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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

            Wednesday, August 15, 2001, Vol. 2, Issue 159

                           Headlines


A R G E N T I N A

AEROLINEAS ARGENTINAS: Pescarmona Angling For Control
ETAM: Clashes With Suppliers Group Over Franchising System
FARGO SA: Exxel Continues Talks With Bimbo Over Possible Sale


B R A Z I L

BANCO NACIONAL: Ex-Controllers Initiate Legal Proceedings
CVRD: Valia Pension Selling Assets To Restructures Portfolio
CVRD: To Announce Corporate Structure Changes By Month End
SUPERVIA: ASEP Wants Maintenance Breakdowns Investigated
TELEMAR: Bad Debts, Costs Cause 32% Drop In 2Q01 Net Income
TELEMAR: Shareholder Meeting Valid, Anatel Sayes Satisfied
TRANSBRASIL: To Resume Sao Paulo-Miami Route Soon
TRANSBRASIL: To Lay Off Workers, Sell Aircraft
XEROX BRASIL: Reduces Costs Amid Economic Problems


C U B A

CUBACAN EXPLORATION: To Settle Debt With Equity Swap


E C U A D O R

FILANBANCO: PricewaterhouseCoopers Awaits Labor Solution


M E X I C O

BANCRECER: IPAB Predicts Auction To Be Completed October 01
MAXCOM: Seeks Cofetel Approval For Extra Fees On ISP Calls


P A R A G U A Y

CAPASA: Attributes Bankruptcy To G$23B Loss
MANUFACTURA DE PILAR: Changes Work Schedule To Cut Costs
PARAGUAYA/ALFA/EMPRESARIAL: Banking Commission Orders Bankruptcy


P E R U

EDELNOR SA: Issues $7.2M Debt For Investments, Debt Restructure





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

AEROLINEAS ARGENTINAS: Pescarmona Angling For Control
--------------------------------------------------
Enrique Pescarmona, a businessman from Mendoza province, is
believed to be one of Aerolineas Argentinas' suitors, though he
never made his proposal for the Argentine airline known to the
public, El Cronista reported Friday. Pescarmona kept a low
profile in the negotiations with SEPI (Sociedad Estatal de
Participaciones Industriales), controller of Aerolineas.

Pescarmona is a shareholder of 9 companies: Impsa, Impsat,
Bodegas Lagarde, Clicknest, La Mercantil, TCA, Environmental,
ICSA and Octano.

In 1990, Pescarmona, along with Iberia, won the management of
Aerolineas, but later on he sold his 17 percent share for about
US$30 million. At that time, he was president of Cielos del Sur,
the company, which controlled the airline Austral.


ETAM: Clashes With Suppliers Group Over Franchising System
----------------------------------------------------------
Etablissement Mayer (Etam), a women's clothing chain, must deal
with a group of suppliers currently in disagreement over its
franchising system, El Cronista said in a report. The company
owes its suppliers some US$3.2 million. Now some of the suppliers
group refuse to be included in an agreement through which Etam
exchanged 46 of its 49 branches for debt. The initial exchange
went to 15 suppliers represented by a grouping of four companies
(Univista, Impecor, Carlos Rizzo and Textiles Asfoura). Etam will
be entitled to a 5-percent royalty for the use of the brand.

Etam, which called in the receivers in 1999, owes banks US$7.29
million and has commercial debts of over US$4 million. It closed
18 of its branches this year. Ironwood Equity, the Argentinean-
American investment fund has controlled Etam since 1999.


FARGO SA: Exxel Continues Talks With Bimbo Over Possible Sale
-------------------------------------------------------------
Mexico's Grupo Industrial Bimbo, the third largest producer of
bread in the world, continues to negotiate with investment fund
Exxel for the purchase of control in Argentine bread company
Compania de Alimento Fargo, according to a report Monday in
Mexican financial daily El Economista. Negotiations began before
Fargo defaulted on a $1.5 million service payment due on a $30
million loan from Deustche Bank. Fargo's default, however, will
neither accelerate nor suspend a possible deal.

