporting by Susan Schneider, editing by Walker Simon; Reuters Messaging: susan.schneider.reuters.com@reuters.net, tel: +1 646 223 6319)

BILL CORMIER, <a href=www.sfgate.com>Associated Press Writer Sunday, May 25, 2003
(05-25) 10:19 PDT BUENOS AIRES, Argentina (AP) --

Nestor Kirchner, Argentina's first elected president since the economy unraveled 18 months ago, was taking office Sunday amid popular demands he rebuild a country battered by its worst financial crisis in a century.

Twelve Latin American leaders, including Cuba's Fidel Castro and Hugo Chavez of Venezuela, joined the 53-year-old center-left politician for a day of ceremonies.

Kirchner, who hails from the sparsely populated Patagonian province of Santa Cruz, enters office with the weakest mandate in Argentine history. He won a four-year term by default when former President Carlos Menem dropped out of a runoff.

A center-left politician from Argentina's long-dominant Peronist party, Kirchner is being sworn in as Argentina's 52nd president on promises to defend domestic jobs and industry after more than a decade of unbridled free market policies.

A day of lavish ceremony kicked off when caretaker President Eduardo Duhalde had a traditional hot chocolate with his staff, then participated in a Mass at a Roman Catholic basilica in Lujan, 40 miles northwest of Buenos Aires.

Duhalde took power as a congressional appointee in January 2002 only weeks after the last elected leader, Fernando De la Rua, was forced out amid an imploding economy and deadly street rioting. De la Rua was halfway through his four-year term when the country plunged into economic chaos, bringing a revolving door of five presidents in two weeks.

Sunday's inaugural was seen as a moment of closure -- and a new beginning -- for a country struggling to steady itself from five years of recession, a $141 billion debt default and deep currency devaluation. The jobless rate remains at a near record 18 percent with more than half of the 36.2 million population living in poverty.

Many South American presidents were attending the day's ceremonies, including populist Luiz Inacio Lula da Silva, who since his own election as Brazil's first leftist leader, has sought to expand regional ties.

"Brazilian and Argentine relations are in their finest hour," he insisted, adding that the arrival of ally Kirchner would help bring about true political integration in the region.

"Today is a day for a democratic fiesta in Argentina," added Lula da Silva in a public letter.

On hand were presidents of Bolivia, Colombia, Ecuador, El Salvador, Guatemala, Paraguay, Peru and Uruguay and a scattering of Central American presidents. The United States sent a delegation headed by Housing and Urban Development Secretary Mel Martinez.

Since winning the presidency, Kirchner has lashed out at U.S.-backed free market reforms and promised a multibillion-dollar public works program to jump-start the economy.

But his economic plan remains vague for reviving South America's third-largest economy. His challenges include shrinking a bloated public sector and overhauling the country's tax code. Kirchner also must define his future relationship with the International Monetary Fund as the country grapples with restructuring.

<a href=www.voanews.com>VOA News 25 May 2003, 13:50 UTC

Nestor Kirchner takes office Sunday as Argentina's sixth president in 18 months, facing the challenge of guiding his country out of economic depression.

Mr. Kirchner, a Peronist from Patagonia, must renegotiate some $60 billion in defaulted foreign debt and restore his country's relations with the international community. To jump-start the domestic economy and increase employment, he has promised a multi-billion dollar public works program.

As a three-term governor of sparsely populated Santa Cruz province, the new president is untested on the national and world stages. He has criticized U.S. policies on free trade, the embargo on Cuba and the war in Iraq.

Several regional leaders, including Cuba's Fidel Castro, Brazil's Luiz Inacio Lula da Silva and Venezuela's Hugo Chavez, will watch as Mr. Kirchner takes the oath of office and receives the presidential sash.

Mr. Kirchner is the first elected president to take power since December 2001, when five leaders ruled in two weeks. He was thrust into office earlier this month when his rival, former President Carlos Menem, dropped out of a run-off election.

Sunday May 25, 2003 5:09 PM By JORGE RUEDA The Guardian-Associated Press Writer

CARACAS, Venezuela (AP) - An opposition party held a protest in a slum area considered a stronghold of President Hugo Chavez, killing one person and injuring 17.

Once political heavyweights, Democratic Action emerged from relative obscurity to hold Saturday's rally, challenging the president in his own backyard - the crime-infested slum of Catia.

Several hundred turned up before unidentified gunmen interrupted the rally and protesters ran for cover.

One man was shot and killed, said district mayor Freddy Bernal, though it was unclear whether he was participating in the rally. Ten people were wounded by gunfire and seven more were treated for cuts from glass bottles. None of the injuries were life-threatening, said Caracas health officer Pedro Aristimuno.

Police sharpshooters stationed on a rooftop above the rally fired at public housing buildings where the shots apparently originated several blocks away.

Members of the government had warned of violence before the protest, calling it a ``provocation'' because of Catia's alleged overwhelming allegiance to the president. Chavez draws most of his support from Venezuela's poor majority, many of whom live in shanty towns like Catia.

Some 4,000 police and National Guardsmen were deployed in Caracas ahead of the event but failed to guarantee security at the protest, which was held on a short, narrow street with poor access and poor escape routes.

More than 50 people have been killed in politically related violence since April 2002 and over 300 wounded by firearms, according to local human rights group Cofavic.

Earlier Saturday, gunmen ambushed a National Guard post in Catia, wounding three soldiers and two civilians, Vice President Jose Vicente Rangel said. He said Bandera Roja, a hard-line opposition group, ``presumably'' was responsible. Bandera Roja denied it. There were no immediate arrests.

The shootings occurred a day after the government and opposition agreed to a plan for a referendum on Chavez's presidency. The agreement was brokered by the Organization of American States.

Chavez, a leftist firebrand, has vowed to defeat his opponents at the ballot box and says he will remain in power until 2021.

Opponents accuse him of trying to install a communist regime in Venezuela, and ruining the economy in the process.

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Sunday, May 25, 2003 By: Patrick J. O'Donoghue

Colombian President, Alvaro Uribe succeeded in obtaining strong support for his counter-insurgency policy against the Revolutionary Armed Forces of Colombia (FARC)  and other left-wing guerrilla groups during a meeting of the Group of 8 (G8)  in Paris. Uribe made the announcement during a Rio Group meeting in Cuzco, Peru. 

However, Venezuelan President Hugo Chavez Frias has put a damper on the meeting of Latin American Heads of State by signing the Cuzco Consensus with reservations. 

The Venezuelan President says he does not agree with United Nations (UN)  involvement in solving Colombia's internal problems and also is holding back on the Free Trade for the Americas Agreement (FTAA). "What the Consensus has stated regarding Colombia is very dangerous because it opens the door to a problem far more serious that the war and that is interventionism ... Venezuela continues to support the peace process." 

As for the FTAA, Chavez Frias questions outside dependence ... "we have enough resources in Latin America so why should we continue depending on others?" 

The Consensus includes the usual presidential-speak about overcoming poverty, consolidating democracy, inclusion and other recurring promises but it makes a major breakthrough by stressing the importance of political parties in democracy and urging legislation to ensure political party autonomy, financial transparency and accountability.

Organization of American States (OAS) general secretary, Cesar Gaviria received praise for his role in getting Venezuela's government and opposition to reach an agreement, which is expected to be signed next week in Caracas.