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       T R O U B L E D   C O M P A N Y   R E P O R T E R

                   L A T I N   A M E R I C A

            Friday, June 22, 2001, Vol. 2, Issue 122

                           Headlines


A R G E N T I N A

AEROLINEAS ARGENTINAS: Governments Negotiate Renationalization
AEROLINEAS ARGENTINAS: Peruvian Airline Eyes Majority Stake


B R A Z I L

BANCO ECONOMICO: Banco Central Postpones Norquisa Sale
CVRD: JBP To Use Full 30 Days To Decide On Option Right
GLOBO CABO: Issues New Shares To Raise Capital
TRANSBRASIL: Signs 5-Yr, $4M Contract With IFS Applications
VESPER: Taken Over By Qualcomm


C H I L E

PSINET: Sells Canadian Operations for US$77 Million
TELEFONICA CTC: Senior Executives File Suit Against VTR Head
TELEFONICA CTC: Navarro Most Seen Likely Buyer Of Sonda Stake


H O N D U R A S

BANCO HONDURENO: Deposit Guarantee Fund To Repay Depositors


M E X I C O

AHMSA: Yet To Present The Court Its Debt-Restructuring Plan
BANCRECER: Banorte Values Bank At Below 5B Pesos
MEXLUB: Future Awaits Decision Of Pemex
SAVIA: California Supreme Court Denies Bionova Appeal


T R I N I D A D   &   T O B A G O

PIARCO AIRPORT: Faces Risk Of An FAA Downgrade


V E N E Z U E L A

MAVESA: Brands Live On Even After Polar's Acquisition
POSVEN: POSCO To Settle $159.6M Debts For Venezuelan Subsidiary



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A R G E N T I N A
=================

AEROLINEAS ARGENTINAS: Governments Negotiate Renationalization
--------------------------------------------------------------
Renewed talks with the Spanish government have Argentine
officials racing against-the-clock to renationalize carrier
Aerolineas Argentinas, El Pais reported Wednesday. Argentine
President Fernando de la Rua, who previously ruled out
renationalization as an option to resolve the conflict at the
struggling airline, now views this as the only way to stave off
insolvency and ensure its continued operations. De la Rua
reportedly changed his stand due principally to the fact that the
Spanish government is thought to be willing to offer financial
assistance in the renationalization process. The lack of any
outside investor interest in rescuing the ailing airline is
widely believed to have swayed the Argentine president's position
as well.

This initiative by the Argentine government was confirmed Tuesday
by sources close to the talks, with a deep divide between those
ministers in favor of the initiative and those opposed. The
renationalization project would allow the government to intervene
in the carrier's management for a one-year period, extendable for
an additional year, in order to normalize its operations. If the
authorities were to assume control of the airline's management,
they could be prepared to make one final financial contribution
to secure a return to normal services, thereby avoiding the costs
associated with insolvency.


AEROLINEAS ARGENTINAS: Peruvian Airline Eyes Majority Stake
-----------------------------------------------------------
AeroContinente SA, Peru's leading airline, is looking to acquire
a majority stake in Aerolineas Argentinas. The company has
contacted the Spanish state-owned holding company SEPI, current
majority owner of Aerolineas, in an effort to secure "a good
arrangement," officials said in an EFE report Wednesday.

"The proposal to acquire Aerolineas Argentinas is based on our
experience in operating and developing airline companies," wrote
Ricardo La Puente, International Development director for Aero
Continente, in his letter to SEPI President Pedro Ferreras.

"We hope you take our proposal into strong consideration, in the
certainty of arriving at a good agreement that would mean
Aerolineas Argentinas would continue to operate, and that would
contribute to safeguarding the source of travel of thousands of
Argentine citizens," La Puente said.

Closely held AeroContinente, which claims to handle 65 percent of
the Peruvian market and 20 percent of the Chilean market, plans
to form a regional carrier for Latin America if its bid is
accepted. The company would not disclose how much it would offer
for the Aerolineas.

"A company, such as Aerolineas Argentinas has many opportunities
to expand and it is economically viable," said Lapuente.
According to Lapuente, AeroContinente may fire part of Aerolineas
Argentina's 6,500 employees as part of a cost cutting plan to
lead the airline into profitability.



