Business Week

How long can it last? That's the question investors are asking as they watch the torrent of portfolio money rushing into Latin America this year -- a surge on a scale not seen since early 1998, before the Russian currency crisis pulled the plug on emerging markets. Top of the heap are countries that just a few months ago were dismissed as lost causes: Argentina, reeling from the shock waves of a debt default and devaluation, and Brazil, where the prospect of a left-wing victory in last October's presidential elections had Wall Street in a panic. Many analysts were telling their clients to get out while they could.

Now it seems investors can't get back into Latin America quickly enough. Inflows into emerging-market bond funds, where Latin America commands at least a 50% weighting on average, reached $1.95 billion in the year to May 21, according to EmergingPortfolio.com, a Boston fund-research company. That's more than three times the $648 million they attracted in all of 2002. "A lot of people have made a lot of money" by betting on Latin America, says EmergingPortfolio's managing director, Brad Durham. "And they believe there is a lot more to make." Right now the region certainly offers some of the planet's juiciest returns. Brazilian bonds have surged nearly 42% in the year to May 27, as measured by J.P. Morgan Chase & Co.'s emerging markets bond index. By comparison, the U.S. high-yield debt market has returned 15%. With deflation looming in Japan, Germany, and now the U.S., institutional investors are hunting for yield. Latin America has become one of their favorite stalking grounds. While 10-year U.S. Treasury bills carry yields of 3.3%, Brazil's government paper offers more than 11% and Venezuela's 14%. The region is also benefiting from improving fundamentals. Brazil, the highflier of recent months, has come back from the brink of debt default and produced a run of record monthly budget surpluses, reassuring investors its economy is back on track. The economies of Peru, Colombia, and Chile are also growing faster than those of the developed world, while Argentina's has staged a remarkable recovery. While Latin bonds have led the way up, equities are going along for the ride. The Merval, the index of the Buenos Aires stock exchange, has climbed 48% in dollar terms since the start of the year, making it the top-performing stock market worldwide. Brazil's Bovespa is not far behind, up 37%. Even some of the region's smaller bolsas are showing gains: The Lima Stock Exchange is up 30%. Like bonds, the region's bourses are bouncing back from some deep lows last year. The surge has been led by local investors. International flows are still negative for the year, says EmergingPortfolio, a sign that many are still leery of putting their money in Latin companies, which often show little regard for the rights of minority shareholders. Indeed, the recent rally is hardly a sign that Latin America is safe for investors. "When a big tide comes in, it takes all boats up with it," says Mohamed El-Erian, who oversees $11 billion in emerging market bond funds at PIMCO, the Newport Beach (Calif.) investment company. "Then you notice that some have holes in them." El-Erian is bullish on Brazil, where the new administration is pushing reforms of the pension and tax systems that would put public finances on a firmer footing and boost efficiency across the economy. But he's staying clear of countries such as Argentina and Venezuela, where the direction of economic policy is uncertain. One worrying sign is that foreign direct investment by multinationals into Latin America has not kept pace with the rush of portfolio capital. No matter how big the tide, it has to ebb. "Emerging markets move in five-year cycles, while in the U.S. it's 10 years," notes emerging-markets veteran Mark Mobius, who as managing director of Templeton Asset Management Ltd. oversees some $7 billion in assets. A rate increase in the U.S. would probably trigger a rush back to the comparable safety of U.S. Treasuries, says EmergingPortfolio's Durham. Further deterioration in the global economic environment could also trigger investment outflows, given Latin America's heavy dependence on commodity exports. In short, investors better keep their life jackets handy.

By Jonathan Wheatley in São Paulo

Mon June 2, 2003 04:02 PM ET By Robin Emmott

PANAMA CITY (<a href=reuters.com>Reuters) - Panama will host the 2003 Miss Universe pageant on Tuesday night in a carnival atmosphere and, in the tradition of international beauty contests, a whiff of scandal.

From Albania to Venezuela, 71 beauty queens will show off their poise, curves and quick wit in a contest that mixes parades in swimsuits and evening gowns with questions such as: "What makes you blush?"

The organization barred Miss Russia, Maria Smirnova, from competing discovering she had posed topless in Playboy in 2000. She was replaced by 20-year-old Olesya Bondarenko.

Last year's winner, Russia's Oxana Fedorova, was fired because she failed to fulfill the responsibilities of Miss Universe, the first time a winner had been relieved of her post. Runner up Panama's Justine Pasek took over the crown.

This year, doubts over whether Venezuela could afford to enter this year's Miss Universe contest were only resolved a week before the final.

Miss Venezuela's sponsor, television channel Venevision, said it could now obtain the funds needed to send entrant Mariangel Ruiz to the contest, despite currency controls imposed by Caracas to stem capital flight.

"I have to thank God for bringing me here," Ruiz, a delighted 23-year-old economics student, told Reuters as she prepared for the contest at a convention center overlooking the Pacific entrance to the Panama Canal.

