www.forbes.com Reuters, 01.10.03, 1:14 PM ET

SAO PAULO, Brazil, Jan 10 (Reuters) - Brazil's Central Bank sold $284 million in domestic debt of $600 million on offer on Friday, its second auction since President Luiz Inacio Lula da Silva took office on New Year's Day.

The securities are part of $1.8 billion in government debt linked to the dollar coming due next Thursday, meaning the bank has already rolled over 74 percent of that amount. It sold $1.03 billion earlier in the day.

In the second auction, the bank sold debt maturing in October and April 2004, agreeing to pay interest rates of 13.77 percent and 13.50 percent respectively.

In the months preceding Lula's election win in October, investors balked at buying government paper for fears that a victory by the one-time radical union boss might nudge the country toward a default, prompting some to demand interest rates as high as 50 percent to buy government debt.

Since then, Lula has repeatedly pledged to honor contracts and maintain tight fiscal policies, encouraging wary investors to line up to buy domestic debt notes again.

www.forbes.com Reuters, 01.10.03, 12:19 PM ET   By Susan Schneider

NEW YORK(Reuters) - After a year of turmoil sown by Argentina's financial meltdown and Brazil's election shivers, Latin American debt issues have flowered in recent days as fresh turn-of-the-year funds and budding hopes for Brazil's new leader infuse the market with cash.

Chile and Mexico braved the once-rocky market this week for a hefty $3 billion in financing, while two Brazilian banks are issuing a further $200 million. A string of Central American nations are on the docket with expected sales this month, including a $500 million planned sale by Guatemala.

The revival is partly the product of the so-called January effect, said analysts. With the old year behind them, investors on the hunt for higher-yielding assets begin the game anew, meaning they must put their money in the markets if they hope to rack up gains in the new year.

Brazilian President Luiz Inacio Lula da Silva's honeymoon with Wall Street is also helping the Latin American debt market bloom. Where investors once viewed the former union boss as a likely death knell to Latin America's largest economy, Lula's cabinet choices and pledges of fiscal austerity and reforms have turned the tide of sentiment.

"The outlook for the first quarter is one in which people are putting money to work and in which Brazil is at least stabilized politically and fundamentally, which justifies people's short-term confidence," said Christian Stracke, head of emerging markets strategy at research firm CreditSights.

Lula, who ran on the left-leaning Workers Party ticket, took office on Jan. 1.

SCANT SALES IN 2002 The fallout from Argentina's disastrous devaluation and default and the skittishness toward Brazil made for a turbulent 2002 across Latin America.

The debt of market heavyweight Brazil closed 2002 with a loss of 3.4 percent, capping the region's gains at 7.2 percent, according to J.P. Morgan's Emerging Market Bond Index Plus. Russia, by contrast, notched up a lofty 35.9 percent return and Turkey gave investors a solid return of 20.7 percent.

Latin American debt sales suffered in tandem. The volume of issues sank 48 percent in 2002 from 2001 and Latin America made up just 28 percent of emerging market deals last year, a sharp drop from its 48 percent share in 2001, according to industry tracker Dealogic.

But the first days of 2003 show signs of a thaw. Chile's mad dash to the markets on Wednesday yielded $1 billion, a deal Chilean Finance Minister Nicolas Eyzaguirre said had seen demand of $4 billion. Mexico doubled its original plans for $1 billion to secure $2 billion in its sale on Thursday.

In Brazil, where credit to companies shriveled last year because of election fears, Banco Safra and ABN Amro Real, the Brazilian unit of of Dutch bank ABN Amro, are selling $100 million in debt each. Seven Brazilian banks have offered bonds in international markets so far this year.

"Last year there was a lot of issuance involving emerging Europe and emerging Asia. The problem was that there wasn't much issuance involving Latin America," said Arturo Porzecanski, head of emerging markets research and debt strategy at ABN-Amro. "So now when Chile comes with a $1 billion and the first Brazilian bank deals in a long time bubble up to the surface -- and there's talk that Central American or Caribbean countries will be next -- we marvel. We marvel because we've been 40 years in the desert," said Porzecanski.

Other emerging economies also jumped into the markets this week. The Philippines raised $500 million Wednesday in the opening of an existing bond maturing in 2013, while Turkey sold a $750 million 10-year dollar bond Thursday.