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B R A Z I L
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BANCO ECONOMICO: Banco Central Postpones Norquisa Sale
------------------------------------------------------
The Brazilian Banco Central announced that Norquisa, which
controls the Compania Petroquimica do Nordeste (Copene), will be
auctioned in July instead of June, South American Business
Information said Wednesday in a report. The auction is postponed
due to concerns that there will be sufficient competition in the
auction, which will give the winner control over the
petrochemical complex at Camacari (Bahia). The Banco Central is
involved in the process since part of the shares to be sold are
held by Banco Economica, which is now in the process of being
liquidated.

The primary potential bidders for the upcoming sale are the Ultra
Group and the Oderbrecht/Mariani consortium. Ultra is protesting
that its rival will be in the position of being both buyer and
seller, as Odebrecht/Mariani already owns a sizeable share of the
R$1.36 billion in stock to be auctioned.


CVRD: JBP To Use Full 30 Days To Decide On Option Right
-------------------------------------------------------
JBP, Japanese pulp and paper company, will take the full thirty
days at its disposal to decide whether to exercise its preemptive
right to buy Companhia Vale do Rio Doce's 51.48 percent stake in
Celulose Nipo-Brasileira S/A (CENIBRA), South American Business
Information reported Wednesday. The Japanese company gained this
first right through the auction held by the Votorantim Celulose e
Papel (VCP). A representative of VCP will visit Japan soon to
discuss the sale.

This transaction is in line with CVRD's strategic focus on mining
and logistics. CVRD is also planning to divest its remaining
assets in the pulp and paper industry, Florestas Rio Doce S/A and
Celmar S/A Industria de Celulose e Papel. However, CVRD will only
announce its decision concerning the sale of the said assets when
the decision of JBP is announced.


GLOBO CABO: Issues New Shares To Raise Capital
----------------------------------------------
Early this month, Brazilian cable-TV operator Globo Cabo
initiated a capital borrowing through the issuance of new shares
in a deal worth US$50 million, South American Business
Information reported Wednesday. According to the report, the
private placement transaction involves the issuance of new
commercial paper and is aimed at North American investors. Under
the terms of the new instruments issued, the zero-coupon
securities would mature in 13 months at which time investors
would receive all principal due.

Market sources predict that this move by Globo Cabo will allow
the company to roll over debt which comes due soon. A put option
was issued to investors who acquired issuance notes for
Multicanal Participacoes. The Multicanal shares were issued in
1996 with a value of US$185 million in four packages, all with a
due date of June 18, 2004. Two packages were sold in private
placements -- one was sold on the North American market and
another on the euro-dollar market. Since this original issuance,
the company was reorganized and the original Multicanal became a
subsiduary of Globo Communicoes e Participacoes, which
subsequently changed its name to Globo Cabo.


TRANSBRASIL: Signs 5-Yr, $4M Contract With IFS Applications
-----------------------------------------------------------
Transbrasil, the 4th largest Brazilian Airline, selects the
Swedish software developer IFS Applications for CRM, Financials,
Distribution and Human Resources, Hugin Online reported
Wednesday. The 5-year ASP hosting contract, which is worth US$4
million, will see Transbrasil deploying IFS Applications as part
of its restructuring program to increase operational efficiency
and customer responsiveness.

"We chose IFS because they have proven their local support and
knowledge here in Brasil. Furthermore, I was impressed with the
possibility of implementing IFS Applications rapidly and step by
step," said Antonio Celso Cipriani, President of Transbrasil.

"We expect that Transbrasil will continue its rapid expansion,
further improving customer service, adding to and changing the
system as requirements change."


VESPER: Taken Over By Qualcomm
------------------------------
Vesper, the fixed phone services mirroring carrier currently
going through a restructuring process, has been taken over by the
telecommunications equipment maker Qualcomm, according to a
report in South American Business Information Wednesday. Qualcomm
has a 16.2 percent stake in Vesper, has one representative in the
company's board of directors, and no voting right. Qualcomm
reportedly took over Vesper as BCI has decided to sell its stake.




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C H I L E
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PSINET: Sells Canadian Operations for US$77 Million
---------------------------------------------------
PSINet Inc. (OTC BB: PSIXE) today announced that certain of its
subsidiaries have entered into a definitive agreement ("the
agreement"), subject to a bidding process, with TELUS Corporation
pursuant to which TELUS has agreed to purchase substantially all
of PSINet's Canadian assets and businesses for approximately
US$77 million (C$118 million), subject to final adjustments.

