June 5 (<a href=quote.bloomberg.com>Bloomberg) -- Brazil's real rose for a third day after yesterday's central bank sale of contracts used to protect investors from a decline in the currency, reducing the demand for dollars.

The real gained 1.4 percent to 2.8745 per dollar in Sao Paulo at 1:51 p.m. New York time from yesterday's three-week closing high. The real has gained 23 percent in 2003, the best performance of the 16 most traded currencies. Mexico's peso rose.

Investors, primarily bank Treasury desks, have more bets the real will fall than it will rise, said Helio Ozaki, a trader with Finambras Corretora de Cambio e Titulos Ltda., a Sao Paulo brokerage that handles more than a quarter of all Brazilian spot- market currency trades. The central bank's sale yesterday of the currency protection made it less likely demand for dollars will rise allowing their bets to pay off.

The central bank slapped a lot of people yesterday,'' Ozaki said. There are about 30,000 more dollar futures contracts out there betting the dollar will strengthen than weaken -- yesterday's sale has pulled the rug out from them and made anyone else ready to bet against the real think twice.''

Many treasury desks were forced to stop adding to their positions yesterday, said Flavio Farah, head of the Treasury desk at the Sao Paulo unit of Dusseldorf, Germany-based Westdeutsche Landesbank Girozentrale.

Betting against the real right now makes no sense,'' Farah said. It's going to be a while before we figure out just what to do for the medium term.''

Inflows

In the meantime, capital flows to the country continue, boosting demand for the real and helping it rise. More than $8 billion of bonds and loans have been contracted abroad this year, according to the O Globo daily newspaper, helping the real outperform all the world's major currencies.

Yesterday, Banco Votorantim SA, the financial services arm of the Sao Paulo-based Votorantim cement, mining, banking and industrial group sold $180 million of two-year bonds to yield 6.25 percent.

Telesp Celular Participacoes SA, based in Sao Paulo and Brazil's biggest cellular telephone service provider, said it plans to sell $150 million of 18-month bonds. Telesp Celular Par is controlled by Vivo, a joint-venture between Madrid-based Telefonica SA and Lisbon-based Portugal Telecom SGPS SA.

Also boosting investor sentiment, Alain Belda, the chief executive of Pittsburgh-based Alcoa Inc., the world's biggest aluminum maker, said his company plans a new power plant in Brazil and will invest $2.7 billion in Brazil over the next seven to eight years.

Capital flows remain strong and the swap sale makes it easier for the flows to cause the real to rise,'' Ozaki said. There are few forces now preventing the dollar from weakening'' against the real.

Inflation Comments

The real's rise may also have been helped by comments today from central bank President Henrique Meirelles.

The inflation rate for the previous 12 months will fall to 10.8 percent, within the range the government has set as a target for this year, by the end of 2003, he said during a visit to investors in Berlin, according to newswire Agencia Estado.

A stronger real will help reduce inflation by reducing the costs of imports and commodities, which are priced in dollars.

Interest rates also fell on expectation lower inflation may give the government room to cut its benchmark target rate at central bank monetary policy committee meetings June 17 and 18.

The overnight interest-rate futures contract for Jan. 2 settlement, the most-traded interest-rate futures contract on Sao Paulo's BM&F futures and commodities exchange, fell for a fifth day in seven, losing 1 basis point to 23.83 percent. The contract indicates investor expectations for the end of December. A basis point is 0.01 percentage point.

Rate Backdrop

In coming days expectation the U.S. will cut interest rates may lift the real further. Much of the rally in Brazilian bond prices in recent months has been fueled by U.S. and European investors seeking higher returns than they can receive at home.

Fitch Ratings' upgrade of the outlook on Brazilian debt to positive from stable may add to the demand for Brazilian investments even as the perception of default risk on $400 billion of government debt falls along with borrowing costs.

Brazilian banks have taken advantage of low U.S. rates -- yields on two-year U.S. Treasury bonds fell to a 53-year low of 1.198 percent this week -- to invest at Brazilian rates. Brazil's benchmark 26.5 percent rate is at a four-year high.

Lower U.S. rates could maintain the difference between U.S. and Brazilian rates that has sparked the bank bond sales even if Brazilian rates were to fall.

Investors are focusing on the possibility of another U.S. interest rate cut by the Federal Reserve as soon as its June 25 meeting, said Daniel Katzive, a currency strategist at UBS Warburg, the biggest trader in the $1.2 trillion-a-day foreign exchange market, in Stamford, Connecticut. ``The currencies that have done best are the ones with the highest yield.''

Brazil's benchmark 8 percent bond maturing in 2014 gained 1.19 cents to 91.50 cents on the dollar, causing the yield to fall to 10.07 percent, according to J.P. Morgan Chase & Co. The bond rose to a record high of 91.75 on May 13.

Mexico

The peso rebounded from its biggest plunge since Brazil devalued its currency in January 1999 by gaining for the first day in three.

The peso strengthened 0.2 percent to 10.5516 per dollar from yesterday's 10.5725 per dollar close, when it fell 2.8 percent, the currency's largest one-day decline since Jan. 13, 1999.

Colombia's peso rose from a three-week high, rising 0.2 percent to 2,835.48 per dollar. The Argentinean and Chilean currencies were unchanged. Peru's new sol weakened 0.1 percent to 3.4840 per dollar. Venezuela fixed it bolivar at 1,598 this year.

GRANMA. Havana. June 5,  2003 CARACAS.— The National Electoral Council (CNE) has banned all public announcements in the media relating to elections, on the basis that it could confuse Venezuelans.

The decision was adopted last night after the private press media began featuring adverts encouraging the population to vote ‘Yes’ on August 19 when the consultation on the repeal of President Hugo Chávez’ mandate is supposedly to take place.

