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

            Tuesday, November 20, 2001, Vol. 2, Issue 227



AEROLINEAS ARGENTINAS: New Owners Reveal Restructuring Plan
BANCO RIO: Majority Owner Takes Steps To Ensure Bank's Future
METROVACESA: May Cease Operations, Leave Argentina
TECNOCOM TELECOMUNICACIONES: Halts Argentine, Puerto Rican Ops


ENRON: Looming Merger Puts Completion Of Projects In Question


LAB: Lufthansa Expresses Interest In Managing Airline


CVRD: Cade Authorizes Privatization Plans
USIMINAS: Higher Sales Eclipsed By Losses On Weak Currency
VARIG: Losses Deepen On Weakening Real, Depressed Economy
VARIG: S&P Lowers RG Receivables Rating to 'B-'; Off Watch
VARIG: Resumes Miami to Rio de Janeiro Non-Stop Service in Dec.
VARIG: Government Extends Help By Reducing Aviation Taxes
VASP: To Sell Stake In Ecuadorian Airline


AEROMEXICO/MEXICANA: Legislators To Counter-Propose Aid Deal
AHMSA: Has New Deadline To Submit Restructuring Plan To SEC
EVAMEX: May Be Ready For Sale Early Next Year, IPAB Says
GRUPO DESC: Shares Decline Despite Debt Reduction Expectations
GRUPO MASECA: Withdraws From Bread-Making Business
GRUPO MEXICO: Needs To Obtain Waiver From Bondholders
XEROX: Appoints New Accounting Head

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AEROLINEAS ARGENTINAS: New Owners Reveal Restructuring Plan
Aerolíneas Argentinas' new owners, made up of three Spanish
businessmen, have unveiled plans to restructure and refloat the
airline, the Financial Times reported.

Gonzalo Pascual, who led bankrupt Aerolíneas Argentinas'
acquisition, believe "there are reasons to be optimistic" even in
the present tough economic environment and difficult conditions
in the airline sector worldwide.

The key to refloating the airline will be whether the new owners
can renegotiate the debt on more favorable terms. The
negotiations, which will commence in April, are aimed at reducing
the airline's secondary debt of $700 million debt to between $400
to $500 million.

The new management has negotiated a 30 percent reduction in costs
for future supplies. By not re-contracting Repsol-YPF as its main
fuel supplier, the company has achieved a savings of about 20 per
cent. BP is now its sole supplier in Madrid while Shell, Exxon
and Repsol-YPF supply its airplanes in Argentina.

The new owners have agreed to maintain the airline's 6,700
employees for the next two years, but have asked them to accept a
20 percent wage cut. Management is expecting a positive response
to its plans by the end of the month.

BANCO RIO: Majority Owner Takes Steps To Ensure Bank's Future
A 22.4 percent drop in Banco Rio de la Plata's third-quarter net
profits indicates the Argentine bank is suffering from the
country's economic deterioration, according to El Pais.

However, Spain's Santander Central Hispano (SCH), which controls
80 percent of Banco Rio, maintains its profit forecasts for 2001
in Latin America of $1.5 billion.

To ensure its results do not fall further and reduce risk, Banco
Rio has drastically reduced bonds and loans to the Argentinean
government from $3.36 billion to $2.75 billion, a cut of 18

In contrast, it has increased loans to private individuals by 5.8
percent through September.

SCH disclosed that the assets of Rio de la Plata account for four
percent of the SCH group as a whole, thus any crisis in Argentina
can easily be assumed by the group.

METROVACESA: May Cease Operations, Leave Argentina
Metrovacesa, which arrived in Argentina in 1999, is considering
the possibility of pulling out of the country, El Cronista

The company may close the subsidiary after freezing all its local
operations due to the gloomy economic situation in Argentina.

When it arrived in the country, Metrovacesa acquired 3 floors of
the building Catalinas Plaza in Buenos Aires for nearly US$2
million from Consultatio and Banco Frances. The company's
original plans to invest around US$30 million in the office and
residential sectors never materialized.

TECNOCOM TELECOMUNICACIONES: Halts Argentine, Puerto Rican Ops
Spanish telecommunications company Tecnocom Telecomunicaciones y
Energia SA has closed down its technology affiliates in Argentina
and Puerto Rico in line with its restructuring plan, Expansion
revealed in a report.