The definitive agreement supercedes the letter of intent
announced June 1st.

The PSINet Canadian operations that are being sold recorded
approximately US$50 million (C$75 million) in revenue for 2000.
The company has a state-of-the-art Internet data centre in
Toronto and approximately 8,600 corporate accounts across the
country. The majority of PSINet's Canadian revenues are generated
in Ontario.

The agreement provides, among other things, that the proposed
transaction will be subject to the approval of both the U.S.
Bankruptcy Court and the Ontario Superior Court, and that both
courts approve certain bidding/auction procedures to ensure that
PSINet receives the highest and best offer for its assets.

Inquiries into the sales process can be directed to Sean Smith of
Dresdner Kleinwort Wasserstein, Inc. at 415-677-4811. Interested
parties who have been financially qualified and who have executed
a confidentiality agreement will have the opportunity to conduct
due diligence with respect to PSINet's Canadian assets and
businesses.

"A sale of our Canadian businesses would help accomplish the
goals of maximizing value for our creditors, ensuring reliable
service for our customers and maintaining opportunities for our
valuable employees," said Harry Hobbs, president and CEO of
PSINet. "The interest that prospective buyers have shown in our
assets, including both our Canadian and Latin American
businesses, clearly demonstrates that there is inherent value in
our world-class networks and operations."

"I'm delighted that TELUS recognizes the value of PSINet's
Canadian operations," said Robert Offley, President of PSINet
Canada. "We will continue to serve our customers throughout the
auction process with the high level of service they have come to
expect from us and will also continue to support our valuable
employees."

In Canada, PSINet provides Internet access, Web hosting, security
and e-commerce application services to the Canadian business and
ISP markets. The company also delivers consumer and small
business Internet services in the Calgary area through its
wholly-owned subsidiary, CADVision. PSINet has about 50 points-
of-presence, or connection facilities. It serves most major
markets in the country, including Toronto, Montreal, Ottawa,
Edmonton, Calgary and Vancouver.

Dresdner Kleinwort Wasserstein provided financial advice to
PSINet on the transaction, and RBC Dominion Securities provided
financial advice to TELUS. Legal representation on the
transaction was provided to PSINet by Nixon Peabody LLP, Wilmer,
Cutler & Pickering and Osler, Hoskin & Harcourt LLP. TELUS
received legal advice on the transaction from Bennett Jones LLP
and Gibson, Dunn & Crutcher LLP.


TELEFONICA CTC: Senior Executives File Suit Against VTR Head
------------------------------------------------------------
The general manager and the head of corporate management of
Telefonica CTC Chile, Claudio Munoz and Rafael Zamora, filed
charges on Wednesday against the head of VTR, Blas Tomic, in
Santiago's 32nd Criminal Court, according to an EFE report. The
action was taken in response to a statement issued by Tomic last
Friday that Telefonica doctored its accounts to pressure the
government into modifying the rates it could charge for several
of the company's services.

"Within a market where the accountability of the participants to
the public and to the law is fundamental, the seriousness of the
accusations made by Blas Tomic are unacceptable to the executives
of Telefonica CTC Chile," the firm said in a statement.

Tomic, meanwhile, insisted that Telefonica was unjustifiably
attempting to evade the regulations that govern it as the
country's most important telecommunications firm. Last year,
Telefonica CTC Chile alleged that as a result of the 1999 rating
regulations, its operations had been greatly affected.


TELEFONICA CTC: Navarro Most Seen Likely Buyer Of Sonda Stake
-------------------------------------------------------------
The Andre Navarro company is seen as the most likely buyer for
Telefonica CTC Chile's 60 percent stake in information technology
company Sonda, South American Business Information said Wednesday
in a report. Navarro currently owns 40 percent of Sonda, having
previously sold 60 percent to Telefonica CTC Chile in 1997 for
US$126 million. The return of this investment to Navarro is
believed to be the result of Telefonica's need to cover some
debts. However, there is one problem which could pose as a
hindrance to this reversion - defining the current value of
Sonda, which should be lower as a result of the difficulties
which have occurred worldwide in the technology market.



