www.forbes.com Reuters, 01.30.03, 12:33 PM ET By Susan Schneider

NEW YORK, Jan 30 (Reuters) - Brazilian sovereign bonds climbed nearly 1 percent on Thursday, lending support to the broader market, as a record primary budget surplus heightened investor confidence in the financial health of Latin America's largest economy. Brazil's share of J.P. Morgan's Emerging Market Bond Index Plus added 0.75 percent in terms of daily returns, underpinning a 0.19 percent gain in the broader index. Brazil's benchmark C bond <BRAZILC=RR> picked up 0.625 points to 68.375 bid. Brazil's bonds clawed their way back from a spate of negative days after the government reported a 2002 primary budget surplus of 52.4 billion reais ($14.7 billion), a figure that put the nation well ahead of its yearly International Monetary Fund target for the fourth time in a row. The surplus was 4.06 percent of gross domestic product. Brazil was also buoyed by expectations that Finance Minister Antonio Palocci will raise Brazil's 2003 primary fiscal surplus target from last year's goal of 3.75 percent. The move would fire investor confidence by further confirming rookie President Luiz Inacio Lula da Silva is sincere about keeping public finances solid. "After the happiness of the election and the good things (Lula) said right after the election, it was time to follow through on some of the policies, and he's starting to do that," said an emerging debt trader. Uncertainty about a possible U.S.-led military strike on Iraq weighed on Brazil's debt and the broader market in recent sessions as investors fret an attack would batter an already tepid U.S. economy, which would in turn weigh heavily on Latin America. The war worries carved a chunk out of the rally Brazilian bonds saw at the turn of the year, when investors snapped up the debt on optimism for Lula's pledges to keep a tight rein on finances and pursue key structural reforms. Lula roiled markets for much of 2002 as Wall Street feared his inexperience in government and pledges to bolster social programs would lead to economic mismanagement and an eventual default on the debt. While investors have warmed to Lula, they are keeping a keen eye on his reform agenda, particularly a proposed overhaul of the costly pension system, said analysts. "From what we can see now, (the pension reform) appears to be much more significant than what we had seen from the former government," said Knut Langholm, a senior vice president at State Street Research and Management Co. "I think the market remains optimistic on that front, even though it will be subject to some controversy because it will create winners and losers," said Langholm. He added that without a meaningful reform, Brazil would need to maintain a primary surplus target of 5.5 percent of GDP or more. Venezuelan bonds, meanwhile, took a breather from two straight days of solid gains. The nation's share of the EMBI-Plus inched 0.75 percent lower, with the DCB bond <VENDCB=RR> slipping 0.5 points to 72.75 bid. Venezuelan debt made a fierce move higher this week as a two-month-old general strike, staged by foes of President Hugo Chavez in a bid to force his resignation or new elections, showed signs of weakening. With Chavez utilizing replacement workers and troops in an effort to break the strike, oil output has climbed in recent days, allaying fears that a sharp, protracted drop in the government's chief source of revenues would leave it without the cash to pay its debts. In addition to the partial oil output recovery, the resumption of normal hours by private banks and the reopening of some restaurants and stores have also signaled the strike's grip is losing hold. But while investors are hunting to pick up Venezuelan debt, the recent price jump means they are not too tempted to do any buying, said the emerging debt trader. "I think there is some latent demand -- there are still a lot of people who don't have Venezuela on their books and are going to need to buy it," said the trader. "They're looking for dips, and they're probably not going to get it unless there is significant bad news." Among other emerging nations, Peru launched a $500 million, 12-year global bond on Thursday morning, a sale that was set to price later in the session.

www.tuscaloosanews.com South American travel diary By Sylvere and Martha Coussement January 30, 2003

ON THE AMAZON RIVER, Brazil | There is nothing like traveling first class. When first conceived, I had described to my wife a genteel drive around South America, staying in, if not good hotels, at least reasonable accommodations. Our optimism was dashed by the first week into our travels.

Manaus, Brazil, is the third-largest city in this country with one and half million people living on the mighty Amazon River. In spite of being 1,000 miles from the Atlantic coast, it is an international port with an industrial complex that prides itself on having a low-tax structure for business customers.

The links to the world for Manaus are principally through the river. Minor routes are northbound to Venezuela, and a road to the west, which is sometimes unpassable. It is steamy, bustling, and seedy, but it/sretains vestiges of its glory days 100 years ago when rubber trees were important and affluence was abundant.

We felt certain there would be a choice of boats to take us and our car, a 1992 Buick Century, to Belem, on the mouth of this great river highway.

