Fri May 23, 2003 01:42 PM ET By Missy Ryan

CUSCO, Peru (<a href=reuters.com>Reuters) - The United Nations must be more aggressive in helping Andean nations quash drug trafficking and moving against rebel violence in Colombia, presidents at Latin American summit said on Friday.

"The drug trade and terrorism threaten our democracies ... and we cannot ignore what is happening in Colombia," Peruvian President Alejandro Toledo said in opening a two-day meeting of the Rio Group, which includes 19 democracies from the Rio Grande to Tierra del Fuego.

"We must together ask the ... United Nations to speak out firmly against terrorism and drug trafficking, especially in Andean countries," Toledo added. "There are sister nations (to Colombia) ready to lend a hand in any way they can."

Toledo's invocation echoes a proposal from Ecuadorean President Lucio Gutierrez urging the Rio Group to push for a United Nations resolution seeking a cease-fire from the rebel group Revolutionary Armed Forces of Colombia, or FARC.

Thousands of people are killed every year in Colombia, the world's No. 1 cocaine producer, as security forces fight FARC rebels and other armed groups the government says are involved in the illegal drug trade. The Andean region is also home to the world's second- and third-largest cocaine producers, Peru and Bolivia.

Earlier on Friday, Colombian President Alvaro Uribe said he welcomed Gutierrez's plan.

"The Ecuadorean president's proposal seems practical, for all the neighboring, allied and democratic countries call on the United Nations to ... tell the FARC that a peace process is needed and that they should cease hostilities," Uribe said.

"If the FARC does not accept, we would have to seek another remedy, which should entail all nations helping Colombia defeat terrorism militarily, with authority," he said.

SUPPORT FOR PLAN UNCLEAR

The proposal on fighting drugs and violence was not on the summit's formal agenda, which officials have said will center on making governance more effective, strengthening democratic governments and curbing rampant social unrest.

It was unclear whether other presidents would support a request to the United Nations on Colombia.

Officials say the summit -- which will address reforms for political parties and mechanisms to recycle debt service into public works investment -- must buck the trend of high-level meetings long on protocol and short on results.

"I come hoping this won't be just another summit where we make speeches, applaud, take a photo and say 'Ciao,"' said leftist Venezuelan President Hugo Chavez, who faces stiff political opposition at home. "This continent needs profound economic and social changes."

The United Nations says Latin America should grow close to 2 percent this year as it recovers from a grave economic crisis including a default and devaluation in Argentina and crippling strikes in oil-exporter Venezuela. Last year, the regional economy shrank 0.6 percent.

<a href=www.voanews.com>AP-Voa News Sharon Stevenson Lima, Peru 23 May 2003, 04:48 UTC

From right to left, Venezuelan Foriegn Minister Areavalo Mendez, Bolovian President Gonzalo Sanchez, Peru's President Alejandro Toledo and Ecudorean President Lucio Gutierrez pose for reporters ahead of the Rio Group summitPresidents of the 19 nation Rio Group arrived in Peru's Cuzco for their annual summit amid a nationwide teachers' strike, highlighting one of the pressing topics of discussion, how to govern with huge populations mired in hard-core poverty and clamoring for a better life.

Leaders arriving from all over Latin America were greeted with the smell of teargas as they entered the famed Inca city in the Andean highlands where striking teachers are pushing their demands.

Meeting behind closed doors in Cuzco they will have a chance to discuss their options for coping with ongoing economic hardship and political instability. Or as one analyst put it, how to govern a country whose people are unhappy.

Presidential authority is increasingly under pressure in Latin America. In Venezuela President Hugo Chavez' opposition still calls for his ouster. Argentina's economic discontent recently helped to force out President Fernando de la Rua. And in Peru, President Alejandro Toledo's popularity has plummeted to 14 percent, as multiple sectors punish him for unfilled campaign promises of more jobs with crippling strikes.

The group of 14 Latin American leaders attending the Cuzco summit are expected to hash over how to strengthen their weakened democratic institutions and political party systems.

But the global concern with terror will also be discussed during the two-day Rio Group summit. As Colombia's war against its two guerrilla groups spills over its borders, the specter of those guerrilla groups exacerbating civil unrest in neighboring countries is a growing concern.

The meeting is expected to conclude with a document called the Cuzco Consensus, pulling together the conclusions of the two-day summit.