The company posted a $4 million loss at the end of September due
to the delays in the arrival of UMTS technology, for which the
company had several projects slated.

The company said that two of its new projects, TM Data Brazil and
Metrocall, "have also developed more slowly than we had hoped,"
but noted that it is maintaining its expectations for both

Tecnocom said it is studying possible collaboration opportunities
with key companies in the telecoms sector.


ENRON: Looming Merger Puts Completion Of Projects In Question
Enron Corp. and Dynergy Inc. announced that they will be
reviewing Enron's operations with an eye toward shedding anything
unrelated to energy trading, natural gas distribution and other
core businesses, as the merger process between the two proceeds
over the next several months, South Florida Sun-Sentinel

As a result, doubts have arisen over whether Enron's
controversial projects in South Florida: a natural gas pipeline
from the Bahamas to Fort Lauderdale and a power plant in
Deerfield Beach, will be completed. So far it's still not clear
whether these projects will survive the review.


LAB: Lufthansa Expresses Interest In Managing Airline
Fernando Knaut, a representative of Lufthansa Consulting in
Bolivia, revealed that the consulting firm is interested in
managing Lloyd Aereo Boliviano (LAB), AFX-Europe said in a

Knaut met with Asbun, the Bolivian investor who recently
purchased Vasp's 50-percent stake in LAB, and proposed the
opening of new routes for LAB and other administrative changes.


CVRD: Cade Authorizes Privatization Plans
Cade, Brazil's antitrust authority, has finally approved the
privatization of mining-transport giant CVRD, Business News
Americas reported Friday.

However, Cade's approval comes with a condition that the Rio de
Janeiro-based company presents financial details to the Transport
Ministry within 30 days "to ensure protection of the systems'

CVRD will be fined 60,000 reais (about US$25,000) a day if it
fails to meet the deadline, with a clause included that the
amount could be trebled.

Since its sale in May 1997, CVRD has steadily grown. It recently
reported a record quarterly profit of 1.2 billion reais for the
third quarter (US$471 million at current exchange rates), helped
by gains from the sale of its non-core pulp and paper interests
in Cenibra.

The company is shedding its paper, pulp, steel and other non-core
interests to focus on mining, transport and electricity

CONTACT:  Roberto Castello Branco:

          Andreia Reis:

          Barbara Geluda:

          Daniela Tinoco:

USIMINAS: Higher Sales Eclipsed By Losses On Weak Currency
Due to a weaker Brazilian real, Belo Horizonte-based Usiminas
failed to stop financial depletion even with higher sales,
especially of value-added galvanized steel, the flat-steel
producer revealed in a Business News Americas report.

It sold 12.6 percent more steel at 3.04Mt Jan-Sep this year,
against same-period 2000, and its operating profit was 27.1
percent higher at 807 million reais (US$318 million at current
exchange rates).

However, Usiminas made a 2.93-million-real net loss (US$1.15
million) during the nine months against a 144-million-real net
profit in same-period 2000.

According to the company, a 76 percent increase in financial
costs to 616 million reais due to the real's 36.6 percent
weakening was the main reason for the loss.

Exports made up a larger share of the company's sales - 17
percent compared to 14 percent previously, while sheet-steel
production rose 8.4 percent to 3.096Mt in the nine months.

VARIG: Losses Deepen On Weakening Real, Depressed Economy
Brazilian flagship airline Varig posted a loss of 608 million
reais ($239 million) in the first nine months of the year,
Reuters reported Friday.

The figure eclipses the losses of 25 million reais the same nine-
month period last year and 178 million reais for all of 2000.

The company attributed growing losses to the country's weak
currency and a slowing economy, which has weighed on the
country's aviation industry.

By the end of the third quarter, the Brazilian real had lost
around 30 percent of its value against the dollar since Jan. 1,
pushing up financing costs on the company's $1.3 billion in debt.

In addition to the high debt costs, Varig faces a slump in demand
due to the economic downturn in Brazil and much of the world and
flagging international travel after the Sept. 11 terror attacks
on the United States. International tickets account for 60
percent of Varig's revenue.