Yes, we were told, a barge capable of handling our car leaves three days a week for Belem. Barge!? Yes, all other boat traffic handles people only, the “buses" of the river. We were assured that there were “restaurant" and bath facilities.

“Oh, fine, what types of cabins are available?" we inquired.

The answer led us to believe that we were really having a problem with our Portuguese. Our cabin was to be our car, since the barge is just for handling commercial traffic.

We loaded up at 9 p.m. for a midnight departure along with 32 trailers, two full eighteen-wheeler rigs, an assortment of smaller trucks, and two cars, all on a 200-foot floating piece of steel. The lighting for all this? Moonlight and flashlights.

We were not very happy campers on board, nor did the animals show particular enthusiasm, since this was to be a four-day trip. Sleeping accommodations were a la hammock ó if you had one ó while the rest of the facilities included the tug “one holer" with a pipe on the ceiling for shower, the whole thing a la unisex.

The “restaurant" facility was the galley of the tug which served three meals per day, kitchen buffet style, and sit-anywhere-you-want-on-deck dining room (be careful of the grease). Ah, yes, just the cruise we had envisioned.

After the fact, we felt the experience was much more delightful than advertised. The Amazon is immense and wild and teems with wildlife on its banks and tributaries. The indigenous people are small and dark-skinned, and were curious about these tall, white folks with a foreign car (Buicks are not imported into Brazil).

They intercepted the barge in their small dugout canoes, lashed it to the tug, and jumped aboard to visit or sell fruits or vegetables. They rode down river for a while and then hitched a ride up river on westbound boats. The ease, agility, and fearlessness with which these people scampered on and off moving vessels from small dugout canoes were fascinating. The dangers were real. If the piranha did not get them, the crocodiles on the banks could.

After sleeping on the hood or with feet hanging out of the car window the first night, we found two spare hammocks, which we strung under the nearest trailer, an effort aided by friendly Brazilian truck drivers. Much conversation was made using dictionaries, hand signals, and Portugese-English. We all commiserated over the daily diet of rice, beans, and meat for breakfast, lunch, and dinner.

Communication and living conditions were not the only challenges as moving around required constant vigilance. There were no lifelines on the barge, and scampering between the barge and the tug was necessary several times per day. Fall overboard? There would be little opportunity for survival.

If not sucked in below the vessel, if the fish or crocs missed you, and if you could swim a mile or more to shore, then all that was necessary was to deal with the jungle. The distances on this river are great, and river travel could be characterized as dull, possibly punctuated by moments of panic and discomfort. In spite of the wonderful experience with the people and scenery, I think we will try to avoid further barge travel if possible.

Next week: Onward to the sights and sounds of Rio.

www.alertnet.org NEWSDESK   28 Jan 2003 19:31

(Adds details, background) By Mark Egan

WASHINGTON, Jan 28 (Reuters) - The International Monetary Fund on Tuesday gave Brazil's economic performance a resounding endorsement, saying there was every reason for optimism as long as the nation stayed the pace of economic reforms.

In a statement released on the lender's web site after IMF Managing Director Horst Koehler met Brazilian President Luis Inacio Lula da Silva in Paris, the fund said it was encouraged by recent strengthening in market confidence toward Brazil and that its economy was on track for recovery.

"We were encouraged by the general improvements in market confidence toward Brazil over recent months, driven by a wider appreciation that sound economic policies will be maintained in Brazil," IMF chief Koehler said.

"Of course, the global environment remains challenging and we agreed, therefore, to keep in close touch, as the IMF continues to support Brazil's efforts to emerge from its temporary difficulties," Koehler said.

Koehler said Brazil's economic program, backed by a $30.7 billion IMF loan, "is on track," saying: "There is every reason for optimism that a basis for sustained economic growth and social progress is being established in Brazil."

Koehler said his discussions with Lula and Finance Minister Antonio Palocci encompassed the global market environment, developments in Latin America and the situation in Brazil. The IMF chief said he was impressed by Lula's vision for speeding up economic activity in Brazil while improving social equity.

Koehler said the new Brazilian president told him that reforms aimed at bolstering Brazil's continuing recovery would be carried out in the coming weeks and months.

"Maintaining fiscal sustainability by progressive structural reforms will lie at the heart of macroeconomic policy," Koehler said.

In December, the IMF gave Brazil's economy a positive bill of health, freeing up a $3.1 billion payment under the nation's massive loan, inked in September of last year.

