05/19/2003 - Source: Business News Americas (<a href=www.latintrade.com>LatinTrade-BNamericas.com) - The governments of Venezuela and Brazil, together with France's Alstom, are negotiating financing for the US$160mn La Vueltosa hydroelectric dam in western Venezuela, Alstom Brazil systems manager Edwaldo Tamberg told BNamericas.

A consortium of Alstom Brasil's Power Environment unit and the French parent company Alstom signed May 11 a turnkey contract with the Uribante Caparro Development (DESURCA) unit of state power company Cadafe to build the powerhouse, transmission lines and two substations for La Vueltosa.

Talks are ongoing with Brazil's national development bank BNDES and French export development agency Coface, Tamberg said. The final division of work depends on the outcome of these talks, but preliminary calculations suggest 80% will be supplied from Alstom Brazil and 20% from Alstom France, he said.

The whole project is brokered on recent talks between the Brazilian and Venezuelan presidents, Luiz Inacio Lula da Silva and Hugo Chavez, and the prioritization of bilateral trade and partnership, Tamberg said.

As well as determining financing, this also helps mitigate some of the political risk, Tamberg explained. Because the talks are between the two governments any default on payment would be with the government and not Alstom, Tamberg said.

"We understand that as long as both governments are in agreement, secure the financing and regulate the guarantees in the best line of the law, the interests of Alstom will be safeguarded," Tamberg said.

"A default by Venezuela would not be a default with Alstom Brazil but with the Brazilian government. It is a different type of risk," Tamberg said.

This is an evolution of the now extinct Reciprocal Trade Covenant (CCR) agreement that used to exist between Latin American countries, Tamberg said. Under CCR, cross border trade between companies was provided with guarantees between the two governments - but it was killed after the financial chaos of recent months and years.

"CCR will not return in the model that was effective previously and that was bilateral for all countries. We needed a new instrument to substitute it, and that is what is being developed now," Tamberg said. "The conditions are being recreated for foreign trade to start working again."

As well as Venezuela, the Brazilian government has determined that Argentina is a priority, and Alstom will seek opportunities with both these countries, where the chance of securing financing for exports is higher, he said.

Alstom will hire a construction company for the civil works at La Vueltosa, which are expected to be straightforward, as the dam was built 10 years ago and geological risks are therefore low, he said.

Alstom will install two Francis turbines, generation units and all associated equipment for total installed capacity of 514MW.

Work should be completed within 36-38 months from the date when financing is closed.

Felicity Lawrence, consumer affairs correspondent Monday May 19, 2003 The Guardian

The government's policy of liberalising trade and removing protectionist measures such as subsidies and tariffs is dangerous for millions in the developing world, the former trade and industry secretary Stephen Byers says, showing a remarkable change of heart, in the Guardian today.

Mr Byers led the UK delegation to the world trade talks in Seattle in 1999 and was responsible for pushing the government's agenda to make developing countries open up their markets to international competition. Removing protectionist measures is still a plank of Labour policy.

Mr Byers said he had changed his mind after a personal visit to Africa.

"I was aware of the arguments, but it's not until you see first hand the consequences of policies, that you see they need to be changed."

It was "getting away from Whitehall and the persuasive arguments of trade policy experts" and discovering the plight of ordinary farmers in developing countries that made the difference.

Aid organisations welcomed his comments as an important turning point in the debate on globalisation.

Andrew Pendleton, a Christian Aid spokesman, said: "This is incredibly significant. It is the first time we've heard from someone close to the heart of government that making developing countries open their markets is very damaging."

Oxfam, which has campaigned against the current trade rules, called on the government to listen to Mr Byers.

"The fact that a former trade minister who helped negotiate the current trade rules has come out and rejected established trade orthodoxies is remarkable.

"This should make our government radically rethink the impact of its policies on poor people around the world ahead of the WTO [World Trade Organisation] meeting in Cancun," said Justin Forsyth, its policy director.

Mr Byers says: "The course of international trade since 1945 shows that an unfettered global market can fail the poor, and that full trade liberalisation brings huge risks and rarely provides the desired outcome.

"The evidence shows that the benefits that would flow from increased international trade will not materialise if markets are simply left alone.

"When this happens, liberalisation is used by the rich and powerful international players to make quick gains from short term investments."

He has been converted to a "regime of managed trade in which markets are slowly opened up ... with subsidies and tariffs being used to achieve development goals."

His new thinking was dismissed as "ill-informed" by the former head of the economics and statistics department of the Organisation for Economic Cooperation and Development, David Henderson.

Professor Henderson said: "The widening of the gap between the rich countries and many of the poor ones cannot be blamed on globalisation."

"None of these factors explains the current problems of, for example, North Korea under Kim, Liberia and Somalia under their respective warlords, or Venezuela under Chavez." Internal influences, including the actions of their governments, were what had kept them poor, he said.

The Department for International Development maintains that free and fair trade is best achieved by removing barriers through the WTO.

