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

            Thursday, October 4, 2001, Vol. 2, Issue 194



AEROLINEAS ARGENTINAS: SEIP Selling To Spanish-Argentine Group


360NETWORKS INC.: Seeks $19M Recovery From Brazilian Subsidiary
CVRD: Likely To Face Competition On Caemi Bid
EMBRAER: Shares Take Steep Plunge On Announced Cutbacks
GLOBO CABO: Shares Drop In Anticipation Of Lower Earnings
MOULINEX: Authorities Consider SEB's Offer "Unacceptable"
VARIG: S&P Appraises Downside Performance Risk On Receivables


AHMSA/GAM: Debt-Payments Suspension Likely To End Early 2002
BANCO ALTANTICO: IPAB, Bital To Wrap Up Sale Next Week
BANRURAL: Teeters On Edge Of Bankruptcy, Official Says
BUFETE INDUSTRIAL: To De-List Stocks From Mexican Bourse
GAM: Foreign Bondholders File Suit Against Federal Government

GRUPO DESC: Shares Up On Debt Payment, Liquidity News
GRUPO DINA: Files Suit Against Canadian Firm Over Broken Contract
SANLUIS CORPORACION: May Face Lawsuit For Damages From Default
XEROX CORP.: Transfers Mexican Manufacturing Ops to Flextronics
XEROX CORP.: Flextronics Deal Won't Result In Mexican Job Losses


ANTELCO: Labor Groups Seen Responsible For Sabotage

     - - - - - - - - - -


AEROLINEAS ARGENTINAS: SEIP Selling To Spanish-Argentine Group
After holding a board meeting Tuesday, Spain's state holding
company SEPI announced it would sell its 91.9 percent stake in
Aerolineas Argentinas to a Spanish-Argentine group, including
Airplus Argentina and its subsidiary, Air Comet, according to an
Associated Press report. Terms of the deal were not immediately

The purchasing group is linked to Spanish tour operator Viajes
Marsans, which owns charter airline Airplus Argentina and has
ties with Scandinavian Airline Systems through its joint
ownership of Spanair. The remaining bidders included Juan Carlos
Pellegrini, a former Aerolineas manager; Enrique Pescarmona, an
Argentine businessman whose holding company controls Impsat Fiber
Networks Inc.; and a U.S.-based investment fund.

Spain, which took over the Argentine carrier as part of a bailout
of Spanish airline Iberia Lineas Aereas de Espana SA, has been
trying to sell Aerolineas for five years. SEPI's plan to find a
buyer was the only way to avoid bankruptcy after racking up more
than $1.8 billion in losses and almost $1 billion in debt.


360NETWORKS INC.: Seeks $19M Recovery From Brazilian Subsidiary
Vancouver-based fiber-optics company 360networks Inc., currently
restructuring under court protection, is attempting to recover a
payment of $19 million from a Brazilian subsidiary, according to
court-appointed monitor PricewaterhouseCoopers. In a summary of
post-filing operations for the company, PwC states that the funds
were frozen in August by a court order obtained in Brazil by a
Brazilian telecommunications service provider. Accordingly, an
application concerning those funds was scheduled to take place in
B.C. Supreme Court October 2.

360networks, headed by former Microsoft Corp. chief financial
officer Greg Maffei, filed for protection from its creditors in
Canada and the United States in June, and since then has been
attempting to restructure. As a part of its bankruptcy filing,
the company reported $1.2-billion in secured debt and $1.45-
billion of unsecured bond debt.

CVRD: Likely To Face Competition On Caemi Bid
The European Commission, the regulatory arm of the 15-nation
European Union, may block the current bid by Brazil's Cia. Vale
do Rio Doce (CVRD) for Caemi Mineracao e Metalurgica SA, the
world's fourth-largest iron ore miner, according to an article in
the Australian Financial Review published Tuesday. Widespread
speculation now suggests that BHP Billiton, the world's largest
mining company, may revive its failed $332-million bid for 60
percent of Caemi. BHP made an unsuccessful attempt to purchase
Caemi, earlier this year. That bid was blocked by Mitsui & Co.,
who used its preemptive rights to buy the 60 percent of Caemi it
didn't already own, then agreed to sell half the company to CVRD.
CVRD is seeking to buy Caemi to expand its share of sea-borne
shipments of iron ore at a time when the commodity's price is
rising. For BHP, buying Caemi would give it increased access to
European steel mills.

