June 12 (<a href=quote.bloomberg.com>Bloomberg) -- Brazil's real fell for the second day in three on investors' expectations the government will reduce the amount of insurance it offers against declines in the real, prompting some investors to buy dollars.

The real fell 0.4 percent in Sao Paulo to 2.8635 per dollar at 3:47 p.m. New York time, after closing yesterday at its highest level since July 17. The real has risen 24 percent in 2003, the best performance of the 16 most widely traded currencies. Mexico's peso declined for the second day in three.

Brazil has insured investors against exchange-rate losses on $58.2 billion of investment by selling interest-rate swaps. At auctions yesterday and today, the central bank refinanced 90 percent of swaps coming due June 18. If it declines to refinance all the maturing contracts, investors may have to buy dollars to lock in a price for expected import and debt payments, causing the dollar to strengthen against the real.

We still don't know if they will refinance more, but with the real at its highest levels this year it makes sense that the government would start cutting its exposure to dollar risk,'' said Jose Roberto Machado Filho, superintendent of the Treasury desk at Banco ABN-Amro Real SA in Sao Paulo. Those who don't think they'll refinance 100 percent are buying dollars.''

Brazil sold $167.2 million of swaps at an auction today and $762.9 million of the swaps at an auction yesterday. It has about $1.1 billion of swaps and dollar-indexed bonds due next week.

Brazil's benchmark 8 percent bond due in 2014 rose 0.50 cent on the dollar to 92.13, paring the yield to 9.92 percent, according to J.P. Morgan Chase & Co.

Mexico

Mexico's peso reversed gains to fall as much as 1.3 percent amid investor speculation on whether Moody's Investors Service would upgrade the country's credit rating, likely boosting investment and reducing Mexican companies' borrowing costs.

The peso slid for the second day in three in Mexico City and U.S. trading, declining 0.8 percent to 10.6595 per dollar from 10.5730 yesterday. The peso has declined 2.7 percent in 2003, the worst performance of the 16 most widely traded currencies.

The market had discounted the upgrade yesterday before knowing the facts,'' said Omar Martin del Campo, a currency trader at Arka Casa de Bolsa SA in Mexico City. After the news was denied, the peso moved and it moved fast because there's little volume.'' Any buy or sell orders are moving the market more than usual because many foreign currency traders are at a convention in Puerto Vallarta, Martin said.

Rating

An upgrade by Moody's from Baa2 to Baa1, three levels above investment grade, would generate more investment in the country by making bonds issued by the Mexican government and some Mexican companies more attractive for investors.

Moody's in March raised Mexico's outlook to positive, which means it may raise its ratings, because of improved management of its $150 billion foreign and local debt.

Moody's in Mexico said it hadn't made any official statements. Sovereign analysts Mauro Leos and Luis Ernesto Martinez Sales were not in their offices in New York.

The peso future contract for June delivery traded on the Chicago Mercantile Exchange fell for the first day this week, declining 0.9 percent to 9.3650 cents per peso.

Colombia's peso extended its 1.2 percent June rally, rising 0.1 percent to 2,823.00 per dollar in Bogota trading from 2,827.00 per dollar yesterday. The peso has risen 1.6 percent this year, after a 21 percent slide in 2002.

Argentina's peso fell for a second day, losing 0.5 percent to 2.8375 per dollar in Buenos Aires from 2.8225 per dollar yesterday, paring its gains in 2003 to 18 percent, the second-best performance among the 59 currencies tracked by Bloomberg.

Peru's new sol strengthened for a second day, gaining 0.1 percent to 3.4805 per dollar from 3.4828 per dollar in Lima trading.

Venezuela this year fixed its bolivar at 1,598 per dollar.

Chile

Chile's peso had it biggest gain in more than two months as domestic pension funds sold dollars to invest in Chile's stock market.

The peso rose for a second day, adding 1 percent to 707.55 per dollar after yesterday's 0.4 percent gain to 714.35 per dollar yesterday in Santiago trading. The currency has risen 1.8 percent in 2003.

Chilean pension funds are selling dollars to fund increased investment in the domestic stock market, which has rallied 28 percent in local currency terms this year, said Eduardo Machuca, a currency trader at Santiago brokerage Intervalores Ltd.

Santiago's IPSA Index's gains this year make it the fifth- best performer in local currency terms among 61 tracked by Bloomberg.