Fargo reports sales of approximately $140 million and liabilities
of close to $120 million. Its parent company, The Exxel Group
directed by Juan Navarro, is seeing a significant negative impact
as a result of the Argentinean recession.



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B R A Z I L
===========

BANCO NACIONAL: Ex-Controllers Initiate Legal Proceedings
----------------------------------------------------------
The former controllers of Banco Nacional, the bank which was
liquidated in 1995, have initiated judicial proceedings against
the Brazilian Banco Central, Valor Economico revealed Thursday.
The group alleges that the equity of the bank was mismanaged and
that the acquisition of part of its assets by Unibanco
represented a conflict of interest.

Morever, the action states that all the liabilities of the bank
would have been paid had the provisions of the current law
regarding the restructuring of federal banks been applied in the
case of Banco Nacional. The latest changes bank restructuring law
came into effect in June of this year.

The bank and its officers are the subjects of several legal cases
involving alleged fraud and mismanagement.


CVRD: Valia Pension Selling Assets To Restructures Portfolio
------------------------------------------------------------
Valia, the pension fund of Companhia Vale do Rio Doce (CVRD), is
restructuring its equity portfolio, which represents 30 percent
of its R$3.5-billion asset, according to Jornal do Brasil Sunday.
The pension fund will sell off its 1.7 percent stake in Americel
(a B band carrier) and its 1.5 percent in Telet.

Early this month, Valia announced its intention to sell an
approximate 15 percent stake in Companhia Siderurgica Nacional
(CSN). The fund has reportedly hired Merrill Lynch to manage the
sale which is expected as soon as there is a window of
opportunity in the market. The sale will be structured as a
global offering with a domestic tranche, which is expected to be
around 30 percent.

In December, CVRD and CSN signed an agreement to relinquish their
cross-shareholdings.


CVRD: To Announce Corporate Structure Changes By Month End
------------------------------------------------------------
CVRD is expected to announce at the end of this month
restructuring of its corporate divisions. The current corporate
model will double from three to six, with new areas: logistics,
non-iron and finance, Valor Economico reported Friday. As a
result, the current executive directors of iron, stocks and the
corporate center will be replaced so as to avoid conflict among
shareholders.

In this context, the replacement of Mozart Litwinsky, executive
director of the area of iron related activities, is perceived as
the most delicate, considering the effect this may have on the
price of Vale shares in a period leading up to the Federal
Treasury's sale of its 31.2 percent of ordinary shares in the
company.


SUPERVIA: ASEP Wants Maintenance Breakdowns Investigated
--------------------------------------------------------
Supervia, which operates the metropolitan train system in the
Brazilian state of Rio de Janeiro, currently faces a suit brought
against it by ASEP (Agencia Reguladora de Servicos Publicos
Concedidos do Estado do Rio), Jornal do Brasil reported Monday.
ASEP wants to conduct an investigation regarding failures in the
maintenance system. Instead of 105 trains, Supervia is operating
with 82 units only. The Transportation Department revealed that
this reduction is due to a struggle between Supervia and one of
its controllers, the Spanish group CAF (Construcciones y Auxiliar
de Ferrocarriles), which is in charge of the trains' maintenance.

SuperVia projected reaching financial breakeven by late 2001 but
postponed its plans due to the delay on the delivery of trains.
The company claims such delay represented a loss of R$170
million.

Early this month, TCR-LA reported that Supervia was facing a
financial crisis with R$5 million in debt. Shareholders, who have
injected US$150 million of equity capital since they took over
the concession, reportedly suspended any new investments in the
interim and have dismissed company officers. Supervia reduced
expected new investments for this year from R$80 million to R$15
million.


TELEMAR: Bad Debts, Costs Cause 32% Drop In 2Q01 Net Income
-----------------------------------------------------------
Brazil's largest fixed-line phone company Tele Norte Leste
Participacoes SA (Telemar) announced a 32-percent drop in this
year's second-quarter net income from the comparable period last
year, Bloomberg reported Monday. Meanwhile, the number of
employees during the period rose and provision for bad debt
soared.