===============
H O N D U R A S
===============

BANCO HONDURENO: Deposit Guarantee Fund To Repay Depositors
-----------------------------------------------------------
A banking regulator announced that the Honduras' Deposit
Guarantee Fund would begin returning Thursday US$42 million in
deposits to 40,000 former clients of defunct Banco Hondureno de
Credito y Servicios (Banhcreser), reported Business News Americas
Wednesday. Deposits will be covered through the sale of the
bank's assets, which was undertaken in two auctions, Tuesday and
last Friday. Local banks Ficosa and Occidente acquired the rights
to return the deposits to Banhcreser clients. Many former
Banhcreser clients will likely choose to open an account with
Ficosa or Occidente, which are among the most profitable and
stable of Honduras' 21 banks.

Banhcreser was intervened and closed last week by the government
because of liquidity problems.



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M E X I C O
===========

AHMSA: Yet To Present The Court Its Debt-Restructuring Plan
-----------------------------------------------------------
Struggling Mexican steel group Altos Hornos de Mexico (AHMSA) has
still not submitted to the First Civil Court of Monterrey, Mexico
a copy of the debt-restructuring agreement with creditors, South
American Business Information said in a report Wednesday. AHMSA
needs to take this step in order to have its temporary
receivership lifted, a move the company hopes will take place
before the end of this year. The agreement needs the approval of
the court but will still take a few weeks before it can be
submitted since the signatures of the company's board must first
be collected.


BANCRECER: Banorte Values Bank At Below 5B Pesos
------------------------------------------------
Monterrey-based Banorte (Banco Mercantil del Norte) will not
acquire Mexican bank Bancrecer if the asking price exceeds 5
billion pesos, according to a report Wednesday in South American
Business Information. Banorte estimates Bancrecer's value at
below 5 billion pesos and it believes that acquiring the latter
for more than that amount would be too on its capitalization. In
a previous TCR-LA report, Banorte said it is interested in
acquiring Bancrecer but it would do nothing to undermine its own
operations.


MEXLUB: Future Awaits Decision Of Pemex
---------------------------------------
Pemex Refinacion, the refining subsidiary of Mexico's state oil
company Pemex, is now studying possibilities regarding the future
of lubricant company Mexicana de Lubricantes (Mexlub), Business
News Americas reported Wednesday. Pemex could either sell it or
declare it bankrupt as the lubricant company has insufficient
resources for its capitalization. Mexlub currently has US$100
million in debts, which were transferred to the Institute for
Banking Savings Protection or IPAB. The company attributed its
financial woes to a reduced market share in the oil and lubricant
markets.

Mexlub is 49-percent owned by Pemex Refinancion and 51-percent by
businessman Salvador Martinez Garza. Pemex could make the
decision in the next few days after Mexlub's situation was
discussed last week during the meeting of the management board of
Pemex.


SAVIA: California Supreme Court Denies Bionova Appeal
-----------------------------------------------------
Bionova Holding Corporation (Amex: BVA) announced today that it
was denied its appeal to the California Supreme Court in
connection with the shareholder litigation case filed by Grace
Brothers, Ltd. against Bionova Holding Corporation and DNA Plant
Technology Corporation ("DNAP") concerning DNAP preferred stock.
The decision was another setback for Bionova Holding in this
ongoing litigation.

The Grace Brothers, Ltd.'s claims arose out of the merger on
September 26, 1996 of DNAP with a wholly-owned subsidiary of
Bionova Holding. The Grace Brothers, Ltd. had been an owner of
DNAP preferred stock and challenged the treatment of the
preferred stock in the merger. In 1999, the Superior Court
granted summary judgment in favor of Bionova Holding and DNAP on
all claims. However, in January 2001, the California Circuit
Court of Appeal overturned the judgment. Bionova Holding and DNAP
appealed the case to the California Supreme Court, which recently
turned down this appeal. The case has now been remanded to the
Superior Court for further proceedings.