Rio de Janeiro, May 19 (<a href=quote.bloomberg.com>Bloomberg) -- Latin American currencies declined, led by Brazil's real on investors' expectations the government will cut interest rates, easing its fight against inflation and causing the trade surplus to shrink.

The real slid 1.9 percent to 2.9975 per dollar at 3:36 p.m. New York time, headed for a two-week closing low. The real has declined 4.2 percent since May 12, the sixth-worst decline of 59 currencies tracked by Bloomberg. In 2003, it is up 18 percent, the best performance in that time. Argentina's peso declined.

Pressure on the government to cut the benchmark interest rate from 26.5 percent is mounting both inside and out of the government and was attacked in a front-page editorial yesterday in the Folha de S. Paulo, Brazil's largest-circulation daily.

The market is beginning to slowly realize this government sees the current set of policies as somehow temporary,'' said Tony Volpon, an economist with New York based Dinosaur Securities. A shift to a growth promoting policy, independent of pension and tax reforms in Congress will lead to a weaker real.''

Central bank President Henrique Meirelles has said interest rates will not fall unless inflation, now at its highest 12-month rate since 1995, also declines. Lula's coalition, though, faces a revolt from party members opposed cutting government pension spending and the system's deficit from 5.5 percent of Brazil's gross domestic product by increasing workers' contributions.

The real pared declines after O Globo newspaper's online news service reported Anne Krueger, the International Monetary Fund's deputy managing director, said Brazil needn't act in the currency market to stop the dollar from declining more quickly.

Investor speculation that the country's central bank might take steps to bolster the dollar and safeguard export growth had contributed to the real's slide from May 12's 11-month high.

Market Rates, Debt

While 13 of 15 economists polled by Bloomberg expect the government to keep rates steady this week, interest rates fell in the futures market for contracts maturing in July or later.

The overnight interest-rate futures contract for January settlement, the most-traded on Sao Paulo's BM&F Exchange, fell 17 basis points to 23.66 percent from 23.83 percent on May 16. The contract indicates investor expectations for the end of December. A basis point is 0.01 percentage point.

Brazil's benchmark 8 percent bond maturing in 2014 fell 2.00 cents to 86.38 cents on the dollar from 88.38 on May 16 and a record high 91.75 on May 13, according to J.P. Morgan Chase & Co. The yield rose to 11.45 percent.

Merrill Lynch & Co., the biggest securities company by capital, today in a note to investors by Tulio Vera, head of emerging market fixed-income research, raised its recommendation on Brazil debt to overweight, so as ``to better capture the next leg of this run up.''

Argentina

Argentina's currency fell for a fourth day after President- elect Nestor Kirchner said he wants to see it weaken to 3 per U.S. dollar to make the country's exports more attractive and spark economic growth.

The peso fell 0.9 percent to 2.9150 per dollar and has dropped 4.7 percent since May 14, when former President Carlos Menem pulled out of the election, giving Kirchner the win.

``It's less appealing to put your funds there with this noisy political background,'' said Guillermo Estebanez, a currency strategist at Banc of America Securities Inc. in San Francisco.

The Argentine peso had gained 16 percent against the dollar in 2003 before today, making the country's exports less competitive overseas, arousing investor concern a strong peso might choke off a nascent economic recovery. Additionally, Argentina's new government will spend 8 billion pesos this year on public works projects, such as paving roads and building homes, to try and spark economic growth, Vice President-elect Daniel Scioli said in an interview. The country hasn't begun talks with bondholders on $95 billion in defaulted debt.

``Kirchner is basically saying he will take away from the fiscal numbers whatever amount could be used to pay creditors,'' Estebanez said.

Mexico

The Mexican peso fell for the third day in four as declining global stock indexes and local interest rates prompted traders to sell pesos.

The peso fell 5.35 centavos, or 0.5 percent, to 10.3535 per dollar from 10.3 per dollar at the close May 16. The peso fell to a record low of 11.2644 on March 6 and last week rose to 10.0985.

U.S. and Mexican stocks declined on concern slow global economic growth will choke off demand for Mexico's exports and capital inflows into Latin America's largest economy. Comments by U.S. Treasury Secretary John Snow this weekend that suggested the U.S. is content with the 22 percent slide in the dollar this year also weighed on the peso.