According to Telemar, second-quarter earnings fell to 115.4
million reais ($46.2 million), from 169.1 million reais in the
year-ago quarter. Operating expenses soared 34 percent to 824.7
million reais, from 617.3 million reais, on higher labor costs
and provisions. Provisions for bad debts, invoices the company
believes won't be paid, more than tripled to 152.3 million reais,
compared with 46.1 million reais in the second-quarter of 2000.
Telemar said labor costs rose to 233 million reais, from 206.1
million reais.


TELEMAR: Shareholder Meeting Valid, Anatel Sayes Satisfied
----------------------------------------------------------
The shareholders' meeting held by Telemar last month has been
confirmed valid by the Brazilian Agencia Nacional das
Telecommunicacoes (Anatel) Jornal do Comercio reported Saturday.
Confirmation came after Anatel conducted an investigation into
the meeting, which saw the dismissal of the company's chairman,
Mr. Manoel Horacio. Anatel had suspected that representatives of
Opportunity Bank might have voted during the meeting. Such a move
would be considered illegal under existing regulations,
considering that the bank is also a shareholder in another
telephone company, Brasil Telecom.


TRANSBRASIL: To Resume Sao Paulo-Miami Route Soon
-------------------------------------------------
The Brazilian air transportation company Transbrasil, which
currently owes R$800 million in debts, will resume operations on
its Sao Paulo-Miami route within the next two weeks, O Globo
reported Saturday. The carrier currently awaits the necessary
aircraft which are under maintenance services in Brazil.

Transbrasil recently had one of its planes seized by the US
Justice Department. According to reports, Pegasus, owner of the
aircraft, went to court against the company claiming the unit
back because Transbrasil wasn't able to meet its payment
obligations.


TRANSBRASIL: To Lay Off Workers, Sell Aircraft
----------------------------------------------
Due to severe financial distress, Transbrasil announced it would
have to lay off staff but didn't state the exact number of
employees to be put out of work, according to a report in Airline
Industry Information. In addition to the planned lay-offs, the
company will sell its three jet aircraft. However, the company's
vice-president Flavio Carvalho stressed that the aircraft, valued
at some US$20 million each, would likely be leased back by the
airline.


XEROX BRASIL: Reduces Costs Amid Economic Problems
--------------------------------------------------
As a part of the overall company restructuring, Xerox Brasil
decided to put up one factory for sale, reduce from eighteen to
ten its call centers, close some offices, and contract out
certain services, Valor Economico reported Thursday. These
efforts are designed to help the parent company's effort to slash
costs in the face of retraction in the domestic market,
devaluation of the real and the problems it is facing in the
United States. About 600 of its 3,200 employees will be put out
of work.

Despite the grim measures, the company remains optimistic, with
investments of US$84 million proposed for Brazil this year and
plans to increase its presence in Internet access services and
distance education.



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C U B A
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CUBACAN EXPLORATION: To Settle Debt With Equity Swap
----------------------------------------------------
Calgary-based junior oil and gas explorer Cubacan Exploration
Inc. announced that it has entered into agreements with creditors
to settle virtually all of its outstanding debt by issuing
slightly over 25 million common shares at US$0.10 each, according
to a report Monday in Market News Publishing.

Approximately 18 percent of the debt is owed to a private company
that is 50-percent owned by Cubacan president Allan Kent. Another
73 percent is owed to Endeavour Resources, where Allan Kent is a
director and CFO, Cubacan said in a statement. The balance of the
shares is being issued to third party trade creditors.

The issue is subject to regulatory approval, and all shares
issued will have a four-month "lock up" hold period from receipt
of the approval. Following the proposed equity issuance, Cubacan
will have 78,376,797 shares outstanding.

Cubacan's only interests are in Cuba, where it owns the Farola
North #1 exploration well in the onshore Block 17. It has an
inventory of drillable targets in the 7,000-plus sq km of lands
it owns in Cuba. The company is listed on the Canadian Venture
Exchange (CDNX) with shares trading under the symbol "CCX".



