TCRLA_Public/020419.mbx        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, April 19, 2002, Vol. 3, Issue 77



BANCO GENERAL: S&P Lowers Credit Grade to "D" Due to Suspension
EDENOR: Government's Current Policy Could Mean Huge Losses Ahead


FLAG TELECOM: Tyco May Write Down US$100 million On Bankruptcy
FLAG TELECOM: Affiliates Filing Separate Bankruptcy Petitions
FLAG TELECOM: Largest Unsecured Creditors Listed in Filings
FLAG TELECOM: General Counsel Kees van Ophem Explains Condition
FLAG TELECOM: Moves Court To Commence Bermuda Proceedings


BCP: US Parent to Upgrade Service Only After Resolving Default
EMBRAER: To Sign Joint Manufacturing Deal with Chinese Partner


WACKENHUT CORPORATION: To Absorb Huge Loss Due to Unit's Failure


PAZ DEL RIO: Chief Says Japanese Solution Still Two Years Away


GRUPO MEXICO: Regulator to Veto Ferromex-Ferrosur Merger
GRUPO MEXICO: Finally Resolves Salary Disputes, Ends Strike
ICONSA: Follows Parent Bufete Industrial to Bankruptcy Court


EDELNOR: Privatization Body to Sell Remaining State Shares in May


BANCO INDUSTRIAL: Governent Stops Hemorrhage With VEB125 Billion

     - - - - - - - - - -


BANCO GENERAL: S&P Lowers Credit Grade to "D" Due to Suspension
Banco General de Negocios is now rated "D" by Standard & Poor's
after seeking a 120-day suspension of operations from the
Argentine Central Bank.  

According to Business News Americas, the new rating applies to
the bank's local and foreign currency long-term and short-term
counterparty credit grade.  They were previously rated "SD."

The report says the bank sought the suspension in order to
restructure its business amidst the turmoil in the Argentine
economy.  The request was granted on April 12.

The ratings agency placed the bank on selective default a few
months ago after the government imposed deposit restrictions and
capital controls on Argentine banks in December last year, the
paper says.

Meanwhile, the bank is also facing a probe on allegations that it
acted as a conduit to funneling funds out of the country.  
Managers of the bank are reportedly under scrutiny right now for
their role in the alleged transaction.

EDENOR: Government's Current Policy Could Mean Huge Losses Ahead
Power distributor Edenor has asked the Argentine commission in
charge of renegotiating contracts to redefine the new tariffs and
regulations currently being imposed by the government under its
economic emergency framework.

According to El Cronista, the company has complained that, since
the devaluation of the peso, it has absorbed some ARS1 billion
worth of losses.  The Electricite de France-controlled firm
estimates annual losses of ARS400 million and cash deficit of
ARS1 billion should the condition in the country and the tariff
levels remain unchanged.


FLAG TELECOM: Tyco May Write Down US$100 million On Bankruptcy
Tyco International, the third-largest shareholder of bankrupt
Flag Telecom, is expected to write-down at least US$100 million
in investments, analysts told Dow Jones Newswires.

In an interview with the news conduit, Hedge-fund manager Doug
Kass said he expects Tyco to lose US$100 million worth of
investments due to the collapse of the network services provider.

Salomon Smith Barney analyst Jeffrey Sprague, however, says he
expects Tyco to actually write-off only US$10 million from its
balance sheet as it had continually marked down the asset as
Flag's share price declined in the market.  But he estimates
total loss to be US$110 million.

Mr. Sprague says "the failure of another subsea player further
calls into question the carrying value of Tycom on Tyco's books."

He said Tyco may partially write down the carrying value of its
Tycom Ltd. unit, which stood at US$2.7 billion at the end of the
first quarter. But even if Tyco writes down 100% of the carrying
value, Tyco's balance sheet would remain well within the cap
covenants of its bank lines, he said.

Plagued by nearly US$2.6 billion in debt, Flag collapsed Friday
before the U.S. Bankruptcy Court for the Southern District of New
York.  The Company sought protection from creditors under Chapter
11 of the U.S. Bankruptcy Code.

Based in Bermuda, Flag had US$3.3 billion of assets as of March
31, 2002.

