By Marcella Sanchez Subscribe to The Post Special to <a href=www.washingtonpost.com>washingtonpost.com Thursday, June 5, 2003; 10:00 PM

After winning an election in which the other candidate simply didn't show up, Nestor C. Kirchner wasted no time last week asserting his new powers as president of Argentina. Barely three days into his term, he forced the resignation of at least half of the military high command by naming loyal but low-ranking generals to head the armed forces.

It was a dramatic and unparalleled action that seemed likely to open old wounds in a country already in need of invasive surgery to repair massive economic and political ills. And it left many here scratching their heads. With an economy that contracted almost 11 percent last year, reining in the military isn't the highest priority, especially considering that the reputation of Argentina's military has been slowly recovering from the abuses and excesses of the past.

While the rationale for Kirchner's decree was unclear, Washington did not lack opinions about its possible consequences.

Human rights groups promptly welcomed it as an essential move to reaffirm military subordination to civilian authority. They hoped too that ultimately it would lead to the end of impunity for officers responsible for the atrocities of the "dirty war,: which led to the deaths or disappearance of nearly 9,000 Argentines during the 1970s and 1980s.

U.S. military officers and experts, on the other hand, feared it would reverse years of efforts to reform Argentina's armed forces. If those replaced were ousted because they were too close to Kirchner's opponents or because they were too interested in influencing judicial decisions against former military abusers, Kirchner has simply traded one kind of politicization for another. He would be sending military officers the message that cozying up to him will protect their jobs.

Both of those views, however, seem caught up in a distant and less relevant past. Kirchner, a little-known provincial governor from the south, was not seeking break from that past or even bring it back. His speeches last week suggest instead a plan to build a new military for the future. He seems to envision a military with civic roles in ways comparable to those of the U.S. National Guard or the U.S. Army Corps of Engineers.

Kirchner arguably faces the most daunting reconstruction task of any Latin American leader. He may be joining the ranks of cash-strapped counterparts who have found in the military the only cheap, quick and obedient institution at hand to help implement urgent development priorities. Venezuelan President Hugo Chavez already has tried it. Brazilian President Luiz Inacio Lula da Silva plans to try it, too.

While the Bush adminstration has remained mostly silent about Kirchner's action, U.S. officials have spoken out in favor of military involvement in non-military activities for more than a decade, particularly encouraging increased roles in fighting drug trafficking.

Even after launching its global war on terrorism, Washington has continued, and in some instances increased funding for, the U.S. Southern Command's participation in joint civic operations with Latin American counterparts to build schools and roads, and provide health care and other services. Locals often view such programs suspiciously, yet some Latin American governments may now integrate them into comprehensive development strategies.

This would reverse a trend of the past decade. The end of dictatorships and internal conflict in several Latin American countries in the 1980s and 1990s led democratic governments to marginalize and strip the ranks and budgets of their militaries. Add to that the current economic woes and present day military leaders would only be too glad to take new orders--even orders not exactly in line with their traditional missions--as a new meal ticket.

Such transitions into traditionally civilian government functions are not without risk. Those who applauded Kirchner's move as progressive, or criticized it for politicizing the armed forces, would probably agree that a plan to call up military support with no clear strategy to call it off would be troublesome. Soldiers trained to kill are not ideal conscripts for civic duties--duties that, by the way, make them more vulnerable to patronage and corruption.

What's more, drafting them for non-military functions could detract from their primary security mission. Some U.S. military analysts say that is already happening in Venezuela where Chavez, a former army colonel, has practically turned the military into an all-purpose institution at the service of his government, while leaving Venezuela's borders susceptible to incursions by Colombian guerrillas and paramilitaries.

In a country with Argentina's history, any proposed change in the role of the military mandates serious public debate, especially at a time when economic woes are likely to make labor unions and private businesses wary of potential jobs and opportunities lost under such an arrangement.

Kirchner has quickly shown that as president, he indeed is commander in chief. But he'll need much more than loyal military leaders to turn his armed forces into an effective, legitimate and progressive tool for his government.

Marcela Sanchez's e-mail address is desdewash(at symbol)washpost.com.

Washington, DC, June 6, 2003 (PAHO)—As part of the first Vaccination Week in the Americas, ministers of health and first ladies joined health workers and community leaders at 10 border areas across the region to vaccinate hard-to-reach children. Their efforts demonstrate that cooperation between bordering countries is essential for promoting health equity in the Americas.