The peso is getting weaker because markets don't know to interpret'' Snow's comments, calling the dollar's recent losses fairly modest,'' said Jose Maria de la Torre, head of fixed- income research at ING Bank Mexico SA. ``The losses in stocks point to further weakness in the U.S. economy.''

Rates on Mexico's benchmark 28-day Treasury bill dropped to a historic low of 4.9 percent in the May 13 weekly auction of government debt, reducing investor sentiment to hold peso- denominated assets.

Colombia

Colombia's currency fell for the third day in four after the Prosecutor General Edgardo Maya said a government plan to cut spending through a referendum was largely unconstitutional.

The peso fell 1.3 percent to 2,885 per dollar from May 16, when its plunged 1.5 percent after the central bank called off its June dollar call options auction, traders said.

``This is partly due to what the prosecutor general said and also because of the suspension of dollar options sales for June,'' said Juan Pablo Barney, a peso trader with Banco de Credito de Colombia SA.

Maya, who monitors government agencies, said 14 of 19 questions proposed in a government-backed referendum, including one to freeze some government spending for two years, were unconstitutional.

Ratings

The Constitutional Court, which is studying the referendum's constitutionality, is set to issue a ruling in late September. Ratings agencies such as Standard & Poor's are closely monitoring the progress of the proposed referendum.

Colombia has a Ba2 rating from Moody's Investors Service and BB from Standard & Poor's, both two levels below investment grade.

The country's peso-denominated bonds paced declines by the currency. The benchmark 15 percent coupon peso-denominated bond due in January 2012 fell 2.27 to 95.9, pushing its yield up to 15.84 percent.

The country's 10 percent dollar-bond that matures in January 2012 fell for a fifth day, losing 2.25 cent on the dollar to 108.5, down from a high of 115.25 last week after Merrill Lynch downgraded Colombian debt to marketweight from overweight.

Chile's peso fell for the fourth day in five, declining 1.3 percent to 714.35 per dollar from 705.05 on May 16. Peru's new sol weakened 0.4 percent to 3.4895 per dollar from 3.4759 on May 16. Uruguay's peso weakened for the first day in three, losing 1 percent to 29.4500 per dollar from 29.3 on May 16. Venezuela fixed its bolivar at 1,598 per dollar this year. Last Updated: May 19, 2003 15:36 EDT

Buenos Aires, May 19 (<a href=quote.bloomberg.com>Bloomberg) -- Argentina's currency fell for a fourth day after President-elect Nestor Kirchner said he wants to see it weaken to 3 per U.S. dollar to make the country's exports more attractive and spark economic growth.

The peso plunged 2 percent to 2.9475 per dollar at 12:01 p.m. New York times and has dropped 6.3 percent since May 14, when former President Carlos Menem pulled out of the election, giving Kirchner the win. Brazil's real and Mexico's peso fell.

``It's less appealing to put your funds there with this noisy political background,'' said Guillermo Estebanez, a currency strategist at Banc of America Securities Inc. in San Francisco.

The Argentine peso had gained 16 percent against the dollar in 2003 before today, making the country's exports less competitive overseas, arousing investor concern a strong peso might choke off a nascent economic recovery. Additionally, Argentina's new government will spend 8 billion pesos this year on public works projects, such as paving roads and building homes, to try and spark economic growth, Vice President-elect Daniel Scioli said in an interview. The country hasn't begun talks with bondholders on $95 billion in defaulted debt.

``Kirchner is basically saying he will take away from the fiscal numbers whatever amount could be used to pay creditors,'' Estebanez said.

Brazil

Brazil's real fell for the fourth day in five on investors' expectations the government will cut interest rates, easing its fight against inflation and causing the trade surplus to shrink.

Brazil's real slid 1.4 percent to 2.9825 per dollar, headed for its weakest closing level in almost two weeks, from 2.9425 on May 16. The real has declined 3.7 percent since May 12, the sixth- worst decline of 59 currencies tracked by Bloomberg. In 2003, it is up 18 percent, the best performance in that time.

Pressure on the government to cut the benchmark interest rate from 26.5 percent is mounting both inside and out of the government and was attacked in a front-page editorial yesterday in the Folha de S. Paulo, Brazil's largest-circulation daily.

The market is beginning to slowly realize this government sees the current set of policies as somehow temporary,'' said Tony Volpon, an economist with New York based Dinosaur Securities. A shift to a growth promoting policy, independent of pension and tax reforms in Congress will lead to a weaker real.''