EMBRAER: Shares Take Steep Plunge On Announced Cutbacks
The shares of Brazilian jetmaker Empresa Brasileira de
Aeronautica SA (Embraer) took a nose dive Monday as analysts
perceived a grim view on the company's outlook following an
announcement of dismissals, according to Nicholas Winning of the
National Post Online. The company's share price fell 7.8 percent,
to 7.74 reais ($4.53) by midday, leaving them almost 58 percent
lower year to date.

On Friday, Embraer announced it would fire 1,800 people, or 14
percent of its workforce, and delay jet deliveries worth $1.9
billion over the next two years due to the airline industry
slump. Embraer disclosed it had begun the planned 1,800 job cuts

"Shares at Embraer are reflecting the announcement of
dismissals," suggested Felipe Monaco, portfolio manager at
Deutsche Bank AG's Brazilian investment unit. "There is no
positive news to motivate investors to buy the shares. There's
still too much uncertainty and risk surrounding the sector."

The firm tempered the gloomy news by saying it had not received
any order cancellations. However, some analysts took that to mean
there could be more bad news further down the line.

"The scenario for Embraer will depend on the clients, the
airlines, and they are not well financially," said Rafael
Quintanilha, a BES Securities analyst. He said he was revising
down his expectations for the shares.

Embraer shares have lost half their value since the Sept. 11
terrorist attacks, as investors bet the worst travel slump in a
decade will force airlines to cancel orders, threatening
development of a new family of jets that Embraer is counting on
for future growth.

GLOBO CABO: Shares Drop In Anticipation Of Lower Earnings
Shares of Brazil's No. 1 cable television provider Globo Cabo SA
fell Tuesday on lower earnings expectations, according to a
report in Bloomberg. Globo Cabo's shares fell 1.6 percent to 61
centavos, after Monday's 6.1 percent decline on earnings

"Since the beginning of the year, we have been increasingly
conservative on Globo Cabo, both because of expected lower growth
and because of its dollar exposure," Credit Suisse First Boston
said in a report. "However, with the Sept. 11 events in the U.S.
there has been a radical worsening of the scenario."

The bank is not expecting growth in Globo Cabo's earnings in

Globo Cabo has lost almost 70 percent of its stock value this
year due to swelling debt ratios and energy rationing. Just
recently, it registered a 285.3-percent increase in losses during
the first-half of this year, to R$389.2 million, against the
comparable period of last year.

MOULINEX: Authorities Consider SEB's Offer "Unacceptable"
The future of Moulinex's Brazilian holdings remains unclear.
French electrical appliances group SEB's offer for French rival
Moulinex has been deemed "unacceptable" by the regional
authorities in the Calvados area of France, according to a report
Tuesday in La Tribune. The council has requested the government
to establish emergency discussions including all the parties
concerned to "examine all takeover options."

Additionally, the regional authorities have also demanded
"financial transparency" in the accounting management of Moulinex
and the terms of its merger with Brandt. The union CFTC has said
it is "enormously disappointed" and has called for a judicial
inquiry into past management at Moulinex, together with a
"comprehensive plan for continuation".

VARIG: S&P Appraises Downside Performance Risk On Receivables
As part of its ongoing surveillance efforts of companies and
sectors impacted by the terrorist attack on America, Standard &
Poor's this past week held discussions with the management of
Viacao Aerea Rio-Grandense S.A. (Varig) regarding the performance
of an outstanding structured transaction, RG Receivables Co. Ltd.
$100 million 9.6% credit card-backed notes due 2005 (single-'B'-
plus/Watch Neg). The RG Receivables transaction is secured with
the proceeds of U.S. dollar credit and charge card receivables
generated by the sale of airline tickets in the U.S. to Varig
customers flying between Brazil and the U.S. and between the U.S.
and Tokyo, Japan.

Standard & Poor's earlier this year increased its monitoring of
the RG Receivables transaction, and of Varig's financial
condition generally, after declining earnings caused the airline
to violate an interest coverage covenant in the RG Receivables
transaction. The potential consequence of this covenant breach,
an early amortization of the principal balance of the
transaction, was averted with the approval by investors of a
limited-duration waiver valid until Oct. 15, 2001. Although the
waiver and continued high coverage levels (exceeding 3 times
scheduled debt service) in the first half of the year indicated
that the transaction was not in imminent danger of significant
credit impairment, Standard & Poor's remained concerned about the
impact that Varig's deteriorating financial condition could
potentially have on the level of receivables generation. As a
result, Standard & Poor's placed the rating on CreditWatch with
negative implications on Aug. 3, 2001.

