www.nytimes.com January 11, 2003 By JEFFREY E. GARTEN

PARIS The Bush administration is leaving no doubt that it intends to use the United States' enormous military power to make the world a safer place. But to succeed, Washington must develop a more robust global economic policy as well. Unless our military confrontations lead to something much better for the millions of people who will be hurt, we will have won the wars and lost the peace.

It's true that the administration is aggressively promoting trade liberalization by pushing for new commercial deals with Latin America, as it has recently done with Chile and is now doing in Central America. It is also pressing for more tariff and quota reductions around the world in an omnibus negotiation that it hopes to conclude within two years under the auspices of the World Trade Organization. These efforts are an excellent start. But there are at least four broader challenges the United States must now confront, and with an urgency that the Bush administration has yet to demonstrate.

The first is reinvigorating global economic growth. The world economy is in trouble: corporate investment and trade are slowing, factories are producing more than they can sell, and deflation is threatening many regions. The two potential economic engines besides the United States — Germany and Japan — are stagnating. Big emerging markets, from Indonesia to Brazil, are in deep trouble.

America's economy is the world's most powerful by far, accounting for almost a third of global demand these days, but even if we grow at a healthy rate this year, the United States by itself cannot create a sustainable international economic recovery. Our own revival depends on the health of our companies, and that in turn depends in part on expanding foreign markets. Overseas sales of our goods and services made up at least 25 percent of our economic growth in the 1990's. Moreover, because many of our top companies — Intel, Coca-Cola, Johnson & Johnson, for example — rely on Europe, Japan and developing countries for more than 30 percent of their revenues, stronger foreign economies are important to the health of our stock markets, the principal financing vehicle for corporate America's expansion.

Washington must bring together its economic partners — the Group of 7 nations made up of Canada and Japan and those in the European Union — to get the global economy moving again. The United States, which is already running huge budget deficits and has lowered interest rates to levels not seen in generations, has little room to maneuver. But it can encourage the European Central Bank, Europe's equivalent of the Federal Reserve, to lower its relatively high interest rates, since inflation on the continent is not nearly the threat that stagflation is. The European Union must also let up on its growth-constricting demands that Germany, Italy and France restrict spending and, in some instances, raise taxes. The United States and Europe can push Japan to restructure its growth-strangling bank debts.

Second, there will soon be an acute need to rebuild countries that are either defeated or disintegrating. The estimates for reconstructing Iraq, for example, range from $120 billion over 10 years, in the case of a very short war, to $1.2 trillion after a prolonged conflict, according to extensive work by the economist William Nordhaus. This amount does not include the costs of the administration's vision of spreading democratic and free market institutions in the gulf region.

The job of economic relief and reconstruction will most likely need to be handled by the United Nations, but substantial American financial support will be essential. Given budget deficits at home, this will be no easy task. Will this money come from domestic programs or from foreign aid already promised to others? At the least, the administration needs to work with Congress to incorporate the requirements in planning — something which Mitchell E. Daniels Jr., director of the Office of Management and Budget, has been reluctant to do.

One problem is that there is no single agency in Washington capable of overseeing the extensive United Nations efforts that must be mounted. One needs to be created, just as the Economic Cooperation Administration was established in 1948 to oversee the Marshall Plan. Like it or not, we are entering a decade of political and military tension, and nation-building is going to be a major part of America's response.

Third, we need to prepare for all-too-possible international economic crises. A major run-up in oil prices in reaction to turmoil in Venezuela and Iraq has already begun and could send the global economy into a deep recession. The United States should be working with the European Union and Japan to release emergency oil reserves if oil prices spiral out of control. It should be encouraging Russia to expand production, too, by promising we will buy Moscow's supplies well into the future.

  Another crisis could involve the dollar, which was down 15 percent against the euro in 2002. If our trade deficit continues to soar and foreigners get nervous, they could dump their dollars. It would help if Washington could persuade the European Central Bank to lower its interest rates — which it should do anyway to stimulate economic growth on the continent — and make the euro less attractive as an alternative to the dollar. Beyond that, Washington, Brussels and Tokyo will have to be prepared to coordinate purchases of the dollar if it goes into free fall.