Meanwhile, the company also posted an operating loss of 624
million reais ($246 million) for the first nine months of this
year on net sales of 3.86 billion reais ($1.52 billion). Its net
equity was a negative 757 million reais ($298 million).

"The airlines are technically bankrupt, the situation is one of
despair, and all of the world is waiting for some action by the
government because the companies cannot do anything else," said
Carlos Antonio Magalhaes, analyst at Sirotsky e Associados.

VARIG: S&P Lowers RG Receivables Rating to 'B-'; Off Watch
Standard & Poor's lowered its rating on RG Receivables Co. Ltd.'s
$100 million 9.6% notes to single-'B'-minus from single-'B'-plus
and removed the rating from CreditWatch where it was placed on
Aug. 6, 2001.

The RG Receivables' notes are secured by the proceeds of credit
and charge card receivables generated by the sale of airline
tickets in the U.S. to Viacao Aerea Rio-Grandense S.A. (Varig)
customers flying between Brazil and the U.S. The transaction is
structured to capture off-shore U.S. dollar-denominated payments
generated from the sale of tickets on Varig S.A. flights between
Brazil and the U.S. and between the U.S. and Tokyo, Japan.

As is the case with all future flow transactions, the RG
Receivables rating is closely linked to the underlying
performance risk of the generator of the securitized assets,
Varig S.A. Thus, a major component of the transaction rating is
Standard & Poor's assessment of Varig's creditworthiness, its
ability to continue operating, and its willingness and ability to
maintain sufficient service to designated U.S. destinations until
the notes are fully paid.

The lowered rating reflects the more difficult operating
environment that Varig faces in the wake of the economic slowdown
in Brazil and the significant drop in global travel in the
aftermath of the terrorist attacks of Sept. 11, 2001. These
factors have put into question the airline's ability to maintain
flight frequencies and load factors on its routes to the U.S.
sufficient to generate the revenue required to cover debt service
payments on the RG Receivables' transaction and cover ongoing
company liquidity needs.

Varig's management has responded to recent events by embarking on
a cost cutting effort that could yield measurable savings. The
company is renegotiating aircraft lease agreements, attempting to
reduce certain labor costs, and considering the sale of certain
noncore assets. The company currently is in discussions with
General Electric (GE) to renegotiate several aircraft leases;
this process could include the return of several aircraft to GE.
Standard & Poor's believes that three or four of the aircraft at
issue with GE are MD-11 long-haul aircraft used on international
flights. In addition, the company is reducing flight frequencies
modestly on its international flights to reflect lower traffic
levels. Flight frequencies on the transaction-critical routes to
the U.S. have been reduced, but Varig management believes that
their frequency will be maintained at the minimum average of 32
flights per week required by the RG Receivables bond indenture.

Although these steps could help bring the company's cost base in
line with its newly reduced revenue generating capacity, much
depends on the severity of the economic slowdown in Brazil and in
the global travel industry generally over the near term. In
addition, these cost reductions do little to mitigate the
negative impact of reduced traffic on Varig's Brazil to U.S. and
Brazil to Japan routes that generate the receivables securitized
in the RG Receivables transaction.

Although the risk of default on the transaction has risen enough
to justify a reduction in the rating to single-'B'-minus,
Standard & Poor's notes that the transaction performed as
designed in 1999 despite similar financial pressures and a broad
restructuring of Varig's debt undertaken at that time with the
company's other creditors. In addition, the receivables coverage
level on the transaction remains adequate, at an estimated 2.7
times (x) quarterly debt service due for the current quarter
ending November 28, although this is down from a level of 3.9x
during the same period of 2000.

Standard & Poor's also notes, however, that the slowdown in
Varig's business in 1999 was driven mostly by economic conditions
in Brazil, with the global travel market much more robust.
Varig's current problems are, however, part of a much larger
global travel slump. Therefore, an improvement in Varig's
prospects, and by extension the rating of the RG Receivables
transaction, will hinge not just on the prospects for a recovery
in Brazil's economy, but also on a recovery in the global travel

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

VARIG: Resumes Miami to Rio de Janeiro Non-Stop Service in Dec.
VARIG Brazilian Airlines, the largest airline in Latin America
and the anchor for Star Alliance in the region, announced Friday
that it will resume its non-stop service between Miami and Rio de
Janeiro in December.