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E C U A D O R
=============

FILANBANCO: PricewaterhouseCoopers Awaits Labor Solution
--------------------------------------------------------
Consulting firm PricewaterhouseCoopers, which has been tasked to
appraise Filanbanco's loan portfolio, decided to delay its
services until the bank solves its labor problems, El Universo
reported Monday. The dismissal of almost 4,000 workers will cost
some US$43 million. Filanbanco's plan is to pay 25 percent of the
total promptly and the remainder in installments.

Ecuador closed Filanbanco, which had had 23 percent of the
country's total banking assets, after its operation became
unsustainable due to growing losses and overdue loans. The bank,
which was founded in 1908, was taken over by the state in 1998 to
avert its collapse. Even with government intervention, the bank
posted losses of $104.8 million last year.



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

BANCRECER: IPAB Predicts Auction To Be Completed October 01
-----------------------------------------------------------
Officials from the Mexican bank bailout agency IPAB announced
that the winner of the defunct Bancrecer's auction won't be known
until the first week of October, Mexican financial daily El
Economista reported Monday. The latest announcement refutes a
recent statement by Bancrecer President Carlos Septien Michel
that Bancrecer's auction process will be completed by Sept. 11.
IPAB officials said it would be impossible to finish that quick
since the bidding process "is a little behind."

Mexico's Grupo Financiero Banorte and Canada's Scotiabank-
Inverlat are both in the running for Bancrecer, the last failed
bank in the hands of IPAB. Analysts have said the purchase of
Bancrecer is the last obvious way for foreign investors to buy
their way into the Mexican financial market.


MAXCOM: Seeks Cofetel Approval For Extra Fees On ISP Calls
----------------------------------------------------------
Maxcom, along with other local-service telephone operators,
applied to the nation's telecom industry regulator Cofetel for
permission to charge a special fee for Internet use, Mexico City
daily El Universal reported Monday. Maxcom wants to be able to
charge a fee of 1.48 pesos per fifteen minutes for the use of a
phone connection to an Internet user's ISP.

Internet users are currently charged for a phone call to their
ISP as they are for any other phone call. According to telephone
operators, the time Internet connections last is disproportionate
to other uses of telephone service.



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P A R A G U A Y
===============

CAPASA: Attributes Bankruptcy To G$23B Loss
-------------------------------------------
Accumulated losses estimated at G$23 billion led Canas Paraguayas
(Capasa), a manufacturer of pipes and tubes, to bankruptcy,
Diario ABC reported Thursday. Capasa has unpaid debts of G$9.984
billion related to credits taken out illegally from private
banks. The company also spent G$651 million in illegal pipes
purchasing operations. An audit showed a difference of G$120.078
million between the company's overall sales and the figures
reported in balance sheets.


MANUFACTURA DE PILAR: Changes Work Schedule To Cut Costs
--------------------------------------------------------
Paraguayan textiles company Manufactura de Pilar will implement a
strategy come August 20, 2001 that will see a stoppage of one
week every month in order to counter financial problems brought
about by the devaluation of the Brazilian currency, Diario ABC
revealed in a report. Pilar says the currency devaluation has
negatively affected the company's sales in the country. The new
schedule is expected to last until the end of this year.


PARAGUAYA/ALFA/EMPRESARIAL: Banking Commission Orders Bankruptcy
----------------------------------------------------------------
Paraguay's banking commission Superintendencia de Bancos ordered
the bankruptcy of three financial institutions, Diario ABC said
last week in a report. The institutions namely, Paraguaya, Alfa
and Empresarial, were reportedly already facing liquidation.



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P E R U
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EDELNOR SA: Issues $7.2M Debt For Investments, Debt Restructure
---------------------------------------------------------------
As part of an ongoing program to issue debt to finance
investments as well roll over existing debt issues, Peruvian
power company Edelnor SA recently sold 25 million soles ($7.2
million) in 180-day paper, Bloomberg reported Monday. According
to BBVA Continental brokerage which handled the placement, the
notes carry an annual interest rate of 9.9995 percent. The firm
says demand was four times greater than the issue. Edelnor has
exclusive rights to distribute electricity in the northern half
of Lima.




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 and Edem
Psamathe P. Alfeche, Editors.

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

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