Latin America could also provide the spark for a global financial debacle. After all, Argentina and Venezuela are in deep trouble, and Brazil's economy is fragile at best. In 1997, a currency collapse in Thailand set off a global financial meltdown. The lesson is that Washington and its economic partners had better focus more on what's happening south of the Rio Grande.

Finally, the United States will have to give much more attention to helping developing countries, the very nations in which so much of today's turmoil exists, get a fairer deal from globalization, which has so far disproportionally benefited rich countries. This means not only negotiating trade agreements but also improving the World Trade Organization's ability to settle trade disputes and to give technical assistance to struggling countries overwhelmed by the blizzard of new trade laws in the last decade. It also means helping the World Bank and its regional counterparts deal with poverty more effectively, rather than just criticizing their performance, which is what Washington so often does.

Admittedly, the Bush administration has never shown much interest in multilateral diplomacy except when other countries press it to the wall, as they have with Iraq. But in the economic realm, there is no choice but to seek partners.

In the immediate aftermath of World War II, the United States pushed for the establishment of the International Monetary Fund and the World Bank, and coordinated the Marshall Plan with European nations. Washington realized then that economic stability and prosperity were essential to a country's security. It's true today, too.

Jeffrey E. Garten is dean of the Yale School of Management and author of "The Politics of Fortune: A New Agenda for Business Leaders.'' He held economic and foreign policy positions in the Nixon, Ford, Carter and Clinton administrations.

Friday January 10, 8:30 PM sg.biz.yahoo.com By Angela Pruitt Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--A mix of investment-grade and junk-rated emerging market issuers are making the trek to international capital markets this week with hungry investors ready to feast on the new bonds.

Mexico and Turkey marked the latest sovereigns to access a welcoming market. Mexico launched a $1.5 billion 10-year global bond Thursday, while Turkey sold $750 million in new 10-year securities. The offerings follow Chile's $1 billion global bond priced Wednesday as well as a $500 million increase of the Philippines' outstanding 2013 global bond.

"Broadly speaking, (issuers) have reasonable access," to overseas markets, said Rob Gvozden, an analyst at Lehman Brothers, adding there was no evidence of great discrimination among credits.

The raft of new bonds comes as emerging market debt capped off 2002 with about 15% in gains and staged a spirited rally in the first week of the new year. A positive environment in the U.S. corporate bond sector and brighter political and economic outlook in Brazil have nourished the environment for new issues, observers say.

There is "clearly an appetite for paper," said Francis Rodilosso, a portfolio manager at Van Eck Capital. However, he said there is "not a bottomless pit of demand. Some credits would have a difficult time issuing now."

Indeed, analysts say the issuers rated in the single-B category, such as Brazil and Venezuela, will be hard-pressed to tap overseas markets as their spreads hover around 1250 basis points and 1300 basis points over U.S. Treasurys, respectively.

"The market is not bullish enough," to take on debt from these countries, said Siobhan Manning, an emerging markets debt strategist at Caboto IntesaBci.

Indeed, Brazil isn't expected to be able to access the market for some time given lingering questions about how President Luiz Inacio Lula da Silva's administration will engineer greater growth for South America's largest economy while maintaining fiscal discipline. Venezuela's debt servicing cost have surged recently amid an ongoing national strike that has shut down the country's vital oil industry, among many other sectors.

"There is no urgency for Brazil to come now. Over the next couple of months the window may open," Manning said, noting the country's coupon and amortization payment schedule is heaviest in April and October.

January is typically a heavy issuance month for emerging markets sovereigns, although with Brazil on the sidelines and following a slew of new debt placed during the tail end of the fourth quarter, the pipeline this quarter is seen as less frenetic compared to last year.

Exotic borrowers are expected to be the next batch of deals to hit external markets this month, including the Dominican Republic, Costa Rica and Guatemala. Market chatter also has it that Colombia could be readying a new bond soon.

Van Eck's Rodilosso said the bonds currently hitting the market don't appeal to a monolithic investor base. These "deals are not necessarily going into same portfolios."

The relative cheapness of the Philippines' deal drew some investors, but others remained turned off by the country - which doesn't have investment-grade status -due to concerns over its widening budget deficit. The new bonds were priced 553 basis points over comparable Treasurys and re-offered at 96.75.