Central bank president Henrique Meirelles has said interest rates will not fall unless inflation, now running at its highest annualized rate since 1995, declines as well. The government, though, already faces a revolt from party members opposed to a plan to reduce pension spending.

While 13 of 15 economists polled by Bloomberg expect the government to keep rates steady this week, interest rates fell in the futures market for contracts maturing in July or later.

The overnight interest-rate futures contract for January settlement, the most-traded on Sao Paulo's BM&F Exchange, fell 14 basis points to 23.69 percent from 23.83 percent on May 16. The contract indicates investor expectations for the end of December. A basis point is 0.01 percentage point.

Brazil's benchmark 8 percent bond maturing in 2014 fell 0.75 cent to 87.63 cents on the dollar from 88.38 on May 16, according to J.P. Morgan Chase & Co. The yield rose to 11.10 percent.

Merrill Lynch & Co., the biggest securities company by capital, today in a note to investors by Tulio Vera, head of emerging market fixed-income research, raised its recommendation on Brazil debt to overweigtht, so as ``to better capture the next leg of this run up.''

Mexico

The Mexican peso fell for the third day in four as declining global stock indexes and local interest rates prompted traders to sell pesos.

The peso fell 4.05 centavos, or 0.4 percent, to 10.3405 per dollar from 10.3 per dollar at the close May 16. The peso fell to a record low of 11.2644 on March 6 and last week rose to 10.0985.

U.S. and Mexican stocks declined on concern slow global economic growth will choke off demand for Mexico's exports and capital inflows. Comments by U.S. Treasury Secretary John Snow this weekend that suggested the U.S. is content with the 22 percent slide in the dollar this year also weighed on the peso.

The peso is getting weaker because markets don't know to interpret'' Snow's comments, calling the dollar's recent losses fairly modest,'' said Jose Maria de la Torre, head of fixed- income research at ING Bank Mexico SA. ``The losses in stocks point to further weakness in the U.S. economy.''

Rates on Mexico's benchmark 28-day Treasury bill dropped to a historic low of 4.9 percent in the May 13 weekly auction of government debt, reducing investor sentiment to hold peso- denominated assets.

Colombia

Colombia's currency fell for the third day in four after the Prosecutor General Edgardo Maya said a government plan to cut spending through a referendum was largely unconstitutional.

The peso fell 1.4 percent to 2,888.10 per dollar from May 16, when its plunged 1.5 percent after the central bank called off its June dollar call options auction, traders said.

``This is partly due to what the prosecutor general said and also because of the suspension of dollar options sales for June,'' said Juan Pablo Barney, a peso trader with Banco de Credito de Colombia SA.

Maya, who monitors government agencies, said 14 of 19 questions proposed in a government-backed referendum, including one to freeze some government spending for two years, were unconstitutional.

The Constitutional Court, which is studying the referendum's constitutionality, is set to issue a ruling in late September. Ratings agencies such as Standard & Poor's are closely monitoring the progress of the proposed referendum. Colombia has a Ba2 rating from Moody's Investors Service and BB from Standard & Poor's, both two levels below investment grade.

The country's peso-denominated bonds paced declines by the currency. The benchmark 15 percent coupon peso-denominated bond due in January 2012 fell 2.27 to 95.9, pushing its yield up to 15.84 percent.

The country's 10 percent dollar-bond that matures in January 2012 fell for a fifth day, losing 1 cent on the dollar to 109.75, down from a high of 115.25 last week after Merrill Lynch downgraded Colombian debt to marketweight from overweight.

Chile's peso fell for the fourth day in five, declining 0.8 percent to 710.90 per dollar from 705.05 on May 16. Peru's new sol weakened 0.1 percent to 3.4789 per dollar from 3.4759 on May 16. Uruguay's peso strengtheded for a second day, rising 0.5 percent to 2915 per dollar from 29.3 on May 16. Venezuela fixed its bolivar at 1,598 per dollar this year. Last Updated: May 19, 2003 12:05 EDT

<a href=www.newsday.com>NewsDay By Reed Lindsay SPECIAL CORRESPONDENT May 18, 2003

Buenos Aires, Argentina - In the 1990s, no Latin American leader more unreservedly embraced the market-oriented policies promoted by the International Monetary Fund and the U.S. government than former Argentine President Carlos Saul Menem.