12 Jun 2003 19:14:11 GMT By Pascal Fletcher

CARACAS, Venezuela, June 12 Reuters) - Venezuela's divided National Assembly broke up in confusion on Thursday as supporters and foes of President Hugo Chavez deepened a parliamentary dispute that is delaying steps toward a possible referendum on the leftist president's rule.

Lawmakers loyal to Chavez refused to enter the assembly chamber, alleging the opposition planned to disrupt a scheduled vote on procedural reforms aimed at speeding up the passage of anti-terrorism and media laws drafted by the government.

Opposition deputies in the 165-member assembly accused government supporters of shying away from the vote because they could not muster the 83 votes needed to win.

The week-long dispute in the assembly, where Chavez supporters are struggling to hang onto a slim majority, is blocking the appointment by the parliament of a new National Electoral Council, the country's electoral authority.

"The country knows that without a National Electoral Council, there will be no elections," pro-Chavez deputy Nicolas Maduro told reporters as deputies from both sides traded accusations and recriminations in the assembly courtyard.

Naming a new electoral council is a key requirement for holding a referendum on Chavez's rule after Aug. 19, halfway through his current term.

The referendum was recommended in a peace accord signed by the government and its foes last month. The Organization of American States is backing the referendum as the best way to defuse the long-running conflict over Chavez's rule in the world's No. 5 oil exporter.

Pro-government lawmakers accuse the opposition of blocking controversial draft laws in parliament.

These include an anti-terrorism bill and legislation regulating television and radio broadcasting. Opposition leaders say they fear the laws will be used by the government to silence criticism and restrict anti-Chavez protests.

"They (the government side) are on the run because they can't hold a majority," opposition deputy Cesar Perez said.

Maduro said pro-Chavez lawmakers would try to negotiate with their opponents to reconvene the parliament next Tuesday.

Former paratrooper Chavez, who survived a coup last year, has said he is ready to submit to a referendum. But his foes, who accuse him of trying to install Cuban-style communism, say they fear he will attempt to avoid a poll.

Washington, DC, June 12, 2003 (PAHO)—The director of the Pan American Health Organization (PAHO), Dr. Mirta Roses Periago, today praised 10 Latin American countries for their successful negotiation to reduce the prices of antiretroviral drugs for HIV/AIDS treatment. The agreement will allow the countries to save up to $120 million a year, which amounts to 150,000 annual treatments.

"These savings are a demonstration of what can be achieved when governments and the pharmaceutical companies are truly committed to the well-being of the population," said Roses. Antiretroviral drug treatment drastically reduces the incidence of opportunistic infections and substantially improves the quality of life for those living with HIV/AIDS.

The reduction of prices will benefit Peru, Bolivia, Colombia, Ecuador, Venezuela, Chile, Argentina, Mexico, Paraguay and Uruguay. The agreement was negotiated June 5 to 7 in Lima , Peru, by the ministries of health of the countries with support from PAHO, the Andean Health Organism (ORAS) and the Joint United Nations Program on HIV/AIDS (UNAIDS). The process of negotiations was accompanied by representatives of people living with HIV.

The biggest reductions were offered by seven manufacturers of generic antirretrovirals. There also were reductions in the prices of one brand name drug manufacturer, Abbott Laboratories. All the companies meet the quality requirements established by the negotiating countries, which are based on standards outlined by the World Health Organization prequalification process.

In the 10 countries, the prices of first line therapy (the most common treatment for people living with HIV) will be reduced between 30 percent and 92 percent. The therapy prices varied from $1,000 to $5,000 and after the negotiation will fluctuate from $350 to $690. "We congratulate the countries on their commitment in utilizing this benefit to improve the care of people living with HIV in the Region," Roses said.

The negotiations will also improve the prices of the laboratory reagents, which are used for diagnosis and follow up. Five manufacturers of reagents offered reductions from 62 percent to 81 percent for the rapid tests of diagnosis, from 13 percent to 33 percent for the ELISA test, from 5 percent to 70 percent for the CD4 count test and from 22 percent to 82 percent for the viral load test.

The negotiation of the 10 countries is the third to take place in the Latin American and Caribbean Region. Other important discounts were obtained for the Caribbean countries, in June 2002, and for those of Central America, in February of this year. It is estimated that 60 percent of the people in the developing world under antiretroviral treatment live in Latin America and the Caribbean.

The Pan American Health Organization, founded 100 years ago, works with all the countries in the Americas to improve the health and well being of all their peoples. PAHO also serves as the regional office of the World Health Organization.