Contact:  FLAG Telecom Holdings Limited
          41 Cedar Ave.
          Hamilton HM 12, Bermuda
          Telephone (441) 296-0909

FLAG TELECOM: Affiliates Filing Separate Bankruptcy Petitions
--------  -------------
Case No.  Debtor Entity
--------  -------------
02-11732  FLAG Telecom Holdings Limited
02-11733  FLAG Atlantic Limited
02-11734  FLAG Atlantic Holdings Limited
02-11735  FLAG Limited
02-11736  FLAG Pacific USA Limited

Petition Date: April 12, 2002

U.S. Bankruptcy Court: United States Bankruptcy Court
                       Southern District of New York
                       Alexander Hamilton Custom House
                       One Bowling Green, 5th Floor
                       New York, New York 10004-1408
                       Telephone (212) 668-2870

Bankruptcy Judge:      The Honorable Allan L. Gropper

Debtors' U.S.
Bankruptcy Counsel:    Conor D. Reilly, Esq.
                       Janet M. Weiss, Esq.
                       M. Natasha Labovitz, Esq.
                       Craig A. Bruens, Esq.
                       Paul H. Guillotte, Esq.
                       Sarah K. Larcombe, Esq.
                       Joseph Furst, Esq.
                       GIBSON, DUNN & CRUTCHER LLP
                       200 Park Avenue
                       New York, NY 10166
                       Telephone (212) 351-4000
                       Fax (212) 351-4035

Debtors' Bermudian
Insolvency Counsel:    APPLEBY, SPURLING & KEMPE
                       Cedar House
                       41 Cedar Avenue
                       P.O. Box HM 1179
                       Hamilton HM EX, Bermuda
                       Telephone (441) 295-2244

Members of the
Prepetition FTHL
11-5/8% Noteholders'
Committee:             Varde Partners, Inc.
                       Elliot Associates
                       Cerberus Capital Partners
                       Salomon Smith Barney
                       York Capital
                       Redwood Capital Management, LLC

Counsel to the
Prepetition FTHL
11-5/8% Noteholders'
Committee:             Kasowitz, Benson, Torres & Friedman

Members of the
FLAG Limited
8-1/4% Noteholders'
Committee:             Goldman Sachs
                       Pacific Life
                       Eaton Vance
                       Greenwich Capital
                       Hartford Financial Services Group, Inc.
                       PPM America, Inc.
                       Putnam Investments
                       Saloman Brothers
                       Trust Company of the West
                       Wellington Management

Counsel to the
FLAG Limited
8-1/4% Noteholders'
Committee:             Akin, Gump & Strauss, Hauer & Feld L.L.P.

Financial Advisor
to the Prepetition
FLAG Limited
8-1/4% Noteholders'
Committee:             Chanin Capital Partners

U.S. Trustee:          Carolyn S. Schwartz
                       United States Trustee for Region 2
                       33 Whitehall Street, Suite 2100
                       New York, NY 10004
                       Telephone (212) 510-0500

FLAG TELECOM: Largest Unsecured Creditors Listed in Filings
The following informationg is gathered from Flag Telecom's
document filings with the Bankruptcy Court:

                 FLAG Telecom Holdings Limited

                  Bankruptcy Case No. 02-11732

                          A. Bondholders

Creditor                          Nature of Claim   Claim Amount
--------                          ---------------   ------------
The Bank of New York              Indenture Trustee $564,000,000
101 Barclay Street                for 11.625%
Floor 21 West                     Senior Dollar and
New York, NY 10286                Senior Euro Notes
Attn: Corporate Trust             due 2010
    Administration -
    Global Finance Unit

York Capital Management           11-5/8% Senior     $48,132,000
350 Park Avenue, 4th Floor        Notes due
New York, NY 10022                March 2010
Cybill Yee
Tel: 212-651-0500
Fax: 212-651-0501

Colonial Management               11-5/8% Senior     $40,000,000
    Associates, Inc.               Notes due
Equity Department                 March 2010
1 Financial Center, 13th Floor
Boston, MA
Carl Ericson
Tel: 617-426-3750
Fax: 617-772-3995

Varde Investment Partners LP      11-5/8% Senior     $18,600,000
3600 West 80th Street, Suite 425  Notes due
Minneapolis, MN 55419             March 2010
Tel: 952-893-1554
Fax: 952-893-9613