"A lot of money has been allocated to the emerging markets -- we hear that just this week about $1.5 billion in new money came into the marketplace -- so therefore issuers are taking advantage of it and trying to soak up the excess liquidity," said Walter Molano, head of research at BCP Securities.

TROUBLES STILL LOOM FOR LATIN AMERICA While the tone is rosier for Latin American issuers, not every would-be debt issuer is in for a smooth ride.

Venezuela is the source of scant cheer among investors, for example, because of a five-week old general strike staged by foes of President Hugo Chavez. The protest, aimed at forcing Chavez to resign or call new elections, has strangled oil production and raised concerns that an increasingly cash-strapped government will not be able to pay its debts.

Argentina, meanwhile, remains a market pariah after defaulting on $95 billion in private debt and an $800 million World Bank loan. Uruguay is still trying to right its economy after being pummeled by the fallout of Argentina's crisis.

Still, if Lula can keep Wall Street's faith, Latin American debt issues will at least have a better chance of success than they did last year. "If the vultures that were circling Brazil from April through September definitely vanish from the sky, all the little animals will come out of their caves," said Porzecanksi.

(Reporting by Susan Schneider; editing by Dan Grebler; Reuters Messaging: susan.schneider.reuters.com@reuters.net, tel: +1 646 223 6319)

www.forbes.com Reuters, 01.10.03, 11:34 AM ET  By Raquel Stenzel

TERESINA, Brazil, Jan 10 (Reuters) - Making good on a campaign promise to confront misery head on, President Luiz Inacio Lula da Silva took 30 of his top aides back home to Brazil's hardscrabble northeast on Friday to visit some of the nation's worst pockets of poverty.

Dubbed "the caravan of hunger," the two-day tour is intended to highlight Lula's anti-hunger program called "Fome Zero," or "Zero Hunger," that he has made his center-left administration's top priority.

Lula, Brazil's first elected leftist leader, kicked off the trip at the Irma Dulce shantytown in the city of Teresina, where he was greeted by thousands of residents, many bearing written requests on sheets of paper. One dweller, Lula said, asked for a soccer field. Another wanted a septic tank.

"A poor person is a poor person anywhere, but the truth is that you have poverty here that is worse than any other," said the former metalworker, his shirt soaked from the sweltering heat.

"You have a situation in which poverty stops being just poverty, and turns into misery."

Lula introduced his cabinet one by one like a rock star presenting his backup band before a short speech focusing on hunger and the rights of Brazilians to basic services like health and education.

Although in a better state than many other Brazilian shantytowns, or favelas, Irma Dulce is home to some 30,000 people who like nearly one in three people in Brazil are poor and have only limited access to basic sanitation, health and education.

Lula had originally planned to launch the Zero Hunger program during the trip but delays in putting it together have postponed its unveiling until later this month.

The details are still sketchy, but it will reportedly involve new measures such as food coupons and existing programs Lula says will be made more efficient.

LULA AT HOME The trip was Lula's first since taking office on New Year's Day. Although he has made a strong effort to put forth a statesman-like appearance, the 57-year-old of humble origins is at his most comfortable on the streets with the working class.

Even with a presidential security detail and bow-tied waiters with cups of water behind him, Lula still showed the common touch that gave him a landslide victory in October. He peppered his speech with words and phrases common in the northeast, where he was born, and stopped to talk to people and sign autographs.

"I really liked his simplicity. If it were a campaign, it would be another thing, but he's already been elected," said Joselino Rodrigues de Souza, a 29-year-old unemployed construction worker.

Lula was scheduled to fly to the city of Recife in his home-state of Pernambuco, where he will spend the night. On Saturday, he will visit a poor area in the state of Minas Gerais he dubbed the Valley of Misery during the campaign.

Friday January 10, 11:13 PM sg.biz.yahoo.com

RIO DE JANEIRO (Dow Jones)--Brazil's Petroleo Brasileiro (PBR), or Petrobras, said late Thursday it has postponed yet again tenders for the construction of two oil platforms.

Petrobras said in a statement that interested bidders now have until between Feb. 12 and 26 to hand in their proposals. The previous deadline was between Jan. 13 and 27 while the original date was Dec. 16.

The oil giant is tendering for construction of the P-51 and P-52 drilling platforms at a cost of $1 billion, according to market sources.

Petrobras said it was "complying with requests from interested bidders for the extension of the deadline for the delivery of the proposals."