The carrier had temporarily withdrawn from the non-stop market in
November, a traditionally slower period for air traffic preceding
the year-end holiday season. VARIG has offered convenient one-
stop service through Sao Paulo during this month.

"The normal weaker travel market, exacerbated by the effects of
the September 11 attacks in the United States, prompted VARIG to
slightly modify flight patterns in November," said Vicente Cervo,
the airlines Director-North America. "We are pleased to re-
instate the non-stop flights to reflect the increased demand
anticipated for the peak months ahead," he added.

Cervo noted that VARIG offers flights to Sao Paulo and Rio from
New York and Los Angeles in addition to Miami. Cervo further
pointed out that VARIG has code-share services with its Star
Alliance partner United Airlines, greatly expanding customer
options for air connections from the U.S. to Brazil and other
countries in South America.

Preparing to celebrate its 75th anniversary in 2002, VARIG has
served the U.S. market since 1955. The airline also flies to
Japan from Los Angeles and offers world renowned in-flight
service to 18 other countries around the world, annually carrying
in excess of 11 million passengers. Along with its two sister
companies, RIO-SUL and Nordeste, these leading Brazilian air
lines serve over 100 airports within Brazil.

CONTACT:  VARIG Brazilian Airlines, Miami
          Jeff Kriendler, 305/866-2115

VARIG: Government Extends Help By Reducing Aviation Taxes
Ailing Brazilian airlines, which includes Varig and Vasp, may get
help from the Brazilian government as they struggle to stay
afloat in a crisis-plagued sector.

According to a report in O Globo, the Brazilian government
announced that it would extend a helping hand to the country's
airlines by reducing taxes on aviation.

The civil aviation department (DAC) is preparing a report in
order to identify which of the sector's taxes can be reduced.

According to Venancio Grossi, DAC's director-general, the
Brazilian government is not in the same position as its US
counterpart which has freed funds to help airlines.

As a result, DAC is considering measures that could reduce the
operating costs of Brazil's airlines. Grossi believes that a tax
cut would be almost the same as an injection of capital.

VASP: To Sell Stake In Ecuadorian Airline
The Brazilian airline Vasp, which recently sold its stake in
Bolivian Airline Lloyd Aereo Boliviano (LAB), announced that it
would sell off the Ecuadorian airline Ecuatoriana de Aviacion, El
Universo reported.

The sale is part of the Brazilian company's strategy of divesting
assets in Latin America. Subsequently, the airline will be
focusing on the country's domestic market.

In Ecuador, Vasp holds a 49-percent interest in the local


AEROMEXICO/MEXICANA: Legislators To Counter-Propose Aid Deal
An alternative legal proposal for the provision of 100 million
pesos to assist Mexico's airlines in making increased payments
for their insurance premiums is now being prepared by the members
of the Chamber of Deputies Communications commission, reported
Mexico City daily Reforma. The bill would directly affect both
Aeromexico and Mexicana.

The move comes amid fears that the executive branch's proposal
could lead to a rescue of the industry, and the loss of the 100
million pesos to be provided.

Their new version of the law would provide the airlines with
funds through the Development Bank, and would oblige the airlines
to repay the loan within 18 months.

Commission member Alejandra Barrales Magdaleno said the money
would be earmarked exclusively for the payment of insurance

AHMSA: Has New Deadline To Submit Restructuring Plan To SEC
After failing to submit its restructuring plan to the Securities
and Exchange Commission (SEC) on November 15, the beleaguered
steel company AHMSA now has a new deadline - December 1, Mexico
City daily Reforma reported.

Accordingly, the delay couldn't be blamed on the company's
management but rather, on the company's bank creditors, who
raised last-minute questions about some issues in the text of the
agreement, and decided that they should be corrected.

The parties involved agreed that it was worth revising the
document, considering the amount of time that has already passed
in its negotiation.

The modified document has been distributed for review, and will
be submitted to the SEC on December 1.