On June 5th Grace Brothers, Ltd. filed a motion for summary
adjudication against DNAP requesting the Superior Court award
damages and interest in the amounts of $4.3 million and $2.1
million, respectively. In addition, Grace Brothers, Ltd. filed
motions requesting the court to issue various protective orders.
Pending a hearing on these motions, DNAP consented to the entry
of a temporary order restricting DNAP's ability to transfer its
assets until July 7, 2001. The other motions filed by Grace
Brothers, Ltd, including the motion for summary adjudication
against DNAP and a motion to enjoin Bionova Holding Corporation
from completing the transfer of its fresh produce business to
Savia, are scheduled to be heard on July 6, 2001. If Grace
Brothers, Ltd. is ultimately successful and is awarded a judgment
in the millions of dollars, this could have a material adverse
effect on Bionova Holding. Bionova Holding and DNAP continue to
deny any wrongdoing or liability in this matter and to continue
to contest this case vigorously.

Bionova Holding Corporation is a leading biotechnology company
focused on genomics-based trait development for plant
agriculture. Bionova Holding's goal is to deliver crop protection
and human nutrition traits through high-efficiency gene
profiling, bioinformatics, and expertise in plant biology.
Bionova Holding and its affiliates have strategic alliances and
licensing agreements with some of the world's leading
agricultural companies, value-added producers and marketers, and
biotechnology research groups. Bionova Holding Corporation is
majority owned by Mexico's Savia, S.A. de C.V. (NYSE: VAI), whose
subsidiaries include Seminis Vegetables Seeds, Inc., the largest
developer, producer and marketer of vegetable seeds in the world.



=================================
T R I N I D A D   &   T O B A G O
=================================

PIARCO AIRPORT: Faces Risk Of An FAA Downgrade
----------------------------------------------
Just three weeks after its opening, Trinidad and Tobago's Piarco
airport, now faces the possibility of a downgrade from a category
one to category two by the US Federal Aviation Administration
(FAA), Caribbean News Agency reported Saturday. The privately
owned Caribbean Communications Network (CCN) disclosed that
Transportation Minister Jearlean John is currently in Washington
to talk with aviation officials in order to prevent the airport
from being downgraded. One of the adverse results of a downgrade
would mean a closure of North American routes for the Trinidad
and Tobago-based national airline BWIA West Indies Airways.

FAA is greatly concerned with BWIA pilot Ian Brunton's
appointment as chairman of the local Civil Aviation Authority.
They believe that his appointment may represent a conflict of
interest.



=================
V E N E Z U E L A
=================

MAVESA: Brands Live On Even After Polar's Acquisition
-----------------------------------------------------
Even though Venezuelan food group Mavesa has been acquired by
Venezuelan beverage group Polar, Mavesa brands continue to be
sold during the ongoing integration process, South American
Business Information reported Wednesday. However, the legal
registrations for the new company's products will now change.

In a related story, Multinational Cargill is set to renew its
supply contract with Mavesa despite Polar's acquisition. It had
been a victim of rumors suggesting the contract would be ended
but it is preparted to continue supplying the edible oils needed
for Mavesa's mayonnaise. Cargill had offered US$400 million for
Mavesa, but Polar won the bid by paying out US$500 million.


POSVEN: POSCO To Settle $159.6M Debts For Venezuelan Subsidiary
---------------------------------------------------------------
Pohang Iron and Steel Corporation (POSCO) announced Wednesday
that it will settle $159.6 million in loans which came due on
June 19 for its Venezuela subsidiary, POSVEN, The Digital Chosun
said in a report. When POSVEN borrowed $266 million from
financial institutions in December 1997, POSCO provided a payment
guarantee worth the value of its equity stakes in POSVEN - 60
percent. POSCO reportedly owns a 40 percent stake in POSVEN,
while its sister companies POSTEEL and POSEC each own 10 percent
stakes. As a result, if financial institutions request POSCO to
honor its payment guarantee, POSCO will have to provide $164
million to cover the debts of POSVEN, while its sister companies
will each have to provide $26.6 million.

"POSVEN tried to rollover its loans but failed when its second
largest shareholder, the US-based Ray-Sion refused to back up the
company with a payment guarantee," said POSCO Managing Director
Cho Sung-sik, explaining the reason for POSCO will have to settle
the loans on behalf of POSVEN.




S U B S C R I P T I O N   I N F O R M A T I O N

Troubled Company Reporter Latin American is a daily newsletter
co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ,
and Beard Group, Inc., Washington, DC. John D. Resnick, Edem
Psamathe P. Alfeche and Janice Mendoza, Editors.

Copyright 2001.  All rights reserved.  ISSN 1529-2746.

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Information contained herein is obtained from sources believed to
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