The concerns articulated by Standard & Poor's last month have
deepened as a result of terrorist attacks on the U.S. In its
discussions with Standard & Poor's, Varig's management indicated
that the impact of the attacks to date on the airline's load
factors on flights to the U.S. and Japan had been modest,
dropping from 74% to 70%. The company also announced that it had
abandoned recent plans to increase its weekly flight frequency to
the U.S. (although it has not yet reduced those flight
frequencies from the current 38), would reduce staff by about
10%, and would attempt to negotiate more favorable terms with its
aircraft lessors. Varig does not at this time anticipate
undertaking any restructuring measures that would negatively
impact the airline's ability to generate sufficient receivables
to service the transaction.

Nevertheless, downside performance risk for both the airline and
the RG Receivables transaction has clearly increased in the
aftermath of the terrorist attack. Standard & Poor's remains
concerned that the likely difficult operating conditions that
Varig will face over the next several months could negatively
impact the transaction. In particular, investors' willingness to
continue the early amortization waiver beyond its Oct. 15, 2001
expiration is a concern, as are the potential restructuring steps
that Varig might take in response. Going forward, Standard &
Poor's will continue to monitor closely the airline's financial
condition, its response to the more negative operating outlook,
and the potential impact of these on the RG Receivables
transaction. Standard & Poor's expects to resolve the CreditWatch
listing in the next several weeks.

CONTACT:  Standard & Poor's, New York
     Kevin Kime, 212/438-6223
     Rosario Buendia, 212/438-2410
     Philip Baggaley, CFA, 212/438-7683
     Reginaldo Takara, (55) 11-5501-8932 (Sao Paulo)


AHMSA/GAM: Debt-Payments Suspension Likely To End Early 2002
The debt-laden Mexican iron and steel giant Altos Hornos de
Mexico SA (Ahmsa) and its parent company, Mexican steel and
industrial conglomerate Grupo Acereros del Norte (GAN), are
likely to lift their suspensions on debt payments at the
beginning of 2002, according to a report Tuesday in Mexican
financial daily El Economista. GAN signed a debt-restructuring
agreement in the later part of September, and is now awaiting the
acceptance of the company's bank creditors. Both companies
finalized plans to submit restructuring plans to the U.S.
Securities Exchange Commission (SEC) at recent board meetings and
are expected to complete their restructuring processes during the
first quarter of 2002. According to sources, the companies' plans
have been delayed by two weeks because of the terrorist attacks
against the United States.

BANCO ALTANTICO: IPAB, Bital To Wrap Up Sale Next Week
The agreement between Mexican bank bailout agency IPAB and Bital
for the purchase of Banco del Atlantico is expected to be
concluded this week, or next week at the latest. According to a
report Tuesday in Mexico City daily El Universal, the agreement
will include the injection of between 13 billion and 14 billion
pesos to reorganize its finances. Bital will contribute close to
20 percent of the funds, while IPAB will assume the remaining 80
percent, revealed sources from the bank bailout agency. At this
point, the two parties are still wrapping up minor details. Bital
and IPAB have been negotiating the sale of Banco del Atlantico,
which has been under the administration of Bital for nearly four
years now.

BANRURAL: Teeters On Edge Of Bankruptcy, Official Says
The National Rural Credit Bank (Banrural) is now at risk of
technical bankruptcy due to a 490-million-peso loss in the first
half of this year, as well as an 85-percent decline in its
reserves, revealed  senior official of the National Farmers'
Confederation, Hector Padilla, in a report Tuesday in Mexico City
daily Reforma.

"Although the official line paints the figures to hide the
serious economic crisis in the country and its main financial
instrument, Banrural's report for the last six months leaves no
doubts," Padilla said.

"The institution has spent 841 million pesos on remunerations and
benefits to its personnel, a quantity similar to the 863 million
dollars that went toward loans for farmers," he added.

Banrural has only 106 million pesos left for new loans, and has a
capitalization index of 3.1 percent, according to financial
regulator the National Banking and Securities Commission (CNBV).