The unprecedented effort, launched Sunday and continuing throughout the week, involves 16 countries from South and Central America, plus Mexico, Jamaica and the Bahamas – 19 countries in all. Plans are already under way for an effort to include the whole of the Western Hemisphere in April 2004.

The goal of the Vaccination Week in the Americas is to reach those children who have never been vaccinated or who have not completed their series of vaccines. The campaign seeks to vaccinate some 16 million children against major diseases, plus 2.7 million women of childbearing age against tetanus. In some areas campaign workers are going house to house, and in remote areas they are traveling by boat. Others are working from temporary health posts to reach marginal urban populations.

En Cucuta, on the Colombian-Venezuelan border, Colombia’s minister of social protection, Diego Palacio Betancourt, and the governor of the department of Santander del Norte participated in the June 1 launch of the campaign, along with representatives of Venezuela’s Tachira State health department.

In some parts of Paraguay, vaccination was done door to door.A similar group traveled to the towns of Bolpebra, Iñaparí y Asís on the border of Bolivia, Peru, and Brazil for launching ceremonies that took place in 115-degree heat and marked the first time a minister of state had ever traveled to any of these towns.

On the Ecuador-Peru border, in the towns of Huaquillas y Aguas Verdes, first ladies Ximena Bohórquez y Eliane Karp de Toledo joined their respective ministers of Health to launch the campaign. Similar events were held along the borders of Argentina and Bolivia, Chile and Bolivia, and Argentina and Paraguay, among others.

The historic initiative is aimed at consolidating the interruption of measles transmission in the region (no cases have been reported in the last six months), maintaining polio eradication, and protecting the region’s children from vaccine-preventable diseases. Experts from the Pan American Health Organization (PAHO) are following the campaign’s progress in the field, and a team from PAHO’s Public Information area is filming and documenting the effort alongside participating health workers.

Vaccination, which is provided free of charge, continues to be a highly cost-effective public health tool for preventing disease. Experts say the eventual goal is to achieve 95 percent vaccination coverage throughout the region.

PAHO was established in 1902 and is the world’s oldest ongoing health organization. PAHO works with all the countries of the Americas to improve health and improve the quality of life of its inhabitants. It serves as the Regional Office for the Americas of the World Health Organization.

Michael Kiefer The Arizona Republic Jun. 6, 2003 12:00 AM

Isabel Allende moved from Chile to San Francisco in 1988 to be with a man. She married that man so she could get a green card and stay in the country. She became an American citizen in 1992. But on Sept. 11, 2001, as the Twin Towers fell, the bestselling novelist finally decided that she had become American. The events of that day brought back painful memories of another Sept. 11, in 1973 - also a Tuesday - the day her uncle, Chilean President Salvador Allende, was killed in a military coup. "The images of burning buildings, smoke, flames and panic are similar in both settings," she writes in her new book, My Invented Country. "That distant Tuesday in 1973, my life was split in two; nothing was ever again the same: I lost a country. That fateful Tuesday in 2001 was also a decisive moment; nothing will ever again be the same, and I gained a country." Allende, 60, is the author of 11 books, most of them fiction. "Among the more commercial writers, she's probably the one taken most seriously," says Raymond L. Williams, professor of Latin American literature at the University of California-Riverside. Yet here is one of Latin America's most famous living authors, calling herself a norteamericana, an estadounidense (a U.S. citizen). She wants to stay, not just for love of a man, but because she wants to belong, to take part. She'd lived away from her native Chile for many years - but as an exile. Now she is an immigrant. "The exile looks toward the past, licking his wounds," she writes, "the immigrant looks toward the future, ready to take advantage of the opportunities within his reach." On Tuesday, Allende will talk about that conversion in Tempe, where she will read from My Invented Country, which is now out in English. Expect a good show: Allende has as great a reputation for her speeches as for her outsized personality. "When I met her for the first time, I was dazzled," says friend and novelist Amy Tan. "She has these great big luminous eyes, and she has a funny mouth. She opens her mouth and - you have no idea - you think she's going to spout magical realism, based on everything you've read about her, and then she comes out with this dirty joke, and your mouth drops open and you can't believe what you heard."