President Luiz Inacio Lula da Silva, who came to power Jan. 1, has severely criticized the federally owned oil giant for ordering construction of oil rigs abroad instead of building them at home.

The controversy fanned nationalist sentiment in the last weeks of Brazil's presidential election campaign ahead of a final Oct. 27 vote. Lula and the former Petrobras' chief executive Francisco Gros engaged in a heated debate through local media about where to build the rigs.

Recent press reports suggested the extension of the deadline was political, but the company's chief executive Jose Eduardo Dutra said the decision came after potential bidders made the request for more time.

One platform, called P-50, was awarded in July to Singapore-based Jurong Shipyard, whose bid was $14 million lower than that of the Brazilian-Singaporean consortium FelsSetal.

If finished on schedule, the $496 million platform will go online in 2004, processing up to 180,000 barrels of oil a day in Brazil's rich offshore Albacora field.

The rigs are key for Brazil's goal of becoming self-sufficient in oil production by 2005, when domestic consumption could be as high as 2 million barrels per day. Brazil has won worldwide recognition for its deep-sea drilling technology.

-By Adriana Brasileiro, Dow Jones Newswires; (5521) 3288-5004; adriana.brasileiro@dowjones.com

'Axis of evil' would expand, expert warns www.globeandmail.com By JEFF SALLOT Friday, January 10, 2003 – Print Edition, Page A8

OTTAWA -- Brazil is scrambling to clean up the diplomatic fallout from a suggestion by its rookie Science Minister that the country needs to know how to build nuclear bombs.

The comments -- since "clarified" by Brazilian diplomats -- tripped alarms at the United Nations and in Washington, where jittery officials are trying to deal with nuclear crises in North Korea and Iraq, and hardly need a new one in South America.

For Brazil or others, hinting about going nuclear as part of a strategy to win respect internationally is bound to backfire, some experts said.

"This unfortunate statement has done political damage," said Luis Bitencourt, director of the Brazil Project at Washington's Woodrow Wilson Center.

Any hint that the newly elected government of President Luiz Inacio Lula da Silva is trying to revive Brazil's nuclear ambitions would be exploited by suspicious U.S. right-wingers, who would lump Brazil in with U.S. President George W. Bush's so-called axis of evil, Mr. Bitencourt said.

Brazilian officials have to be careful about their words because many UN members remember that the country's military dictatorship tried to develop nuclear weapons, Mr. Bitencourt said. Brazil has the most advanced nuclear-energy and research programs in Latin America.

The furor was set off by a radio interview this week in which Science and Technology Minister Roberto Amaral was asked whether Brazil needs to develop the knowledge to manufacture nuclear weapons.

"We cannot renounce any scientific knowledge -- the knowledge of the genome, the knowledge of DNA, the knowledge of nuclear fission," he said.

Earlier in the interview, Mr. Amaral said Brazil is against nuclear proliferation but cannot erase its knowledge of the technology.

The minister said that although Brazil is a country of peace, it needs modern armed forces with "high technological development."

When the interview was broadcast on the Portuguese-language service of the British Broadcasting Corp., it set off alarms at the Vienna headquarters of the International Atomic Energy Agency.

The IAEA, the UN's watchdog on nuclear-proliferation questions, is involved with crises in Iraq, where its inspectors are looking for evidence of a nuclear-weapons program, and with North Korea, which recently expelled UN nuclear-program inspectors.

The agency sought clarification from Brazil, and is satisfied that the country intends to adhere to the Treaty on the Non-Proliferation of Nuclear Weapons, IAEA spokesman Mark Gwozdecky said last night.

The Brazilian Ministry of Foreign Relations said there has been no change in the country's fundamental commitment to renounce the development of nuclear weapons.

The ministry noted that the Brazilian constitution prohibits bringing nuclear weapons into the country aboard the ships of other countries. Other officials vowed that Brazil favours nuclear research only for peaceful purposes.

Brazil and rival neighbour Argentina halted their nuclear-weapons programs in the mid-1980s. But there are suspicions that at least some Brazilians want the weapons to give the country extra diplomatic heft to match its emergence as an economic power.

During the fall presidential-election campaign, Mr. da Silva criticized the non-proliferation treaty, saying it favours the original nuclear-weapons states -- the United States, Russia, China, France and Britain.