Smith Barney                      11-5/8% Senior      $7,540,000
Smith Barney Mutual Funds         Notes due
333 West 34th Street, 3rd Floor   March 2010
John Bianchi
Tel: 800-451-2010

Brinson Advisors, Inc.            11-5/8% Senior      $5,500,000
Mitchell Hutchins Funds           Notes due
1285 Avenue of the Americas       March 2010
New York, NY 10019
Marianne Rossi
Tel: 212-713-2000

Aragon Investments, Ltd           11-5/8% Senior      $4,005,000
Chicago, IL 60606-3405

Sutter Real Estate                11-5/8% Senior      $4,000,000
San Francisco, CA 94111           Notes due
                                   March 2010

Bank of Montreal                  11-5/8% Senior      $3,250,000
100 Kings Street West, 3rd Floor  Notes due
First Canadian Place              March 2010
Toronto Ontario M5X 1H3
Lemuel Seabrook

Redwood Capital Mgmt              11-5/8% Senior      $3,000,000
Englewood Cliffs, NJ 07632        Notes due
                                   March 2010

Wells Fargo Capital Markets       11-5/8% Senior      $3,000,000
550 California St, FL 14          Notes due
San Francisco, CA 94104           March 2010
Louise Chen

Atlantic Asset Management         11-5/8% Senior      $2,500,000
New York, NY 10006                Notes due
1111-5/8% Senior                  March 2010

HSBC Bank Plc Global              11-5/8% Senior      $2,250,000
    Investment Services            Notes due
England                           March 2010

Satellite Credit                  11-5/8% Senior      $2,000,000
    Opportunities Fund, Ltd        Notes due
Boston, MA 02110-1727             March 2010

Trust Company of the West (TCW)   11-5/8% Senior      $2,000,000
865 S Figueroa                    Notes due
Los Angeles, CA 90071             March 2010

Enterprise Capital Management     11-5/8% Senior      $1,450,000
Atlanta, GA 30326                 Notes due
                                   March 2010

First Allmerica Financial         11-5/8% Senior      $1,250,000
    Life Insurance                 Notes due
New York, NY 10066                March 2010

American Express Financial Corp.  11-5/8% Senior      $1,000,000
55440-0534                        Notes due
                                   March 2010

Deutsche Banc Securities          11-5/8% Senior        $745,000
                                   Notes due
                                   March 2010

USB Warburg LLC                   11-5/8% Senior        $300,000
677 Washington Blvd 9N            Notes due
Stanford, CT 06901                March 2010
Carlos Lede
Tel: 203-719-7644
Fax: 203-719-0795

Afliac Market Value Fund          11-5/8% Senior        $250,000
New York, NY 10006                Notes due
1111-5/8% Senior                  March 2010

                          B. Trade Creditors

Latham & Watkins                  Professional           $48,642
99 Bishopsgate, LONDON            Services

Arthur Andersen-UK                Trade Debt             $22,171
P O Box 125, Nottingham

American Stock Transfer & Trust   Trade Debt              $4,000
40 Wall Street
New York, NY 10005
Tel: 212 936 5100

Appleby, Spurling & Kempe         Professional            $3,001
Cedar House                       Services
41 Cedar Avenue
Hamilton, HM12
Tel: 00 1 441 295 2244

Financial Times                   Trade Debt              $2,774
1 Southwark Bridge
London SE1 9HL
Tel: 020 7873 3000

                     FLAG Atlantic Limited
                  Bankruptcy Case No. 02-11733

Creditor                          Nature of Claim   Claim Amount
--------                          ---------------   ------------
Tycom                             Trade Debt          $1,737,288
Building A
60 Columbia Turnpike
Morristown, NJ 07960

Dresdner Bank                     Bank Debt             $247,402
75 Wall Street
New York NY 10005-2889

Skadden, Arps, Slate,             Professional            $6,473
    Meagher & Flom                 Services
919 Third Avenue
New York, NY 10022-3897

Hobbs Group L.L.C.                Trade Debt              $6,000
P.O. Box 13535
Accounts Receivable Dept
Newark, NJ 07188-0535
Tel: 203-351-5600

Appleby, Spurling & Kempe         Professional            $5,710
Cedar House                       Services
41 Cedar Avenue
Hamilton, HM12 Bermuda
Tel: 00 1 441 295 2244