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Friday, May 16, 2003 By: Linda Sonderman

Date: Fri, 16 May 2003 17:20:47 -0400 From: Linda Sonderman linda@alpi-group.com To: Editor@VHeadline.com Subject: Re: hitting your head against a brick wall

Dear Editor: <a href=www.vheadline.com>Gustavo has said it all. We who have worked in tourism for years, I've been in the business for over 20 years, have been battered constantly.

I compare working in tourism to hitting your head against a brick wall at least once a day. Every time we (tourism in Venezuela) make some progress ... bang, something happens to knock it down again.

I also compare tourism in Venezuela to another country I know well, the Turks & Caicos Islands.  When we first went to Providenciales (better known as Provo) in 1972, a beach front lot was selling for US$40,000 and a hillside lot with a spectacular view $8,000. There were no more than 500 residents on Provo, no paved streets, no electricity (except for a couple of privately owned generators), one field telephone on a sand dune near the beach, no TV, one small -- 8 room -- hotel, one small store, and the airport was a short coral strip with a small wooden shack for a terminal. At that time the island exported fish and Caribbean lobster or crayfish.

Today, after several changes of government, most with a good tourism policy and an eye towards development, the beach front lot is valued at over $1.5 million and the hilltop lot with a view at $200,000. There are over 15,000 residents; the roads are paved; there are 2 major supermarkets, many grocery stores, and place to purchase almost anything; the major roads are paved and the main road is in the process of being converted into a 4 lane highway; every home has electricity; most homes have at least one phone and an internet connection and there is cable TV; there are a whole slew of hotels and resorts; and a fairly modern airport with a paved runway and an ever expanding terminal.

The island still exports crayfish and fish so what is the difference -- tourism. That there have been favorable tax breaks, favorable legislation and an atmosphere to promote tourism. That is the only difference -- but what a difference it has made in the lives of every resident of the Turks & Caicos.

And, the only "touristy" product that the islands has is beach ...  can you imagine how Venezuela would be with a government that really promoted tourism, that made it easy and profitable for the tour operators and investors to function?

Venezuela with hundreds of miles of Caribbean coast, mountains, Amazonian jungle, a massive Delta, the desert area near Coro, and Angel Falls & the Gran Sabana.

No one could stop the growth in tourism ... but, every government since I have been here (over 20 years) has said that tourism is a priority for the country and none have taken the steps needed to really promote tourism...

Linda Sonderman linda@alpi-group.com Alpi Tour, Caracas, Venezuela

Rio de Janeiro, May 16 (<a href=quote.bloomberg.com>Bloomberg) -- Brazil's real reversed losses to gain as importers took advantage of its four-day, 4.3 percent decline against the dollar to bring in export earnings.

The real rose 0.8 percent to 2.9425 per dollar at 4:07 p.m. New York time. Some banks bought dollars to protect themselves against weekend political developments that might drive the exchange rate when trading opens next week, prompting the real to jump between gains and losses today. Mexico's peso rose.

When the real rubs up against 3 per dollar, exporters bring in dollars,'' said Joao Medeiros, a partner at Pioneer Corretora de Cambio Ltda., a Sao Paulo currency brokerage that handles about a third of all foreign exchange trading in Brazil's spot market. When it's about 2.80, the opposite happens, the importers buy goods from abroad -- this is holding the currency in the range.''

Earlier, the currency fell as much as 1 percent on investors' concern a slowing U.S. economy may limit exports to the world's largest economy and the supply of investment capital. Increased flows of export earnings increases demand for the real, helping it rise against the dollar.

Also supporting real was a declaration by the president of Brazil's central bank that the country's 26.5 percent benchmark interest rate won't be cut until the inflation rate falls.

The time to lower rates will be determined by the rate of inflation,'' Henrique Meirelles told Madrid's daily El Pais while in Spain for meetings with Latin American central bankers. There will be no lowering of interest rates until inflation has been lowered.''

The real has gained 20 percent in 2003, the best performance of the 59 currencies tracked by Bloomberg. With its May 13-15 slide, the real will see its first weekly decline in 13.

Rates

If rates were to fall, the incentive to borrow dollars abroad to invest in Brazilian government securities will fall. So far this year about $5 billion of foreign debt has been sold abroad, most of it by banks taking advantage of low rates outside of the country, U.S. benchmark rates are at four-decade lows, to invest at four-year high yields at home.

While Brazil's benchmark inflation rate slowed in April to 0.97 percent from 1.23 percent in March, the 12-month rate in April rose to a seven-year high of 16.77 percent from 16.57 percent a month earlier.

Before today, the real had fallen 3.2 percent on the week on investors' expectations Meirelles and other members of Brazil's national monetary policy committee might lower rates after meetings May 20 and 21.

Weekends, Banks

The real jumped between gains and losses today.

Beyond the conflicting U.S. economic reports, the real was weighed down by some banks' purchases of dollars as a hedge against weekend political events, some traders said.

Investors in Brazil often seek to protect themselves against weekend developments, especially where politics, often played out in the nation's weekly news publications, is involved.