Memories and whimsy

The new book is subtitled A Nostalgic Journey Through Chile, which doesn't let on that it's also a journey from Chile, through time as well as space, a critical look at a country Allende thinks she remembers. Her grandchildren tell her she recalls things that never happened. Indeed, the word inventado in the book's Spanish title is more whimsical than its nearest English equivalent, "invented," and it carries a stronger connotation of things made up. "From the moment I crossed the cordillera of the Andes one rainy winter morning," she writes, "I unconsciously began the process of inventing a country." Allende was a journalist in Chile in 1973 when Gen. Augusto Pinochet took control of the government. Two years later, because of her name and her politics, she fled to Venezuela with her husband and two children. Allende was a foreigner in Venezuela, and it tinged her books. The Spanish word for foreigner is extranjero, whose root is linked to the words extraño, "strange," and extrañar, "to miss or to long for." "I think it's good for a writer to be searching for roots, to cling to memory, to try to understand your circumstances," she said in a recent telephone interview. "You don't take anything for granted. You observe carefully. I think the writing comes from my need to preserve my memory and to find a place to plant my roots, because I don't have a geographical place. It has to be a mythical place or a metaphorical place, which is the books." Allende's debut as a novelist came unexpectedly. In 1981, she started a letter to her grandfather, who was dying, and it turned into her first novel, The House of the Spirits, which came out a year later. Allende was immediately lauded as a "magical realist," a term often used to describe the fiction of Nobel-prize winner Gabriel García Márquez. Simply put, it describes a playful and quasi-mystical storytelling style that seems to give equal weight to the probable and the improbable, tongue-in-cheek and straight-faced. Allende, an urban and urbane Chilean, was surprised to be categorized with a tropical Colombian. "We are perceived as one continent abroad," Allende says, "because these writers seemed so similar or familiar in a way, and they were writing different stories in different styles, but everything was under the big label of Latin American Magical Realism." And though they are culturally different, they share a language that allows a looser perception of reality, but that depicts a reality nonetheless. And both, as professor Williams points out, listened to stories passed down orally from grandparents, stories that later found their way into their fiction. Tan went to hear Allende read shortly after she published her own first novel, The Joy Luck Club. She was delighted when Allende introduced the ghost of her grandmother, who, she told the audience, was standing next to her. "I couldn't tell if she was joking or serious," Tan recalls, "because she just sort of turned to the side and introduced her grandmother, and you could practically see her grandmother there, she was so lively." Williams says that much of Allende's appeal lies in her storytelling abilities, partly because, like García Márquez, she started out as a journalist and "consequently understands quite well how to communicate to a large audience." Critics describe her as the most-read Latin American female writer; she has sold more than 35 million books in 30 languages. "She's had an exceptional life," Williams says, "and she has an incredible ability to tell stories about that." Allende sees this at the heart of her or any writer's work. "All that one writes is based on our own experience, or one writes about things one cares for," she says. Exile was too much for Allende's marriage. In 1988, she met William Gordon, who would become her second husband, and she began her odyssey toward becoming an American. But even that word is loaded. South and Central Americans, Canadians and Mexicans often bristle that we in the United States have appropriated the word "American" to describe ourselves. Technically, they're all "Americans." "I didn't want to become an American or move forever to this country," Allende says. "I was just having an affair with a guy that I fell in lust with. And then after we started living together, things started to work." She liked California, liked its yoga classes and bookstores, and most of all liked its freedoms in lifestyle and politics.

Marriage of convenience

Then her visa ran out and she had to leave the country. She didn't want to stay illegally, she says, because she had been illegal before during her years in exile, and so she decided to marry Gordon. "I forced this poor man into marriage because I needed a green card," she says, her voice rising. "For no other reason - I'm not kidding! We've been very happy for 16 years, but that's just a miracle. The reason I married him is I couldn't be an alien." And though she became a citizen in 1992, actually considering herself American was not so easy, she found. She polished her English but felt she still didn't understand the nuances of the language and the codes and subtleties of the people who speak it. And perhaps they didn't understand her, and once again, she found herself relegated to a linguistic barrio. "I speak Spanish. Here, I'm just another Latino and I should be cleaning houses. What am I doing there on a platform with a microphone? That's the first question," she says with a laugh. "As a Latin American in the United States, people don't make much of a difference between Mexico or Argentina or Uruguay or Chile. It's different to be a Cuban in Miami than to be a Mexican farm worker in California." Or a Chilean novelist in the Bay area. But she's optimistic: She's an immigrant now, not an exile. She carries Chile in her heart and in her imagination, but she plans a future in the United States. "I don't want to be a customer," she says. "I want to belong to a community that goes somewhere and is doing something. So I want to be a citizen and I want to be involved."