Simmons & Simmons                 Professional              $283
21 Wilson Street                  Services
London EC2M 2TX UK

Barclays Bank plc                 Bank Debt         Unliquidated
222 Broadway
New York NY

                 FLAG Atlantic Holdings Limited
                  Bankruptcy Case No. 02-11734

Creditor                          Nature of Claim   Claim Amount
--------                          ---------------   ------------
Slaughter & May                   Professional              $789
35 Basinghall Street
London EC2V 5DB
Tel: 020 7600 1200

                          FLAG Limited
                  Bankruptcy Case No. 02-11735

                          A. Bondholders

Creditor                          Nature of Claim   Claim Amount
--------                          ---------------   ------------
IBJ Schroder Bank & Trust Company Indenture Trustee $430,000,000
One State Street                  for 8-1/4%
New York, NY 10004                Senior Notes
Attn: Corporate Trust             due 2008

Vanguard Group                    8-1/4% Senior      $56,630,000
Fixed Income                      Notes due
100 Vanguard Blvd                 January 2008
Karen Hogan
Tel: 610-669-1000
Fax: 610-407-2807

Jackson National Life             8-1/4% Senior      $41,200,000
Jackson Natl Life Ins Co of NY    Notes due
1 Corporate Way                   January 2008
Robert Fritts
Tel: 517-381-5500

PPM America, Inc.                 8-1/4% Senior      $32,800,000
Equity Investments                Notes due
225 West Wacker Drive-1200        January 2008
Marvin Lutz
Tel: 312-634-2553
Fax: 312-634-0055
JoAnne Bianco
Tel: 312-634-2500

Pimco Advisors                    8-1/4% Senior      $17,991,000
PIMCO Funds                       Notes due
P.O. Box 6430                     January 2008
840 Newport Center Drive
Benjamin Trotsly
Tel: 800-426-0107

New York Life Insurance Equity    8-1/4% Senior      $16,400,000
51 Madison Avenue-203             Notes due
Karen Beyer                       January 2008
Tel: 212-576-6194
Fax: 212-448-1711

Putnam Advisory Global            8-1/4% Senior      $15,695,000
    Fundamental Research           Notes due
1 Post Office Square              January 2008
John Boselli
Tel: 617-760-8461
Fax: 617-760-1375

UBS Warburg LLC                   8-1/4% Senior      $15,000,000
100 Liverpool Street              Notes due
John Campbell                     January 2008
Tel: 0207 567 2939
Fax: 0207 567 2064

Appaloosa Investment L.P.         8-1/4% Senior      $12,405,000
                                   Notes due
                                   January 2008

Lincoln National Life             8-1/4% Senior      $12,000,000
915 South Clinton Street          Notes due
Mail Stop 8A-02                   January 2008
Jon Boscia
Tel: 219-455-2000
Fax: 219-455-1729

Palomino Fund Ltd                 8-1/4% Senior      $10,870,000
                                   Notes due
                                   January 2008

Eaton Vance Management Inc        8-1/4% Senior      $10,650,000
Equity Research &
255 State Street
Michael Weilheimer
Tel: 617-482-8260
Fax: 617-542-7410

American Home Assurance           8-1/4% Senior      $10,000,000
AIG Tower 1-2-4                   Notes due
Kinshi-Cho                        January 2008
Yasuo Goto
Tel: 3-5619-3084
Fax: 3-5619-3153

Unumprovident Corporation         8-1/4% Senior      $10,000,000
                                   Notes due
                                   January 2008

Perry Capital                     8-1/4% Senior       $9,949,000
599 Lexington Avenue, 36th Floor  Notes due
New York, NY                      January 2008
Nat Klipper
Tel: 212-583-4000
Fax: 212-583-4099

Trust Company of the West (TCW)   8-1/4% Senior       $9,000,000
400 South Hope Street, 3rd Floor  Notes due
Richard Pool                      January 2008
Tel: 212-553-9865
Fax: 212-553-9880

Offit                             8-1/4% Senior       $8,000,000
520 Madison Avenue, 27th Floor    Notes due
New York, NY                      January 2008
William Charlton
Tel: 212-350-3776
Fax: 212-371-7687

Provident Life                    8-1/4% Senior       $8,000,000
1 Fountain Square                 Notes due
Vicki Corbett                     January 2008
Tel: 423-755-1373