Investment-grade corporate bond investors showed the most interest in Chile's deal, which marked the nation's largest sovereign bond ever. The government said it received some $4 billion in orders as expectations the country won't tap the U.S. market again this year fueled demand.

As such, Chile was able to price its transaction at the bottom end of official price guidance - 163 basis points over Treasurys.

Mexico, which was due to price late Thursday, has also become less of a dedicated emerging markets play given the country's investment-grade status, observers say.

"We are particularly bullish on Mexico relative to the high-grade universe," said Lehman's Gvozden. He said that Mexico's fairly small financing requirements given the government's zero net borrowing requirement "offers a fairly strong underpinning."

Mexico upsized its deal, co-managed by J.P. Morgan and UBS Warburg, from $1 billion and narrowed the price guidance to 246 basis points from an initial 250 basis points.

Meanwhile, Turkey sold its bond at a spread 712 basis points over Treasurys, via J.P. Morgan and Morgan Stanley. The new securities carried a yield of 11.25% and an 11% coupon.

-By Angela Pruitt, Dow Jones Newswires, 201-938-2269, angela.pruitt@dowjones.com

news.ft.com By Adrienne Roberts and agencies Published: January 10 2003 18:40 | Last Updated: January 10 2003 18:40

Gold ended the week close to six-year highs after reaching a peak of $356.50 an ounce on Thursday.

The looming threat of war in Iraq, and a shaky US dollar, helped sustain buying interest in the metal.

The speculative net long position on New York's Comex was shown to have grown again. According to the latest CFTC Commitments of Traders figures, large speculators were net long 59,505 100-ounce contracts, the largest such position in almost seven years.

John Reade, analyst at UBS Warburg in London, suggested new participants might have been entering the gold market. "Since the size and durability of these flows are unknown and there are few obvious sellers of gold in evidence, then gold could hold these levels or even make further gains," he said.

He warned, however, that speculation-led rallies could end as quickly as they had started and that physical demand was "not supporting the gold price at the current levels".

Spot gold was $353.00 an ounce at London's afternoon fixing, compared with $344.50 an ounce the previous Friday.

The concerns about Iraq, as well as continued failure by Venezuela to resolve its strike, kept support under the crude oil market.

But concerns about a possible tightening in oil supplies receded as Opec signalled its willingness to step up production to compensate for loss of Venezuelan crude.

The cartel is scheduled to hold an emergency meeting on Sunday, with analysts expecting it to boost output by about 7 per cent.

On Friday, the International Energy Agency said it would consider releasing strategic oil reserves if a continued strike in Venezuela coincided with war in Iraq.

Late in London, IPE February Brent was $29.32 a barrel compared with a close of $30.77 a barrel the previous week.

By early afternoon in New York, Nymex February WTI was $31.67 a barrel compared with a close of $33.08 the previous week.

news.ft.com By Christopher Swann Published: January 10 2003 18:56 | Last Updated: January 10 2003 18:56

Gloomy employment figures cast a further shadow over the US dollar on Friday, sending it to a fresh three-year low against the euro.

Worries have been mounting in recent months that the US economic recovery is failing to generate jobs. This was underlined Friday by non-farm payrolls, which fell 101,000 in December.

Analysts are still forecasting US economic growth of around 2.7 per cent this year. But this would come under threat if the fear of unemployment starts to undermine consumer spending.

Many now believe that the dollar is in a no-win situation.

Even if, as expected, the US outpaces the eurozone and Japan by a significant margin, analysts expect the current account to drag on the currency. Growth is expected to be based on consumption and government spending, which tend to suck in imports, rather than on business investment, which tends to attract foreign capital.

On Friday the euro hit $1.055. Tony Norfield, head of currency strategy at ABN Amro, said the dollar was now reaching technically sensitive levels. "If the euro manages to close above $1.055 or $1.06, then the upswing looks likely to continue," he said. Mr Norfield added that positions by real money investors were still relatively modest. Many were likely to be tempted to hedge their portfolios against the threat of further dollar weakness.

"Low US interest rates has meant that it is now cheaper to hedge dollar exposure than at any time since 1993-94," said Mr Norfield.

The antipodean currencies also rose strongly. "The Australian and New Zealand dollars are being helped by their high yields and their perceived remoteness from geopolitical tensions," said Tim Fox, market strategist at National Australia Bank. It had looked like the Venezuelan bolivar was only going one way.