Reach the reporter at (602) 444-8994.

Friday, 6 June 2003, 12:37 pm Press Release: Council on Hemispheric Affairs

www.coha.org Council on Hemispheric Affairs Monitoring Political, Economic and Diplomatic Issues Affecting the Western Hemisphere Memorandum to the Press 03.31 6 June 2003

COHA Research Memorandum:

The OAS Meets: A New Latin America Emerges?

• Fallout from the bitter debate over war in Iraq can be expected to play a dominating role at the summit and reshape major relationships among OAS members-if not in the meeting hall, then in the corridors.

• The Kirchner administration makes its first major foreign policy debut, and can be expected to signal whether it plans to follow a predominantly pro-Mercosur or pro-FTAA agenda.

-. The issue of Cuba returns to the agenda and is sure to further divide the assembly.

• Look at the role of Brazil, the region's new grand diva.

On June 8, foreign ministers of the thirty-five members of the Organization of American States will descend upon Santiago, Chile for the annual meeting of that body's General Assembly, a gathering at which delicate diplomacy aimed at patching up, or at least submerging, the disagreements that have divided the hemisphere over the past year can be expected to overshadow the official agenda item of "good governance." Just as the recent G8 summit in France was more a diplomatic pageant than a productive discussion about the state of the world economy, the significance of this OAS meeting will lie not in any concrete product or declaration expected to emerge, but rather in the web of evolving interhemispheric relations showcased there-relations that have been badly fractured of late by issues as diverse as the war on Iraq, the proposed Free Trade Area of the Americas and the crackdown on dissidents in Cuba. Equally important, this meeting marks the OAS debut of the administrations of Presidents Luis Inácio "Lula" da Silva of Brazil and Néstor Kirchner of Argentina. Thus it can be expected to help set the tone of relations between a growing political grouping of center-left South American leaders led by Lula, with a strong orientation towards multilateralism and progressive social policy, and the unilateralist, free-trading Bush administration, as represented in Santiago by Secretary of State Colin Powell.

The OAS Post-Iraq: Tentative Rapprochement?

Clearly, the most sensitive issue being faced by the OAS member states is the same one that dominated the G-8 summit: the aftermath of the unilateral American invasion of Iraq, which was at the time staunchly opposed by many OAS members and universally rejected in public opinion polls throughout the region, including Canada. Diplomatically, U.S. policy was challenged in the UN Security Council by the two Latin American delegations there, Chile and Mexico. However, now that the Bush administration has been somewhat appeased by the sacking of Chile's UN ambassador Juan Gabriel Valdés, who vocally opposed the war, Santiago can expect far more cordiality upon the appearance of the somewhat tarnished Powell in Chile than President Chirac recently received from Bush when the two met in Evián.

For its part, the Lagos administration has made it extremely clear that it wishes to bury any trace of recent disagreements with Washington as soon as possible, almost groveling as it insisted repeatedly that Powell would be most welcome at the OAS gathering-in spite of his probable finagling with intelligence data to justify his charge at the UN that Iraq possessed weapons of mass destruction. In fact, the Chilean paper El Mercurio went so far as to declare that he would be the "star" of the event; other Chilean diplomatic sources cited in the same conservative paper indicated that Powell's visit to Santiago had been undertaken precisely in order to smooth things over (limar esperezas) following the Iraq fracas.

At the same time, it is highly doubtful that American relations with Mexico, the other Security Council dissident, will be mended quite as rapidly. In the case of Chile, there were economic incentives for the government to humble itself and make amends: namely, the Lagos administration's desire to see the US-Chile free trade agreement, which had already been concluded and initialed by President Bush, sent to Congress for its approval and ratification. In contrast, Mexico and the United States have engaged in a series of trade skirmishes lately over agricultural exports under NAFTA, disputes which have grown steadily more acrimonious and show no signs of being close to resolution. There is also a heavy load of lingering ill-will over the failure to conclude an immigration agreement that would regularize the status of Mexican immigrants in the U.S. and facilitate the issuing of tens of thousands of new visas under a revised "guest worker" program. In general, a malaise of resentment prevails among Mexican opinion makers over the Bush administration's complete (if benign) neglect of Mexican-American relations since September 11, and particularly since the UN votes on Iraq.