Deutsche Banc Securities          8-1/4% Senior       $6,705,000
                                   Notes due
                                   January 2008

Marathon Asset Management LLC     8-1/4% Senior       $6,200,000
230 Park Avenue, 7th Floor        Notes due
Andrew Rabinowitz                 January 2008
Tel: 212-499-1350
Fax: 212-499-1385

AIG Life                          8-1/4% Senior       $6,000,000
AIG Life Insurance Co.            Notes due
Post Office Box 667               January 2008
John Oehmke
Tel: 302-594-2000

                            A. Trade Creditors

Freshfields Bruckhaus Deringer    Professional           $82,070
65 Fleet Street                   Services
London EC4Y 1HS
Tel: 0207 936 4000

Arthur Andersen & Co. (Bda)       Professional           $61,130
Victoria Hall                     Services
Accounts Receivable Dept
11 Victoria Street
Hamilton HM 11

Arthur Andersen (Malaysia)        Professional           $57,996
P.O. Box 11040                    Services
Accounts Receivable Dept
Kuala Lumpur 50734
Tel: 03-255-7000

Agilent Technologies UK Ltd       Trade Debt             $43,547
Eskdale Road
Winnersh Triangle
Berkshire RG41 5DZ UK
Tel: 020 7868 9208

Hobbs Group                       Trade Debt             $12,587
P.O. Box 13535
Accounts Receivable Dept
Newark, NJ 07188-0535
Tel: 203-351-5600

FLAG TELECOM: General Counsel Kees van Ophem Explains Condition

FLAG's Troubles & Woes

Kees van Ophem, FLAG's Secretary and General Counsel since
October 2001, relates how the Company finds itself at the steps
of the Bankruptcy Court:

FLAG's troubles stem from a dramatic change in the economic
climate generally, and an even more dramatic shift in the
environment for telecommunications companies.  This shift has
imposed severe financial challenges on the telecommunications
industry in general and, in particular, FLAG's competitors,
customers and potential customers, and, due to dramatically lower
capital expenditure budgets, FLAG itself.  Overcapacity for
bandwidth in some regions and lower than anticipated demand have
led to dramatic declines in bandwidth prices, the unavailability
of new capital, and chapter 11 filings by companies in virtually
every sector of the telecommunications industry.

The Turnaround Plan

In light of the current economic climate, FLAG Telecom has
focused its business strategy on preserving capital and reducing
costs by: serving the core backbone needs of large telecom and
Internet companies, focusing on regions where FLAG has a
competitive advantage, and increasing the revenue generating
capacity of the FLAG Telecom global network by expanding the
number and scope of bundled services available to its customers.

With this business plan in hand, the Debtors began negotiations
with their principal creditors to restructure their bank, bond
and trade debt.

The Chapter 11 Scenario

In connection with these negotiations, Mr. van Ophem relates, the
Debtors concluded that the commencement of these chapter 11 cases
was in the best interests of all stakeholders because it would be
difficult, outside of reorganization proceedings for the Debtors,
to effect the contemplated restructuring. The Debtors continue to
believe that FLAG Telecom's core businesses, taken as a whole,
are viable, and believe that continued operation of activated
networks, completion and lighting of additional near term revenue
producing segments, and continued development of FLAG Telecom's
servicing abilities are each capable of producing significant
future revenue streams. Meanwhile, the Debtors believe that the
current unsettled telecommunications market is not a favorable
environment for liquidation. Consequently, the Debtors believe
that reorganization of their core businesses will generate
substantially more value than other business options.