Last year the currency fell 46 per cent against the dollar. With the oil strike entering its second month, 2003 looked set for more of the same.

But suggestions that the US may be poised to mediate has helped push the dollar back from 1,621 bolivars to 1,471 bolivars.

There has also been a realisation, said Marc Chandler, chief currency strategist at HSBC in New York, that the financial vulnerability of the country has been overstated.

"Venezuela has about $14bn in hard currency reserves, about four times its sovereign debt servicing obligations this year," he said. He added that the US had a powerful motive for bringing the strike to an end, since the curtailment of oil exports from Venezuela had added upward pressure on gasoline prices and inventories are falling.

Reuters, 01.10.03, 11:14 AM ET By Robin Emmott

PANAMA CITY, Jan 10 (Reuters) - With major Latin American bond markets looking volatile in 2003 and markets hungry for higher yields, debt from the small nations of Central America could catch the eye of investors.

Panama, Costa Rica, El Salvador and Guatemala, whose small economies are dominated by coffee, bananas, sugar and tourism, plan to issue dollar-denominated sovereign debt on international markets this year, with Costa Rica and Guatemala leading off this month.

Costa Rica's Finance Ministry said it will launch a $450 million bond offer in January, led by Deutsche Bank, but declined to give an issue date.

Guatemala, the biggest economy in Central America with gross domestic product of $45 billion in 2001, said it aims to sell $500 million in new paper on Jan. 20, although it has yet to set to the terms of the offer.

Panama hopes to issue around $250 million later this year, according to Deputy Finance Ministry Domingo Latorraca, while El Salvador's Finance Ministry has set either June or July as the date for its bond sale.

Analysts put the El Salvador offer at some $300 million. There will be takers for debt, analysts say, despite rising fiscal deficits in the four countries, as investors look for higher yields and assume more risk.

Yields are around 7 percent to 9 percent on Central American bonds, seen as medium risk, compared with 3 percent to 4 percent on dependable U.S Treasuries.

"Central America looks good in the context of Latin America right now. The majority of countries in the region have a negative outlook," said Richard Francis, sovereign risk specialist at ratings agency Standard & Poor's.

A five-week-old general strike has brought Venezuela's economy to a halt, while Argentina appears hard pressed to prepare for elections in April amid economic malaise.

Uncertainty in Brazil over the direction of the new government makes the relative stability of Central America look attractive. This for a region that in the 1980s was known more for its civil wars and death squads than its credit ratings.

Mexico debt, however, remains in high demand. On Thursday Mexico milked market optimism, doubling a planned sovereign bond sale to $2 billion.

According to Rafael Barraza, former president of El Salvador's Central Bank, Central America should benefit from the pick-up of the U.S economy in 2003.

"Negotiations for a free trade pact between Central America and the U.S. will also give investors confidence," Barraza said. The United States and five Central American nations, Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua, launched free trade talks on Wednesday.

PAST SUCCESSES Central American issuers are also riding on the back of last year's success, analysts say.

In April, El Salvador sold $500 million in 30-year international bonds, the first Central American country to issue a 30-year bond. El Salvador again went to market in July, issuing $300 million in nine-year bonds.

El Salvador is one of Latin America's few investment grade issuers. Fitch and Moody's both rate it investment grade, but not Standard & Poor's, which rates it BB, giving the same rating to Costa Rica, Guatemala and Panama.

The popularity of Central American debt may not last beyond 2003, however.

Still seen as an exotic credit popular for its scarcity value, continued issues of the region's debt could damage that image and snap off demand, analysts say.

Typically the bonds make up around 1 percent of a fund manager's portfolio.

"The more that issuers sell, the more closely investors pay (attention) to economic fundamentals. Looking carefully at Central America could scare off some buyers," said Francis Rodilosso, who oversees $200 million for hedge fund Van Eck Capital.

Costa Rica is currently running a budget deficit of 4.4 percent of gross domestic product, while El Salvador has a fiscal gap of 3.3 percent.

Panama recently disappointed investors with a weak tax reform, bringing in only half of the $120 million initially projected. Guatemala is struggling with the three-year-old collapse in world coffee prices, dealing a severe blow to its export base.

Copyright 2003, Reuters News Service