That loan was aimed squarely at assuaging market jitters, which hammered the nation's currency ahead of November's presidential elections. Before the election, markets had feared that if leftist Lula was elected, he might abandon IMF reforms and undermine the Latin American economy by running up government spending on social programs.

With that in mind, the IMF structured its loan to make the bulk of the payments available only if Lula stayed the course of reforms during 2003.

The latest IMF endorsement came as a new poll released in Brazil showed that 78.4 percent of Brazilians expect the new government to do a good job.

Lula, a one-time radical union boss who became Brazil's first working-class president, was elected in a landslide on Oct. 27, winning the most votes ever in Brazilian history thanks to his promises to create jobs and wipe out hunger.

www.forbes.com Reuters, 01.28.03, 12:26 PM ET

WASHINGTON, Jan 28 (Reuters) - Outgoing New York Fed President William McDonough on Tuesday gave high marks to the new leaders of Brazil's economic team.

McDonough advised banks to remain in Brazil, saying he was encouraged by statements made by Brazil's new Finance Minister Antonio Palocci and central bank head Henrique Meirelles.

"The new finance minister and central bank governor are saying all the right things and are getting remarkable support from the democratically-elected president," McDonough said in a speech to the Bankers' Association for Finance and Trade.

A new government headed by a left-leaning former union leader Luiz Inacio Lula da Silva took over on Jan. 1.

The political views of Brazil's new leadership raised fears among investors that sent the real currency tumbling last year. However, investors have recently cheered a more moderate stance by Lula's top economic advisors.

Speaking at the World Economic Forum in Davos, Switzerland, Meirelles said, according to Brazilian media reports, that the government would target a surplus above 4 percent of GDP, up from the 3.75 percent goal agreed with the International Monetary Fund.

The comments were broadly welcomed by the investor community, which had worried Brazil may not produce a surplus high enough to finance the country's hefty debt-to-GDP ratio, now close to 60 percent.

On Thursday, Brazil's economic team also secured the endorsement of a top U.S. Treasury official.

"The focus on fiscal policy is very welcome," said John Taylor, the Treasury's under secretary for international affairs. "The signs are good."

www.forbes.com Reuters, 01.28.03, 2:31 PM ET By Mark Egan

WASHINGTON, Jan 28 (Reuters) - The International Monetary Fund on Tuesday gave Brazil's economic performance a resounding endorsement, saying there was every reason for optimism as long as the nation stayed the pace of economic reforms.

In a statement released on the lender's web site after IMF Managing Director Horst Koehler met Brazilian President Luis Inacio Lula da Silva in Paris, the fund said it was encouraged by recent strengthening in market confidence toward Brazil and that its economy was on track for recovery.

"We were encouraged by the general improvements in market confidence toward Brazil over recent months, driven by a wider appreciation that sound economic policies will be maintained in Brazil," IMF chief Koehler said.

"Of course, the global environment remains challenging and we agreed, therefore, to keep in close touch, as the IMF continues to support Brazil's efforts to emerge from its temporary difficulties," Koehler said.

Koehler said Brazil's economic program, backed by a $30.7 billion IMF loan, "is on track," saying: "There is every reason for optimism that a basis for sustained economic growth and social progress is being established in Brazil."

Koehler said his discussions with Lula and Finance Minister Antonio Palocci encompassed the global market environment, developments in Latin America and the situation in Brazil. The IMF chief said he was impressed by Lula's vision for speeding up economic activity in Brazil while improving social equity.

Koehler said the new Brazilian president told him that reforms aimed at bolstering Brazil's continuing recovery would be carried out in the coming weeks and months.

"Maintaining fiscal sustainability by progressive structural reforms will lie at the heart of macroeconomic policy," Koehler said. In December, the IMF gave Brazil's economy a positive bill of health, freeing up a $3.1 billion payment under the nation's massive loan, inked in September of last year.

That loan was aimed squarely at assuaging market jitters, which hammered the nation's currency ahead of November's presidential elections. Before the election, markets had feared that if leftist Lula was elected, he might abandon IMF reforms and undermine the Latin American economy by running up government spending on social programs.

With that in mind, the IMF structured its loan to make the bulk of the payments available only if Lula stayed the course of reforms during 2003.

The latest IMF endorsement came as a new poll released in Brazil showed that 78.4 percent of Brazilians expect the new government to do a good job.

Lula, a one-time radical union boss who became Brazil's first working-class president, was elected in a landslide on Oct. 27, winning the most votes ever in Brazilian history thanks to his promises to create jobs and wipe out hunger.