Miss Universe, jointly owned by property tycoon Donald Trump and NBC Television and launched by a swimsuit company 52 years ago, draws a global television audience estimated by organizers at 600 million people in 176 countries.

June 2, 2003, 3:29 PM EDT

NEW YORK (<a href=www.newsday.com>NewsDay.com-AP) _ Federal prosecutors are seeking the extradition of an alleged South American drug kingpin who they say ordered dozens of his minions to swallow heroin pellets to smuggle into the United States.

Ramrio Lopez-Imitola's cartel, based in Colombia and Venezuela, has smuggled roughly $200 million worth of heroin into the United States since 1997, the U.S. government said in extradition papers filed Monday.

Lopez-Imitola was arrested April 4 in Colombia and admitted at the time that he had been selling drugs for 30 years, U.S. prosecutors said.

A federal indictment accuses Lopez-Imitola of using terror and torture to preside over the drug cartel to make sure his drug couriers would not cooperate with investigators or steal drugs.

As often as 60 times per month, Lopez-Imitola directed lower members of the cartel to swallow heroin pellets or to carry the drug hidden in suitcases, prosecutors said.

One courier died in Miami after one of the 89 pellets he had swallowed burst in his stomach. The body was recovered by Miami Beach police after it was dumped in Biscayne Bay, prosecutors said.

June 2 (<a href=quote.bloomberg.com>Bloomberg) -- Brazil's real extended declines, falling for a second day, after the central bank refinanced 77.8 percent of maturing contracts used by investors to insure against exchange-rate risk, a result seen boosting demand for dollars.

Brazil's real shed 0.4 percent to 2.9805 per dollar at 2:32 p.m. New York time from Friday. The decline has cut the real's gains this year to 19 percent against the dollar. It remains the best performer of the world's 16 most-traded currencies. Mexico's peso rose, pacing increased U.S. manufacturing.

``Our threshold is for about a 75 percent refinancing; anything less should cause the real to decline,'' said Marco Sudano, director of the Treasury department at Uniao de Bancos Brasileiros SA, Brazil's fifth-largest commercial bank.

Today's auction of interest-rate swaps is the first since government ended a promise to refinance all of its $100 billion of outstanding swaps when they expire. With the government's failure to refinance all of the $1.41 billion due June 12, investors may have to buy dollars to hedge against declines in the real, a move that may cause the real to weaken.

2002

Brazil sold swaps and dollar-indexed Treasury bonds in an effort to bolster the currency when it came under attack during Argentina's debt crisis and before last-year's presidential elections in Brazil on concern a new president might lead South America's largest economy into default on $300 billion of bonds.

Under the contracts, the central bank guaranteed about $100 billion of investment against any decline in the real. While the government is now making money on its bet as real is the best performing of the world's 16 most widely traded currencies in 2003, it lost large sums last year when the real weakened 35 percent. The government wants to reduce its own exposure to such risks, the central bank said.

Brazil's 8 percent bond maturing in 2014 declined 0.56 cent to 88.63 cents on the dollar causing the yield to rise to 10.84 percent, according to J.P. Morgan Chase & Co.

Mexico

The Mexican peso rose for the third day in four after manufacturing in the U.S. rose for the first month since December, boosting prospects for growth in the world's biggest economy and Mexico's largest trading partner.

The peso rose 0.6 percent to 10.2580 per dollar and earlier rose 0.9 percent to 10.2175 per dollar. The peso has gained 10 percent against the dollar since falling to a record low of 11.2644 on March 6 and is up 1.3 percent in 2003, the 12th-best performance of the 16 most widely traded currencies.

The bulk of the peso's rise followed the release of the Institute for Supply Management's manufacturing index for May, showing a rise to 49.4 from 45.4 in April, building on reports last week showing rising output and consumer confidence. Mexico's $600 billion economy, Latin America's largest, sends about 85 percent of its exports to the U.S., representing about a quarter of its national income, and receives about 70 percent of its foreign investment from its northern neighbor.

``If you see improvement in U.S. manufacturing, it could be a sign that any slowdown in Mexico may be tempered,'' Jana Butland, a currency strategist at FleetBoston, adding that the currency was also buoyed by rising stocks in the U.S.

The Standard & Poor's 500 Index added 1.5 percent, the Dow Jones Industrial Average gained 1.6 percent and the Nasdaq Composite Index jumped 1.5 percent.

Mexico's export-assembly plants need a recovery in the U.S. and among American consumers to halt a slowdown that has cost about 200,000 jobs since the year 2000 and contributed to the central bank to forecast slow growth this year. Still, lower interest rates and slower inflation on the domestic front.

Regional Currencies

Chile's peso strengthened for a third day, gaining to 711.10 per dollar from 711.35, and Argentina's peso rose for a second day, adding 0.6 percent to 2.8450 per dollar from 2.8620 per dollar on Friday.

Peru's new sol strengthened for the second day in three, rising to 3.4918 per dollar from 3.4945 per dollar on Friday. Colombia's markets were closed for a national holiday. Venezuela fixed its bolivar at 1,598 per dollar earlier this year.