A couple of banks are concerned we might get some bad political news over the weekend,'' said Mario Battistel, head of foreign exchange trading at Novaca Corretora de Cambio SA, a Sao Paulo currency brokerage. They'd rather lock in their dollars now than risk having to buy them at a steeper price next week.''

President Luiz Inacio Lula da Silva's pension and tax bills that promise to curb deficit spending have stirred up opposition within and from without his ruling coalition.

The bill to overhaul the pension system, which aims to reduce the systems deficit that now stands at 5.5 percent of Brazil's gross domestic product, seeks to increase workers' contributions while cutting the government's funding liabilities.

Brazil's benchmark 8 percent bond maturing in 2014 gained 1.63 cents to 88.31 cents on the dollar, its first gain in three sessions, paring the yield to 10.91 percent, according to J.P. Morgan Chase & Co.

Earlier, it fell as low as 85 cents on the dollar, its lowest since April 28. The bond rose to a record 91.75 on May 13.

Mexico

The Mexican peso strengthened for the first day in three as investors took advantage of its two-day, 3.2 percent decline to buy dollars.

The peso rose 14.05 centavos, or 1.4 percent, to 10.2965 per dollar from 10.4370 per dollar yesterday.

Some investors bought the currency after its two-day slide, remaining confident Mexico's economy will rebound in 2003 after two years of slow growth and that inflation will be kept in check. Central Bank President Guillermo Ortiz repeated the goal of holding inflation to 3 percent plus or minus 1 percentage point this year in a speech in Seville, Spain.

Still, rates on the benchmark 28-day Treasury bill dropped to a historic low of 4.9 percent in the May 13 weekly auction of government debt, reducing investors' incentive to buy Mexican debt, said Bard Luippold, a currency analyst with Lehman Brothers Inc. in New York.

``The weakening trend could continue in Mexico and today is just a breather in front of the weekend,'' Luippold said.

Colombia

Colombia's peso was headed for its biggest decline in almost four months after the central bank left lending rates unchanged and called off the monthly auctions of government securities that have strengthened the currency 4 percent since February.

The peso fell for the first day in three, losing 1.5 percent to 2,849.5 per dollar from yesterday. The currency last had a bigger one-day loss on Jan. 27, when the currency fell to record low of 2,980 against the dollar.

The bank, which has sold $600 million of the options in three monthly sales since February, won't hold a sale in June. The peso has risen 4 percent since the bank's first sale Feb. 28.

``The exchange rate remains at a competitive level for Colombian exports,'' the bank said in a statement.

The bank suspended the next options sale to help halt a recent strengthening of the currency that prompted President Alvaro Uribe to warn that its rapid climb would hurt Colombian exports.

Cone

Argentina's currency plunged for a second day against the dollar after the country's next president said his government won't cater to business interests.

The peso plunged 2.5 percent to 2.89 per U.S. dollar, after losing 1.2 percent yesterday.

Nestor Kirchner spoke after his presidential challenger, Carlos Menem, withdrew from the race ahead of a runoff election weekend.

Chile's peso reversed early declines to rise 0.1 pecent to 705.05 per dollar from 706.05 per dollar yesterday. Peru's new sol was little changed at 3.4759 per dollar from 3.4758 per dollar yesterday. Venezuela fixed it bolivar at 1,598 this year. Last Updated: May 16, 2003 16:10 EDT

Sao Paulo, May 16 (<a href=quote.bloomberg.com>Bloomberg) -- Brazil's government said it will finance infrastructure projects in neighboring nations in its biggest push to date to boost regional economies and increase its influence.

Brazil, South Americas' biggest economy, is close to signing agreements with Venezuela to finance the petrochemical sector and with Peru, Trade and Industry Minister Luiz Fernando Furlan told business executives in Germany, according to a statement provided by his office. This month, the government said it will create a $1 billion fund to finance bilateral trade with Argentina through BNDES, the development bank, and finance $600 million in roads and other projects in Bolivia.

The plan, which will use Brazilian taxpayers' money to spur their neighbors' economies, underscores the importance President Luiz Inacio Lula da Silva places on increasing Brazil's regional influence to better negotiate trade accords with the U.S. and Europe, analysts said. Even as Lula crafts tax and budget policies to win the confidence of international investors, the former trade union organizer hasn't abandoned his often-stated goal of making Latin America more independent.

If Brazil really wants to exercise a role of leadership in the region, it will have to pay a price,'' said Luciano Dias, a political scientist at Brasilia-based Goes & Consultores. Their line of thought is `if I make my neighbor grow, get richer, he will buy more in my country, he will be a better market for my goods and if he is poor I have to help him grow.' This is the same logic for the Marshall plan.''

Brazil, whose $500 billion economy is bigger than all other countries in South America combined, has had similar projects in the past, with plans to fund road and bridge construction with Argentina. Some proposals by former President Fernando Henrique Cardoso never got off the ground, Dias said. Last Updated: May 16, 2003 16:47 EDT