Sao Paulo, May 15 (<a href=quote.bloomberg.com>Bloomberg) -- Brazil's real took its biggest plunge since January on concern its 19 percent gain in 2003 may prompt the government to bolster the U.S. currency to safeguard the growth of Brazilian exports.

The real fell 2.7 percent to 2.967 per dollar, the biggest drop since Jan. 24. The real remains the best performing currency in 2003 among the 59 tracked by Bloomberg even after its three- day, 3.6 percent decline. Mexico's peso fell to a two-week low.

There is this concern exporters and the government may push to prevent the real from strengthening further,'' said Sergio Machado, head of the Treasury desk at Banco Fator SA in Sao Paulo. Banks are trading on this speculation.''

President Luiz Inacio Lula da Silva's government is divided over the stronger real's possible effect on export growth, which may account for half of the Brazilian economy's projected 2.5 percent growth in 2003. While exporters have suggested the government take steps to weaken the real, a slowdown in inflation has prompted calls for the central bank to lower lending rates from a four-year high to boost domestic demand and growth.

Over the last week, the currency has traded in a range of 2.8425 to 2.9680 to the dollar as exporters buy reais as the real strengthens and importers buy dollars as it weakens.

``The great discussion over recent days has been the right level for the dollar that will preserve the trade balance and allow inflation to come down,'' said Clive Botelho, treasury director at Banco Santos SA.

Botelho and other investors say a rate cut would pare local banks' returns on Brazilian government securities engineered by raising money at low rates abroad to buy Brazilian Treasury debt.

Rates

Rates were raised five times since October from 18 percent to 26.5 percent as last year's 35 percent decline in the real sent inflation soaring to 12.53 percent, the highest 12-month rate since September 1996.

Botelho said many investors expect interest rates to come down in the second half, loosening up cash to buy dollars.

``We expect to see some significant decompression of monetary policy in the second half -- everyone's aware of that.''

Brazil's benchmark 8 percent bond that matures in 2014 fell for a second day, losing 2.44 cents on the dollar to 86.69, raising its yield to 11.36 percent, according to J.P. Morgan Chase & Co. The bond rose to a record high 91.75 on May 13.

Mexico

Mexico's peso fell a second day, a 3.2 percent since Tuesday, as lower interest rates and weakness in the U.S. economy prompted investors to sell pesos. The currency extended declines after the government said the economy contracted in the first quarter.

The peso fell 1.6 percent to 10.4370 per dollar. Earlier, the peso fell 1 percent as the day's trading opened, then reversed declines to rise 0.4 percent, before the afternoon's decline. The peso rose as high as 10.1075 yesterday.

The currency's two-day slide follows the decline of Mexican Treasury bill yields to record lows and the worst retail sales figures since 1991 in the U.S. The narrowing of the difference between U.S. and Mexican debt yields combined with the prospects of slower growth in Mexico's biggest export market have investors reluctant to hold pesos now, said Adam Weiner, Latin American strategist with AIG Trading Group in Greenwich, Connecticut.

People are concerned interest rates are at an all time low,'' said Weiner. At a certain point, people say the carry isn't as good as it was.''

Mexican Treasury-bill yields on May 13 fell to a record low at a government debt auction, which may signal that demand for peso-denominated securities will start to slow as interest rates fall below the inflation rate, analysts said.

Historic Lows

The 28-day Treasury bill's yield fell to 4.90 percent, its lowest ever, down from 9.7 percent in March while the 91-day bill' yield dropped to 5.59 percent from 6.19 percent a week ago.

Even with yields on U.S. Treasuries at four-decade lows --the 10-year's yield fell to 3.52 percent yesterday -- Mexican securities no longer offer the large returns of earlier this year that helped the peso rebound from a record low in March.

The Mexican government's report this afternoon that the county's economy shrank 0.49 percent in the first quarter helped extend the peso's decline.

Mexico has more to lose from slower growth in the world's largest economy than most other Latin American economies.

The U.S. buys about 85 percent of Mexico's $160 billion in annual exports, representing about a fifth of its $600 billion gross domestic product, and provides about 70 percent of the country's foreign investment.

Investors with a short-term interest in Mexico are pulling back some of their large peso positions now, explaining the speed of the drop, said Nathaniel Karp, an analyst at Grupo Financiero BBVA Bancomer SA in Mexico City.