-- Jeb Blount in Rio de Janeiro at (5521) 2516-1552, or jblount@bloomberg.net, Alexander Hanrath in Mexico City (52-55) 5242-9252, or ahanrath1@bloomberg.net, through the New York newsroom (1-212) 318-2730 Editor: Jameson. type {WCRS } to rank the performance of 59 currencies tracked by Bloomberg. Click on or type {BRL HCP } to chart the historical change in price of the dollar against the real and the real against the dollar. Click on {CNP03910990106 } for graphs relating to the performance of Brazil's currency, benchmark 8 percent bond maturing in 2014, Bovespa stock index and interest rates.

Company news: 1323Z BZ CN

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#<768424.391099># -0- (BN ) Jun/02/2003 18:33 GMT

Last Updated: June 2, 2003 14:33 EDT

By David Pines, Community Online Newspapers,

Chef-owner Alfredo Alvarez presents a sample of SOCO’s international cuisine, a delicacy he calls Pandora’s Box.

The new Pan-Asian restaurant SOCO offers cuisine from around the globe to patrons in search of a unique dining experience.

Featuring Latino, Asian, Mediterranean, Portuguese and Irish offerings, chef-owners Alfredo Alvarez and Luis Contreras believe they are on the verge of a new world order with their inventive culinary offerings.

“We like to say we have World Peace Cuisine,” said Contreras. “We can please anybody. If you come here with a party of five, two can have sushi, another Latino or Italian, we can satisfy all tastes.”

Contreras says the SOCO staff specializes in creating palate-pleasing selections that are equal to delicacies cooked up by the finest chefs in the various countries around the world.

“We make the best risotto in town, better than any Italian restaurant,” said Contreras. “One of our best sellers is the banana black cod fresh from the icy waters of Alaska that we prepare in a special Mandarin style. It’s smothered in a ginger coconut sauce with caramelized bananas and crowned with a binato nest, like a white sweet potato.”

This hidden Grove eatery, nestled in the same Bird Avenue location that formerly housed the Il Tulipano bistro, has a dark brick and wood interior resembling a cutting edge eatery from New York’s Soho. The atmosphere is highlighted with cylindrical lighting; modern tables and chairs, dramatic metal sculptures, and features the astonishing work of Grove artist Neith Nevelson.

The real booty to be found at SOCO is presented in the unique dessert offerings, like a coconut crème Brule inside a real coconut, a pyramid of nuggets from Spain, and there’s the traditional chocolate soufflé.

Contreras is disappointed the restaurant has not yet unearthed a local following for what he considers an unreal deal for lunch. “The lunch is incredible, served in a Japanese style I call the Pandora’s Box, and it’s only $8.95 with salad or soup,” he said. “It has chicken teriyaki, shrimp tempura, rice, sushi, a little of everything, with dumplings, orange and Carambola, we should be having lines out the door to come to eat here. All our prices are reasonable.

“The Grove is not great for lunch, it’s not commercial like the North or downtown Grove or the Gables, but for dinner it’s perfect. We have complementary valet parking during lunchtime, besides if you look at a menu our meals are generally $11 and with that you get a nice piece of Angus beef, fish, potatoes, rice, soup, salad, dessert, everything.” For the dinner crowd, SOCO takes service to another level, sometimes even experimenting with their cooking to see if inspiration strikes.

“Dinner is more serious and we want you to come here and dine with us, sit here and have a nice chateaubriand,” said Contreras. “Veal chops, rack of lamb, and one time I made a whole pheasant that I rolled, tied, cooked half way and put puffed pastry around like a Wellington, with nothing but seasoning inside and foie grass on top. I don’t know if I can repeat that.

“We do some new stuff and classical by request, such as a Wellington for a party of 30, a Tonodor Rossini with a piece of filet mignon, different bouillabaisses with pate featuring Italian tomato sauce, French saffron pernod, Latin cilantro grove or a spicy Thai dish with oyster sauce. We also have something I call Swiss sushi with a touch of rolled rice pudding with banana tempura inside, figs and dolce de leche and boom, boom, boom see you later. We are still working on perfecting floating islands.”

Alvarez and Contreras are lifelong friends from Venezuela. Alvarez came up with the diverse menu while working as a consultant on Celebrity Cruise Lines preparing about 13,000 meals each day and traveling all around the world. A decade ago, they opened Giacosa in the Gables and the Dominican Republic.

Contreras learned about the different ingredients used in seafood in Spain at Diego’s in the Gables and he served a short term as the chef at Yuca on South Beach before reuniting with Alvarez at SOCO. “It was there I came up with a Latin Third World fusion that is really different,” said Contreras. “Now, a lot of restaurants are copying this ‘Nuevo Latino’ experimental cuisine.”

SOCO is located at 2833 Bird Avenue. The hours are 12-3 p.m. Monday through Friday for lunch and 6-11 p.m. Monday through Saturday for dinner. Reservations are suggested. For more information, please call 305-446-8400.