All of these unresolved issues make it unlikely that relations in Santiago between Powell and his Mexican counterpart, Foreign Minister Luiz Ernesto Derbez will be particularly warm. This more pessimistic view was underscored by remarks made in comments by Luigi Einaudi, former American diplomat and now assistant secretary-general of the OAS. He suggested that Latin American governments had underestimated the extent to which they had harmed their standing in Washington by opposing the war, and that in fact "it was not possible in Santiago or Mexico City to realize the degree of disappointment of President George Bush" at the perfidy of his hemispheric compatriots.

Argentina and Brazil: New Administrations Make a Hemispheric Debut

Not only will the atmosphere of this summit be one of heightened tensions as a result of the Iraq crisis, there is also a certain air of expectancy as Foreign Ministers Celso Amorim of Brazil and Rafael Bielsa of Argentina make their OAS debuts as the representatives of the newly elected administrations of Presidents da Silva and Kirchner, respectively. While Amorim can be expected to re-articulate the same regionalist and pro-Mercosur agenda that the Lula administration has aggressively promoted over the last six months, Bielsa will be under singular scrutiny; this is one of his first opportunities to articulate the new Argentine administration's foreign policy in a highly visible forum, with the two hemispheric heavyweights, Brazil and the United States, likely aggressively courting him in an effort to line up a valuable ally for their respective causes.

On the one hand, Brasília is hoping for the support of Buenos Aires in its project of regional integration, which entails strengthening and expanding Mercosur and postponing further FTAA negotiations until a united South American position can be reached that will call for U.S. concessions on crucial issues such as agricultural subsidies. Washington, on the other hand, would like to enlist Argentina as a FTAA supporter, a stance that would require Buenos Aires to deprioritize Mercosur, at least in the immediate future. Thus far, the Kirchner administration has made tantalizing promises to both sides. While campaigning, Kirchner declared Argentina's strategic alliance with Brazil to be his main foreign policy priority, and Bielsa has already met with his counterpart Amorim to discuss Mercosur, trade issues and the desired expansion of the UN Security Council, which might make another seat for Latin America available. A date for a meeting between Lula and Kirchner is to be finalized within the next fifteen days. At the same time, Foreign Minister Bielsa assured Powell in a personal conversation that "our work of subregional integration far from excludes continental integration, which we hope to construct on a realistic and harmonious footing . . .[taking] into account the diversity and so the needs of each country."

While until now the Kirchner administration has been able to please everyone, the upcoming summit may well mark the end of its honeymoon period of foreign policy neutrality. When Bielsa meets Powell in Santiago on June 8, and especially after the latter goes on to Buenos Aires to meet President Kirchner in person on June 10, the latter's administration will be forced to tilt its hand, either making commitments to Washington that Brasília will find extremely unpalatable or staking out a more reserved position vis-à-vis the U.S. and committing itself to a regionalist, pro-Brazil agenda. The choice will have momentous repercussions for both Argentina and Latin America as a whole.

Cuba: The Ripple Effects of Repression

Competing with these complex maneuverings will be the recent crackdown in Cuba, where more than seventy-five dissidents were arrested and imprisoned in March and April, and the failure of earlier attempts to craft any hemispheric initiative to condemn these events. Following the arrests, the ambassadors of Canada, Chile and Uruguay presented a declaration to the Permanent Council of the OAS (composed of the ambassadors of all the member states) that expressed "their deep concern for the grave deterioration of the human rights situation in Cuba . . . as evidenced by the arrest and severe sentences for more than seventy-five Cuban citizens who had participated in peaceful political activities." The declaration was supported by the United States, Argentina, Colombia, Bolivia, Ecuador, Peru and most of Central America, but opposed by Brazil, Venezuela and the fifteen members of Caricom; Mexico and Guatemala expressed sympathy for the aims of the resolution but maintained that the Permanent Council was not an appropriate forum in which to address this question because Cuba had no opportunity to defend itself.