The government called it false propaganda and accused the opposition of once again lying to the public, as it is fully aware that no referendum is taking place on that date.

The Venezuela Project Movement and the Referendo Sí Association have organized the campaign in an attempt to create an atmosphere of chaos among the population so that they can then call for rebellion and civil disobedience, emphasized national executive representatives.

According to the CNE, whose new members must be selected by Parliament next week, the "Yes" adverts could confuse Venezuelan society as a repeal referendum process has not yet been convened.

Reuters, 06.05.03, 1:15 PM ET CARACAS, Venezuela, June 5 (Reuters) - Car sales in Venezuela fell by 64.4 percent in May compared with a year before as the industry struggled with the country's sharp recession, the Venezuelan Automobile Chamber (CAVENEZ) reported Thursday. A total of 4,916 cars were sold last month compared with 13,799 units in May of 2002. April auto sales in the world's fifth largest oil exporter totaled 4,269 units. Sales during the first five months of 2003 fell 68.5 percent to 22,061 compared with 70,127 units during the January to May period in 2002. Car sales have dropped as Venezuela has battled an economic crisis and political instability. A two-month general strike in December and January battered sales, and tight currency curbs introduced in February have also cut into business. The companies affiliated with CAVENEZ are DaimlerChrysler AG's (nyse: DCX - news - people)<DCXGn.DE> DaimlerChrysler de Venezuela, Fiat SpA's <FIA.MI> Fiat Automobiles, Fiat affiliate IVECO Venezuela, FordMotor Co. (nyse: DCX - news - people), General Motors Corp.'s (nyse: DCX - news - people) General Motors de Venezuela, Mitsubishi Motors Corp.'s <7211.T> MMC Automotriz and Toyota Motor Corp.'s <7203.T> Toyota de Venezuela. The figures represent the total vehicle sales in Venezuela, and also include car models made by non-members of CAVENEZ, such as Mazda Motor Corp. <7261.T> and Volkswagen AG <VOWG.DE>.

Reuters, 06.05.03, 11:53 AM ET By Louise Egan

SANTIAGO, Chile (Reuters) - The Chilean government is as euphoric as proud parents of a newborn baby -- after a long and tortuous labor it is about to give birth to a bilateral free trade agreement with the United States.

Chile's Foreign Minister Soledad Alvear and U.S. Trade Representative Robert Zoellick will sign the treaty Friday in Miami, sealing 11 years of negotiations that ended last December. Both Congresses are likely to approve it this year. An oasis of calm in a continent swirling in economic and political turmoil, Chile is the only country in Latin America, apart from Mexico, to win Washington's blessing as a preferred trade partner.

For U.S. President Bush, the deal has mostly symbolic value -- it is a potent message he is serious about jump-starting talks for a wider hemispheric free trade zone.

But for Chile's socialist President Ricardo Lagos, the deal with his biggest export market and foreign investor is a giant stamp of approval for over a decade of free market, export-oriented policies and political stability.

"We have our own internal problems but we're way better off than other (Latin American) countries," said Jaime Lean, a gas-mask manufacturer whose exports to the United States skyrocketed after the Sept. 11 attacks there.

The deal will set Chile further apart from much of Latin America, where countries like Argentina have defaulted on their debt, Peru and Venezuela are rocked by violent street protests and Colombia is gripped by a leftist guerrilla war.

Visitors to Santiago are amazed by its ultra-modern airport and highways and orderly traffic. Unlike neighboring countries, police hand out fines in disgust if someone attempts a bribe. One in five Chileans has a home computer, over half use mobile phones and 75 percent own their homes.

Washington's dismay at Lagos' opposition to the Iraq war cost only a minor delay in the signing of the deal.

"Being in a bad neighborhood right now actually helps Chile," said Patricio Navia, a political scientist. "Because it's the best behaved country in the continent, the U.S. rewards that. The U.S. wants to show other countries the way."

But Chile hopes its closeness with Washington won't hurt relations in the region. Foreign Minister Soledad Alvear said in Argentina that Chile is committed to integration with its neighbors as an associate member of the Mercosur trade bloc. Surprisingly, it is small players like Lean, the gas-mask maker in search of niche markets, who will benefit most with the trade deal, which cuts import duties on 85 percent of industrial goods traded between the two countries.

U.S. consumers will not see a flood of copper, salmon, wine and grapes -- Chile's top exports to the United States. In fact, traditional trade is expected to climb only marginally because most goods already are traded duty-free.

Critics say Chile's zeal for globalization has not bridged the income distribution gap, the worst in Latin America after Brazil. Others fear an invasion of U.S. fast-food chains and cheap products could bulldoze local culture.

The National Chamber of Commerce estimates, however, that trade deals with Washington and the European Union alone will boost economic growth by 2 percent a year.

<a href=www.mpa.gr>Macedonian Press Agency Athens, 5 June 2003 (18:20 UTC+2)

The EU congratulates the Venezuelan government and opposition in signing a political agreement on May 29. The EU also recognizes the invaluable role played by the Secretary General of the Organization of the American States, the Carter Center and the UNDP in helping to facilitate a mediation process over the last seven months between the government and opposition representatives. The EU calls upon all parties to proceed without delay to the necessary follow up, e.g. re-establishing of the electoral council, updating the voters' register, and other preparations as mentioned in the agreement. The EU stands ready to assist in the implementation of the agreement and provide technical assistance for the preparation of any type of electoral consultation.

The EU hopes that this latest agreement will prove a significant step and solid basis for the process of solving the political crisis in Venezuela within the framework of the constitution, the rule of law and democratic principles.

The Acceding Countries Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, the Slovak Republic and Slovenia, the Associated Countries Bulgaria, Romania and Turkey and the EFTA countries, members of the European Economic Area align themselves with this declaration.