There are no other investors with money to move the market like this,'' said Karp. They were coming in pretty hard, pretty strong before, and they were going to leave sooner or later.''

Colombia, Chile

Colombia's peso rose for the fifth day in six on investor expectations the country's central bank will keep its benchmark lending rate unchanged at its weekly meeting tomorrow.

The peso rose 1.3 percent to 2,806.50 per dollar after its 1.1 percent slide yesterday to a 2842.00 close. The peso has gained 2.1 percent against the dollar in 2003 after declining 21 percent last year.

The bank has raised its so-called repurchase agreement rate twice this year to 7.25 percent to slow accelerating inflation and a third increase might threaten growth.

Investors bought dollars yesterday after President Alvaro Uribe said he was concerned about the peso's 6.2 percent gain since January.

Many exporters fret the peso's rise may make Colombian exports less competitive abroad and derail a domestic economic expansion the government forecasts to reach 2 percent in 2003.

Chile's peso fell for the fourth day in five, losing 0.5 percent to 706.05 per dollar from 702.85 per dollar yesterday, paring its gain on the year to 2 percent.

Argentina's peso fell 1.3 percent to 2.8375 per dollar.

Peru's new sol was little changed at 3.4758 per dollar from 3.4749 per dollar yesterday. Venezuela fixed its bolivar at 1,598 per dollar earlier this year.

Last Updated: May 15, 2003 19:34 EDT

Reuters, 05.15.03, 3:09 PM ET

CARACAS, Venezuela, May 15 (Reuters) - The Andean Development Corporation (CAF), the financing arm of the Andean community of nations, said on Thursday it had placed $500 million in 10-year bonds in the U.S. market.

CAF President Enrique Garcia said in a statement the notes were placed Wednesday with a coupon of 5.20 percent in an operation conducted through Merrill Lynch, Citigroup, Credit Suisse First Boston, Deutsche Bank and Goldman Sachs.

The largest multilateral lender to the Andean nations, CAF estimates it will provide about $3 billion in loans to the region in 2003. Last year, the agency approved about $3.3 billion in loans.

Copyright 2003, Reuters News Service

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Thursday, May 15, 2003 By: Patrick J. O'Donoghue

The lawyer of a group of homeless people in Paraguay has asked the Venezuelan Embassy in Paraguay for political asylum. Argentinean Marilina Marichal (37)  represents some 6,000 squatters in San Lorenzo, 20 kilometers outside the capital Asuncion.

The Paraguayan Attorney General's Office has charged her withdisturbing public order, incitation to violence, defending illegal actions and conspiring against the State. Marichal's husband, Raul Marin says the family has received serious death threats, leaving them with little choice but to seek asylum. 

"When the Venezuelan government takes note, I'm sure it will understand our situation." 

Marin himself and three squatter leaders face arrest and have been waiting for a ruling from the Supreme Court of Justice (CSJ) on their status as human rights defenders. Marichal is currently inside the Venezuelan Embassy in Asuncion with her 8-year old daughter. 

Paraguayan Attorney General Carlos Calcena argues that Marichal's situation does not merit political asylum ... "she has broken the country's laws."

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Thursday, May 15, 2003 By: Patrick J. O'Donoghue

Venezuelan Interior & Justice (MIJ) Ministry Juridical Security Minister, Jaime Velasquez has announced the creation of an Andean passport that would allow free transit to members of the Andean Economic Community (CAN) in member countries (Bolivia, Colombia, Ecuador, Peru and Venezuela) from 2004.  

However in the same breath,  the Minister points to internal problems caused by difficulties in bringing its national identification and migratory control procedures up to date.  

Andean Parliament president,  Jannett Madriz has called on the Venezuelan government to quickly get rid of red tape that has slowed down the process of an Andean passport. 

Venezuelan Trade Minister Jose M. Soto has  asked member countries for understanding regarding its exchange rate policy. 

Several Andean countries are hauling Venezuela over the coals for incompliance with private debt commitments. Soto has asked main plaintiffs, Ecuador and Peru to supply a list of companies owed money.