Ultimately, the declaration received the support of only sixteen OAS members, and its sponsors were forced to withdraw it on May 20. They declared their intention of submitting it as a pronouncement of the group to the Assembly, though it cannot be considered an official document. Despite the deadlock, further debate on the subject can certainly be expected, and however much Secretary Powell and the Bush administration may wish for the OAS to unite in denouncing recent events in Cuba-which in large measure, they had helped to provoke by instructingU.S. diplomatic personnel in Havana to supply and closely liaise with the dissidents-the adoption of a joint OAS position on the subject is highly unlikely. Brazil, Mexico (the only Latin American country to maintain continuous relations with Cuba) and especially Venezuela will not readily abandon their defense of Cuba in deference to Washington's wishes.

This new wave of diplomatic maneuvering over Cuba is another reminder of the persistent divisiveness of this issue in hemispheric relations. Recently, it has seemed possible that Castro's long isolation, vigilantly enforced from Washington, may be significantly easing up with the emergence of Chávez, Lula and even Kirchner (at whose inauguration Castro was enthusiastically cheered) as supporters of a policy of relaxation toward Havana; the dynamics of the debate over Cuba at the OAS meeting will be crucial in revealing the nature and strength of this possible nascent pro-Castro coalition.

Finally, yet another matter of great import as the OAS assembly unfolds will be the comparison of the Santiago meeting with that of the recently concluded Rio Group in Lima. More and more, Latin American pundits are looking upon the all-Latin Rio nations as forming the basis of a new regional grouping in which the U.S. and Canada will have only observer status, as is the case with the former metropole nations in the Organization of African Unity, and the OAS meeting will be closely looked to as a source of further evidence for or against this theory.

Momentous events over the past six months both inside and outside the hemisphere have engendered a situation in which relations among American states are both particularly tense and remarkably fluid. While recent debates over Iraq and Cuba have provided hints at the foreign policy positions of major Latin American players, much is still to be determined about the emerging contours of hemispheric relations. The upcoming OAS summit should be closely watched as positions are staked out and sides chosen in the explosive debates to come over democratization, multilateralism and trade. Indeed, there is a strong possibility that the OAS will be more fundamentally divided at this meeting than ever before, split between Washington's more compliant free trading clients and an emerging Latin American bloc willing and able to push a very different agenda.

This analysis was prepared by Jessica Leight, research associates at the Council on Hemispheric Affairs. Issued 6 June 2003

The Council on Hemispheric Affairs, founded in 1975, is an independent, non-profit, non-partisan, tax-exempt research and information organization. It has been described on the Senate floor as being "one of the nation's most respected bodies of scholars and policy makers." For more information, please see our web page at www.coha.org; or contact our Washington offices by phone (202) 216-9261, fax (202) 223-6035, or email coha@coha.org.

June 5 (<a href=quote.bloomberg.com>Bloomberg) -- Brazil's currency rose to its highest close in almost 11 months after the central bank sold contracts used to protect investors from a decline in the currency, reducing demand for dollars.

The real rose 2.0 percent to 2.8575 per dollar in Sao Paulo, its highest closing price since July 18. The real has gained 24 percent in 2003, the best performance of the 17 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 insurance 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.''

Bond Sales

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.

The real got an added lift in afternoon trading in Sao Paulo after Banco Safra SA said it plans to sell at least $75 million of two-year bonds to yield 5.5 percent to 5.75 percent. Morgan Stanley has been hired to manage the sale.

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.

Car Exports

Brazil's auto manufacturers said exports of automobiles rose 8.6 percent in May to 50,400, the highest monthly amount since at least June 1997, from 46,395 in April.

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.

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

In Brazil's capital, Brasilia, a committee of Brazil's lower house of Congress said a bill to limit pension expenses is constitutional, moving forward plans designed to help the government eventually reduce its $400 billion debt. Reduced default risk may make investors more willing to invest in Brazil.

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.

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 1.06 cent to 91.38 cents on the dollar, its highest close ever, causing the yield to fall to 10.11 percent, according to J.P. Morgan Chase & Co.

Mexico, Regional Currencies

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 0.3 percent to 10.5433 per dollar from yesterday's 10.5725 per dollar close, when it fell 2.7 percent, the currency's largest one-day decline since Jan. 13, 1999.

Colombia's peso rose 0.1 percent to 2,838.50 per dollar. The Argentinean and Chilean currencies were little changed. Peru's new sol weakened 0.1 percent to 3.4837 per dollar. Venezuela fixed its bolivar at 1,598 this year.