Reuters, 06.12.03, 2:39 PM ET NEW YORK, June 12 (Reuters) - Credit agency Fitch Ratings said on Thursday it expects oil prices to stay around $30 per barrel this year but fall to near $20 per barrel in 2004. In a conference call on Fitch's U.S. oil and natural gas industry outlook, the ratings firm said near-term crude oil prices were likely to remain around the high $20's to low $30's per barrel this year, propped up by low inventory levels. Fitch said the recent surge in natural gas prices was a "double-edged sword," because high prices could result in what Fitch termed "demand destruction." Next year, the return of Iraqi exports and increased output from non-OPEC sources like Russia and Angola "will lead to crude prices in the $20 per barrel area," said Sean Sexton, senior director of the Fitch oil and gas sector. Prices used by Fitch to model sector forecasts were $27 per barrel for oil and $4.50 per thousand cubic feet (mcf) in 2003 and $21 per barrel and $3.50/mcf for 2004. Iraqi exports are not expected to exceed one million barrels per day (bpd) "until August at the earliest," said Sexton. But he added that toward the end of 2004,exports could be "north of a million" and perhaps 2 million. Global demand growth was projected at about 1 percent for 2003. Sexton said the rating outlook for the upstream exploration and production sector was "somewhat positive," citing Burlington Resources Inc. (nyse: BR - news - people), Chesapeake Energy Corp. (nyse: BR - news - people) and Pioneer Natural Resources Co. (nyse: BR - news - people). Oil drilling is up 16 percent from first quarter 2003 and natural gas up 11 percent, said Fitch's Patrick McGeever. He noted that oil rig use was retracting somewhat recently but said the trend remained positive. McGeever said exploration and production companies' expanded capital expenditure budgets for second-half 2003, due to high crude oil prices boosting cash reserves, should help drillers. He also pointed to Mexico's state-run energy firm Petroleos Mexicanos SA's drilling expansion program as supportive to jack-up rig utilization. Pemex is expected to add 15 units this year, half for semisubmersibles and the other half for jackups. Pending royalty relief that could come from the U.S. Minerals Management Service for deep water drilling also may help the drilling sector. Second-half 2003 could find international drillers helped by greater geopolitical stability after the Iraq war, Venezuela's strike and the Nigeria election, Fitch said. Fitch noted that some payments to service companies may have been slow from Nigeria's state-owned firm during the recent election, but companies expect that to cease post-election. While the refining environment has "improved significantly" and the sector is rated stable, Fitch expects margins to remain volatile going forward. Fitch expects refiners to respond to any downturn in margins and cut back production "sooner rather than later" as the sector has quickened its response time. Longer term Fitch looks for gasoline imports to slip as new cleaner-burning gasoline regulations impinge on foreign refiners' ability to send product to the United States. Refiners' need for natural gas in their operations will have their profits hit by higher natural gas prices that are boosting production costs.

MAYELA ARMAS H. EL UNIVERSAL

The directors of the Central Bank of Venezuela (BCV) have shown concern about the country’s indebtedness since this could have an impact on fiscal stability during the next few years.

BCV President, Diego Luis Castellanos, on June 9 sent a letter to the Finance Minister, Tobías Nóbrega, including some remarks made by the bank concerning a public borrowing transaction amounting to VEB 4.8 trillion ($3 billion) provided for in Public Borrowing Law for 2003.

In the letter, the official seriously opposed to the financial conditions surrounding the transactions, stating that the bank “is concerned that such a huge indebtedness -together with the Republic’s current debt- may have an impact on both the fiscal sustainability and the domestic market’s absorption capability, which may compromise the financial system’s stability.”

The BCV board of directors also questioned the three types of bond placements: in US dollars, euros and in the domestic market. Regarding transactions in dollars, it is believed that interest rates are too onerous and do not reflect the actual risk, while bond placements in euros are “also expensive and imply a foreign exchange risk.”

Concerning transactions with sovereign debt bonds (DPN), the bank estimated that titles subject to swap could not be used as a mode of payment, “since this can be considered as a debt refinancing, and that requires a special law. We suggest to suspend the use of dation in payment.”

In response, on June 10, Nóbrega sent a letter to Castellanos explaining the transaction. The Finance Minister shared BCV’s view as to the interest rates to be implemented for bond placements in US dollars, and added that such rates reflect the current conditions in world financial markets. As to the rates for operations in euros, Nóbrega claimed that spreads stemmed from the market values observed during the last few weeks.

The minister stated that internal public debt bonds' swapping is made with unmatured bonds, which do not require a special law. He affirmed that Venezuela’s borrowing is within the limits of the Umbrella Law of 2003.