<a href=www.lapress.org>LatinAmericaPress Adolfo Pérez Esquivel  Fernanda Sández Fernanda Sández.  May 15, 2003

Interview with Adolfo Pérez Esquivel

According to Adolfo Pérez Esquivel, 1980 Nobel Peace Prize winner and head of the non-governmental Peace and Justice Service (SERPAJ) in Argentina, the impunity with which the United States has acted in Iraq jeopardizes the security of Latin America and the rest of the world, because it indicates that the United States could intervene anywhere without opposition or sanction. Pérez Esquivel spoke with Latinamerica Press correspondent Fernanda Sández in Buenos Aires about this threat and the regional scenario that has emerged since the war.

How do you view the conflict in Iraq?

The war in Iraq — although more than war, I think we should call it an invasion — represents the hegemonic expansion of the United States in the world (LP, April 9, 2003), which means it is not a new phenomenon. This has been under way for a number of years, but since Sept. 11, 2001, it has picked up speed and the actions have taken a clear direction: to control the Middle East and its oil reserves.

How do you see this new world situation affecting Latin America?

The United States tried something similar in Latin America [in April 2002] when, through the State Department and in alliance with local business interests, it encouraged a coup against the constitutional government of Hugo Chávez in Venezuela (LP, April 22, 2002). Considering that 30 percent of the oil that the United States imports comes from Venezuela, there is obviously a direct relationship between that episode and what is happening today in Iraq. It’s one more effort to gain direct and complete control over oil reserves worldwide. Even so, while oil is a key issue, it is only one aspect of this effort, which has much more serious connotations for Latin America.

What are those connotations, specifically?

The increasing militarization of the continent, which is reflected in the installation of US military bases throughout the region (LP, April 9, 2003). There are three main areas of action, each of which has been developed to a different degree so far. One is the triple border area shared by Argentina, Brazil and Paraguay, where there is already a US presence (LP, Nov. 5, 2001). Another is Colombia, with Plan Colombia, which involves the intervention of military personnel and advisers in the region (LP, April 10, 2000 and March 12, 2002). And the third is the so-called Puebla-Panama project, which encompasses Mesoamerica and the Caribbean (LP, July 29, 2002). As you can see, these three main areas are the bases of operation through which the United States plans to intervene on the continent. And with absolute impunity, because — as I never get tired of repeating — the first victims of this conflict were the United Nations and international law.

To what extent do you see them affected by the war?

Although future scenarios are fairly unpredictable, it is clear that the United Nations was blocked and pushed aside, with no ability to respond, and the United States even threatened to keep it from intervening in Iraq. If the United Nations does not act clearly and firmly from now on, it will be extremely difficult for it to survive. Something similar has happened with international law — one stroke of the pen has struck down international agreements, protocols and conventions that took more than 50 years to build.

This puts the entire world in a complete state of insecurity. And Latin America can’t escape, because with this new policy of "preventive" war, the United States can intervene in any country with absolute impunity and with no opposition whatsoever.

This is a real concern when one US State Department document, for example, states that "democracy in Ecuador is under pressure from increasingly radicalized populist and indigenous movements," as if it’s suggesting the need to take action.

Let’s say that intervening in internal social affairs in various countries is another [US] objective. In Ecuador, President Lucio Gutiérrez is implementing a very ambiguous policy (LP, Feb. 12, 2003). But I have no doubt that if Ecuador should become involved in Plan Colombia, Latin America could become a new Vietnam, with consequences as serious as or more serious than those of the war in Iraq.

Why?

Because it would be a new version of guerrilla warfare. There are already some alarming signs. For example, in Argentina there’s a document dated June 20, 2001, sent to Congress by the president, requesting authorization for Latin American and US troops to enter the country. That document is key, because it requests the entry of troops and one of its justifications is a war scenario in which the enemies are social organizations, non-governmental agencies and other potential enemies (LP, Oct. 3, 2001). This shows to what extent the old doctrine of national security remains in effect. When this occurred, SERPAJ and the Latin American Association of Jurists filed a request for an injunction, which was ignored. So the troops entered the country, and later they left.

This continues to occur in different parts of the continent, which shows that we are facing what I call "globalized totalitarianism" — the establishment of an empire, a global dictatorship that is destroying everything in its path. Despite this, however, I see some encouraging signs.

What are those signs?

Grassroots mobilizations. Even the people of the United States have started to mobilize, because the memory of Vietnam is still very fresh in people’s minds, and there are demonstrations in every state. In our case, there is a different challenge: we have to begin to create new social, political and economic spaces. Now more than ever, we must stimulate our own way of thinking, cultural identities, spirituality and meaning of life among our peoples.