EVAMEX: May Be Ready For Sale Early Next Year, IPAB Says
Sources from the National Bank Savings Protection Institute
(IPAB) are hopeful that Evaporadora Mexicana (Evamex) will be
ready for sale by the end of the first quarter.

According to a report in Mexico City daily Reforma, the dairy
industry has been waiting for IPAB to put Evamex on the block
since the beginning of the year.

Evamex, directed by Andres Casco Flores, collapsed in the 1995
economic crisis with a debt burden of $200 million. The company
ended up under the control of banks including Union, Cremi and
Serfin. But when the banks failed, IPAB took over the dairy

Evamex is now one of Mexico's five or six most important
companies in the industry, and produces brands including Boreal,
Los Volcanes, Nutrileche, Mi Leche and Vaca Coqueta.

GRUPO DESC: Shares Decline Despite Debt Reduction Expectations
Desc SA, an industrial group with subsidiaries in auto parts,
chemical, food and real estate saw its shares tumble 5.6 percent
to 3.35 pesos, Bloomberg reported Friday.

Laura Forte, an analyst with Salomon Smith Barney, lowered her
2001 earnings per American depositary receipt estimate to 37 U.S.
cents from 63 U.S. cents, maintaining an outperform rating on the

Forte said she expects Desc to reduce its total debt by $190
million this year, surpassing its own goal by $90 million.

GRUPO MASECA: Withdraws From Bread-Making Business
According to a company press release, GRUPO MASECA SA (Gruma),
the largest producer of tortillas in the U.S., exited from its
bread-making business and sold its Mexican equipment and Costa
Rican operation to Grupo Bimbo SA for $70 million, Bloomberg
reported Friday.

The Monterrey-based company earlier promised to turn around the
money-losing bread-making unit or sell it at the end of the year.

"We are happy to see management taking a first step to deliver on
its promise to go through each business line with a fine-toothed
comb," Marco Vera, head of Latin American research at Deutsche
Banc Alex Brown said in a report.

Gruma said the sale represents about 4.3 percent of its assets
and would be used mainly to pay down debt. Vera estimated that
the company has about $668 million in debt.

Meanwhile, the company also announced it is in talks with an
unidentified U.S. company to sell its California bread-making

GRUPO MEXICO: Needs To Obtain Waiver From Bondholders
Grupo Mexico is seeking a waiver from bondholders over repaying
$550 million in debt payments that it must make after ratings
agencies downgraded the debt at its Mexican mining subsidiary, to
below investment grade, the Financial Times revealed Friday.

Prompted by record low copper prices, the downgrades triggered a
clause in Mexican mining subsidiary Grupo Minero Mexico's debt
obligations that allows bondholders to withhold the company's
export revenues in order to pay down debt.

The bondholders, lead by John Hancock Life Insurance are
currently holding $20 million in export sales in a trust.

Analysts believe that if bondholders hold onto the funds, GMM may
not have enough cash to operate.

XEROX: Appoints New Accounting Head
Beleaguered office equipment company Xerox Corp., currently under
federal investigation for alleged accounting irregularities,
named a new chief accounting officer, Reuters reported Friday.

Accordingly, Gary Kabureck will be taking Gregory Tayler's
position of chief accountant temporarily. Tayler was named

Reports have it that Xerox's former auditor, KPMG LLP, had
recommended Xerox remove Tayler from his role as controller into
a job where he would not have a direct financial reporting role.

The move comes amid persistent concerns about Xerox's accounting
practices, stemming from alleged irregularities in its operations
in Mexico.

Xerox recently disclosed in a filing with the Securities and
Exchange Commission that the agency's Division of Corporate
Finance and Office of Chief Accountant were joining the probe of
Xerox accounting practices.

Bill McKee, Xerox spokesman, said that the company has not
received any word from the SEC that the scope of the
investigation has broadened.

"We still maintain, and our auditors maintain, that all our
filings were appropriate," he said.

Tayler has been with the company for more than 10 years and had
been assistant controller prior to being named controller, a
position he has held for about a year. His appointment as
treasurer comes as long-time treasurer Margie Filter, 61, moves
toward retirement, Xerox said.

McKee said the controller position will remain open until a new
chief financial officer is named. Current CFO Barry Romeril plans
to retire in December.

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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