BUFETE INDUSTRIAL: To De-List Stocks From Mexican Bourse
Analysts revealed that the Mexican construction company Bufete
Industrial is going to de-list its stock from the Mexican bourse
(BMV), as part of a plan to restructure its debt, Mexican
financial daily El Economista reported Tuesday. The official
decision was made during a September 27 shareholders' meeting.
Trading in the company's shares is currently suspended, as its
main subsidiary has suspended all debt payments.

GAM: Foreign Bondholders File Suit Against Federal Government
Foreign investors, who hold close to US$75 million in bonds
issued by sugar producer Grupo Azucarero Mexicano (GAM), are
suing the Mexican federal government for the expropriation of the
company's sugar refineries, under the regulations of the North
American Free Trade Agreement (NAFTA). According to a report
released Tuesday Mexican financial daily El Economista, the free
trade clause being cited refers to equal treatment of investors
based on the principal of international reciprocity. It is also
possible that foreign investors with equity ownership in the
refineries might launch a similar legal action. Late last month,
GAM launched a suit to have the expropriation of its refineries
reversed, on the grounds that its installations did not match the
criteria in the federal government's expropriation decree.

GRUPO DESC: Shares Up On Debt Payment, Liquidity News
Desc SA, an industrial conglomerate with businesses in chemicals,
auto parts and real estate, saw its shares rise 26 centavos, or
8.4 percent, to 3.4 pesos, Bloomberg reported Tuesday. The
increase in share price follows an announcement by the company on
Monday that it paid $60 million to creditors during the third
quarter, reducing its total debt to $960 million. The company has
$100 million in debt payments coming due by year-end, and $150
million in cash on hand, according to Desc Chief Financial
Officer Arturo D'Acosta.

GRUPO DINA: Files Suit Against Canadian Firm Over Broken Contract
Grupo Dina has presented officially before the International
Chamber of Commerce a claim of $123.161 million against Western
Star Trucks, the company said in a report Tuesday in Mexican
financial daily El Economista. Dina's complaint is based on the
Canadian company's cancellation of a contract, which caused Dina
financial problems over the following months, eventually leading
to the closure of its Dina Camiones plant in Sahagun, Hidalgo,
said Dina Legal Director Mauricio G. Mendoza Silva. Western Star
has until 2002 to reply to Dina's claim, said Mendoza.

SANLUIS CORPORACION: May Face Lawsuit For Damages From Default
Shares of auto parts and mining company Sanluis Corporacion SA
fell 50 centavos, or 7.5 percent, to 6.2 pesos, according to a
report Tuesday in Bloomberg. Sanluis last month defaulted on a
$200 million bond even though the company had the cash to pay its

"There could be a lawsuit for damages caused by the default,"
said Alejandro Gonzalez, Bursametrica's industrial groups

The company recently denied it is struggling financially, saying
that its annual operating cash flow has reached $106 million and
annual sales have surpassed $522 million. The decision to
temporarily suspend interest payments was necessary in order to
preserve the financial health of its two subsidiaries, Rassini
and Luismin.

XEROX CORP.: Transfers Mexican Manufacturing Ops to Flextronics
Taking another major step forward in its turnaround plan to
reduce costs, improve productivity and increase competitiveness,
Xerox Corporation (NYSE: XRX) announced Tuesday a manufacturing
agreement with Flextronics (NASDAQ: FLEX), a $12 billion global
electronics manufacturing services (EMS) company.

The agreement includes payment to Xerox of approximately $220
million and assumption of certain liabilities for the sale of
inventory, property and equipment and a five-year contract for
Flextronics to manufacture certain Xerox office equipment and
components, at a modest premium over book value.

Xerox will sell to Flextronics office manufacturing operations
including manufacturing assets and inventory in Toronto; Resende,
Brazil; Aguascalientes, Mexico; and Penang, Malaysia. The
approximately 3,650 current Xerox employees in these operations
are expected to transfer to Flextronics.

"Our agreement with Flextronics will redefine our office
manufacturing strategy through significantly improved asset
utilization, greater supply chain flexibility and cost savings as
well as generating cash from the asset sales," said Anne M.
Mulcahy, Xerox president and chief executive officer.

The company also said that it will stop production by the end of
the second quarter 2002 at its printed circuit board factory in
El Segundo, Calif., and its customer replaceable unit plant in
Utica, N.Y. The operation in El Segundo currently employs 425;
Utica's employment is 265. When these plants close, Flextronics
will build the work into its global network of manufacturing

In addition, Xerox will begin consultations with European works
councils regarding the sale of its office manufacturing
operations in Venray, The Netherlands, and the transfer to
Flextronics of some production work currently performed at
Xerox's site in Mitcheldean, England.