So when Menem bowed out Wednesday from his campaign to win a new presidential term, his departure symbolized the end of an era of unrestrained economic liberalization in Argentina. Following the election of left-leaning presidents in Brazil, Ecuador and Venezuela, it also was the latest sign in South America of the political shift against U.S. policies.

Menem's opponent in the election planned for Sunday, Nestor Kirchner, will assume office on May 25. He has vowed to pull Argentina out of one of the worst crises in its history by replacing a "model of economic concentration and financial sectors" with a large-scale public works program, subsidies for small- and medium-sized companies and increased social welfare.

"This new model means taking a stronger position towards the IMF, rejecting the idea that the market will solve everything, and consolidating Mercosur," the South American free- trade bloc, said Torcuato Di Tella, a white-haired left-leaning Buenos Aires intellectual who has spoken in favor of Kirchner's candidacy.

Kirchner has said he will give priority to relations with Brazil and the rest of Latin America, at the expense of the intimate ties Menem had knit with the United States.

Kirchner has voiced opposition to the U.S.-led invasion of Iraq, which was hugely unpopular here, while praising outgoing President Eduardo Duhalde's decision to abstain on a U.S.-backed resolution in the United Nations to condemn Cuba for human rights violations.

"I haven't come this far to make pacts with the past, or for this to all end in an agreement among the elite," said Kirchner, 53, at a news conference on Wednesday. "I'm not going to fall prey to the corporations."

Governor for 11 years of the vast, sparsely populated Patagonian province of Santa Cruz, Kirchner has won praise for running an efficient administration that has stayed debt-free and has boasted relatively low poverty rates despite more than four years of recession in Argentina.

Critics say that's the least that might have been expected from an oil-rich province where the government is the main employer. Kirchner's opponents in Santa Cruz say he held power through authoritarian methods and a system of political patronage.

What is certain is that the president-elect, who has not held federal office, will face challenges far more daunting than he did as governor. These include a monstrous $130-billion debt, an entrenched political elite riven by factions, unprecedented levels of unemployment and poverty and a crisis-weary nation that has come to view its leaders, and even its institutions, with scorn.

Worse, Menem's withdrawal prevented Kirchner from solidifying his mandate with an electoral majority. Kirchner was set to trounce Menem in a runoff Sunday, but won only 22 percent of last month's first-round vote - a record low for an elected Argentine president.

"Kirchner has a strong discourse, but in Argentina people are used to leaders who say one thing and do something entirely different," said Graciela Ocaña, a legislator with the center-left ARI party. "He's got an enormous opportunity to make up for his lack of legitimacy by pushing through some of the popular measures he's promised."

This opportunity will be limited, however, by a lack of money. While the economy has showed signs of rebounding in recent months, the Duhalde administration will leave some potentially explosive financial problems.

Most grievous is the ever-rising external debt. To avoid default, Argentina will need a new deal with the IMF after a temporary agreement ends in August. "The IMF is going to demand a high budget surplus and a tough monetary policy to keep inflation low, but this could contradict with the government's plans for spending and growth," said Alejandro Vanoli, an economist at the University of Buenos Aires.

Like Brazil's new president, Luis Inacio Lula da Silva, Kirchner has tempered nationalist rhetoric with assurances of fiscal responsibility to international investors and creditors. He has vowed not to renationalize the formerly state-owned companies privatized during the 1990s and has announced that Economy Minister Roberto Lavagna, who negotiated the last agreement with the IMF, will stay on.

"Kirchner's not a leftist," said Buenos Aires-based analyst Analia Del Franco. "He isn't bringing a revolution. This is going to be a government of transition, which will be more nationalist than anything."

According to Del Franco, Kirchner must win a consensus from a wide range of antagonistic sectors, both within and outside his long-dominant and much-discredited Peronist Party.

Menem's supporters hold a significant minority in congress and in the provincial governments, and new anti-Peronist political leaders from both the left and right are gaining force after surprisingly strong showings in the first-round vote.

Kirchner must consolidate support from the main Peronist faction, led by Duhalde, his most influential ally in the election. Analysts warn that Kirchner's need for alliances with Duhalde and other party bosses who backed his candidacy may compromise his vow to reform politics and fight corruption. For now, this seems a minor concern for Argentines who, like Ernesto Argento, yearn for normalcy. "We just want this mess to end," said Argento, 69, who runs a shoe-shine shop. "We want a president who will last four years."