As a result of these actions, Xerox expects to incur cash
restructuring charges that will approximately equal the premium
over book value from the asset sales.

Xerox and Flextronics expect that the first in a series of
closings on the asset sales will occur in the fourth quarter,
beginning a one-year transition period for Flextronics to assume
manufacturing of Xerox-designed office products and related
components. Flextronics will also begin the manufacturing of
Xerox's electronic parts and subsystems during the first half of
2002. Xerox will continue to strengthen its manufacturing
competencies in high-end production printing and publishing
equipment, toner and imaging supplies through its remaining
global manufacturing plants.

In total, the agreement with Flextronics represents in excess of
$1 billion in annual manufacturing costs, approximately 50
percent of Xerox's overall manufacturing operations.

"This agreement exemplifies the type of business that we have
built Flextronics to handle and is further evidence that the
trend towards virtual manufacturing continues," said Michael E.
Marks, chairman and chief executive officer of Flextronics. "This
is also an opportunity to expand our customer base and product
portfolio through the acquisition of these sites in addition to
gaining valuable knowledge through the Xerox people."

"Our partnership with Flextronics ensures that all Xerox office
products and components will continue to be produced under the
high quality standards that customers rely on from Xerox," said
Ursula Burns, president, Xerox Worldwide Business Services. "At
the same time, Xerox will benefit from Flextronics' commitment to
significant annual productivity improvements, maximizing its
large-scale purchasing and technological efficiencies."

Today's announcement with Flextronics is the latest in a series
of Xerox turnaround-related actions that are restoring Xerox's
financial strength and positioning the company for a return of
profitability. For example, Xerox announced last month a
framework agreement with GE Capital's Vendor Financial Services
to become the primary equipment-financing provider for Xerox's
U.S. customers. The two companies also agreed to the principal
terms of a financing agreement under which Xerox will receive
from GE Capital approximately $1 billion secured by Xerox's lease
receivables in the United States.

Xerox's agreement with Flextronics is expected to close in stages
subject to the completion of global regulatory requirements.
Xerox will receive cash proceeds from the agreement in phases as
the companies close on the individual worldwide asset sales.

Deutsche Banc Alex. Brown served as Xerox's advisor on this

To see company's latest Balance Sheet:

CONTACTS:  Christa Carone, Xerox Corporation, 716-423-5074,

           Bill McKee, Xerox Corporation, 716-423-4476,

           Manuella Solomon, Flextronics, 408-576-7867,

           Cheryl Scritchfield, Flextronics, 43 1 602 4100 26,

XEROX CORP.: Flextronics Deal Won't Result In Mexican Job Losses
Xerox Corp.'s $220-million deal with Flextronics International
Ltd. will not result to job losses in Mexico, Reuters reported
Tuesday. The deal will see Flextronics taking over Xerox's plant
in the central Mexico state of Aguascalientes that has some 2,300
employees, and in other assets changing hands.

"Basically the operation (in Aguascalientes) will remain the
same, just with another owner," revealed Xerox Mexicana director
general Rick Dauval. According to him, additional jobs could be
generated by Flextronics in Aguascalientes as it adds new
production lines to the plant.

Xerox will maintain some 1,000 employees in Mexico, mainly in
sales, maintenance and client-support, working out of its Mexico
City headquarters, Dauval said. It also has a small plant
manufacturing cartridges for Xerox machines in the border city of


ANTELCO: Labor Groups Seen Responsible For Sabotage
Executives at Paraguay's state-run telephone company National
Telecommunications Administration (Antelco) revealed that
sabotage on the company's Asuncion facilities left 20,000
customers without service, reported EFE Friday. According to
Antelco chief Oscar Stark, the saboteurs severed a fiber-optic
cable in Asuncion's Villa Morra neighborhood cutting off
communication with the rest of the capital and outlying cities.
Officials see the attacks as the work of labor groups opposed to
the company's privatization as it coincides with an executive
order setting strict limits on the sale of preferred stock to
ANTELCO workers interested in vying to acquire the company.

Some union leaders claimed they were in a position to get outside
partners to join with ANTELCO's 5,500 employees in buying up all
of the company's stock. However, the government only wants to
sell a maximum of 10 percent of the stock to current employees.

Antelco is in the process of being sold to the private sector and
the process is expected to be completed by the end of the year.

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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