Why FLAG Filed Now

On April 11, 2002, the Company was informed that the Bank Group
was accelerating the debt owed under the Credit Agreement dated
as of October 8, 1999 (as amended by the First Amendment to
Credit Agreement and Equity Contribution Agreements dated as of
December 14, 1999; the Second Amendment to Credit Agreement dated
as of November 16, 2000; and the Third Amendment to the Credit
Agreement and Forbearance Agreement, dated as of March 25, 2002)
among Flag Atlantic Limited, the banks and other financial
institutions party thereto -- the Lending Consortium is comprised
of: Barclays Bank plc, Dresdner Bank AG, New York and Grand
Cayman Branches, Westdeutsche Landesbank, Girozentrale, New York
Branch, Australia and New Zealand Banking Group Ltd., Bank of
Scotland, City National Bank, Credit Lyonnais, DG Bank Erste Bank
Der Oesterriechischen Sparkassen AG, Gulf International Bank
B.S.C., Bayerische Hypo-Und Vereinsbank, AG, New York Branch, IKB
Deutsche Industriebank AG, Luxembourg Branch, Kbc Finance
Ireland, Landesbank Hessan-Thuringen Girozentrale, Landesbank
Sachen Girozentrale, Mitsubishi Trust & Banking Corp., NIB
Capital Bank, Rabobank International, Raiffeisen Zentralbank,
Osterreich Aktiengesellschaft, Societe Generale, Sumitomo Bank
Limited, and The Royal Bank of Scotland plc. as of March 25, 2002
-- Barclays Bank Plc, as the administrative agent for the
Lenders, Dresdner Bank AG, New York Branch, as the documentation
agent, Westdeutsche Landesbank Girozentrale, New York Branch, as
the syndication agent, and Barclays Capital, as the lead arranger
was accelerated.

Mr. van Ophem explains that the acceleration arguably caused
cross-defaults of the Debtors' institutional bond debt. Although
FTHL is not a borrower or a guarantor under the FLAG Atlantic
Limited facility, Barclays Bank plc froze FTHL's funds on deposit
at Barclays.  Further, FTHL held significant funds at a financial
institution that was a lender under the FLAG Atlantic Limited
facility.  In response to the acceleration and fear that other
financial institutions party to the FLAG Atlantic Limited bank
facility would similarly freeze funds, FTHL moved approximately
$210,000,000 out of such accounts. The funds were ultimately
moved to FLAG Pacific Holdings Limited -- a non-Debtor and non-
filing entity.

FLAG TELECOM: Moves Court To Commence Bermuda Proceedings
Certain debtors that are organized in Bermuda -- FLAG Telecom
Holdings Limited, FLAG Limited, FLAG Pacific USA Limited, FLAG
Atlantic Holdings Limited and FLAG Atlantic Limited -- ask the
Court for authority to commence proceedings in the Supreme Court
of Bermuda, and to apply for the appointment of Joint Provisional
Liquidators in a two-fold approach to:

(1) prevent the seizure of assets or the commencement of any
liquidation proceedings by foreign creditors who do not
honor the automatic stay imposed by the United States
bankruptcy Court, and
(2) facilitate the ultimate restructuring of the Debtors under
Bermuda law.

Conor D. Reilly, Esq., at Gibson, Dunn & Crutcher LLP, tells the
Court that no authorization will be required to commence the
Bermuda proceedings.  This is because such proceedings and the
Chapter 11 cases are to be commenced substantially
contemporaneously and because the Bermuda proceedings will,
effectively, be ancillary to the Chapter 11 cases.

As a result of the accelerated filing of the Chapter 11 cases,
the process of filing for commencing the Bermuda proceedings or
selecting Joint Provisional Liquidators will now go forward on a
post-petition basis. Mr. Reilly says the Debtors have determined,
in the exercise of their business judgment, that the commencement
of the Bermuda proceedings is in the best interests of their
businesses, their creditors and their estates.

Mr. Reilly says the Bermuda proceedings foster two significant
goals underlying the Bankruptcy Code: the principle of providing
a forum for restructuring of all of a debtor's debts rather than
allowing self-help remedies by overzealous creditors, and the
principle of facilitating restructuring and reorganization.


BCP: US Parent to Upgrade Service Only After Resolving Default
American telecom operator Bellsouth says it plans to only change
the TDMA network of BCP, its Brazilian subsidiary, to a CDMA
platform rather than to GSM, in order to offer 2.5G services.

Citing an O Globo report, Business News Americas says the CDMA
upgrade will also be done in six other countries where it still
operates TDMA networks.  Of the company's operations in 11 Latin
American countries, only four so far are using the CDMA platform.

The American parent, however, clarified that the upgrade will be
implemented only after the US$375 million debt default of BCP
shall have been resolved.  The company says it is currently in
talks with Brazilian local bank partner Banco Safra to help find
a solution on the matter.

BCP operates in the Sao Paulo area plus six states in the
northeast region.

EMBRAER: To Sign Joint Manufacturing Deal with Chinese Partner
Brazilian aircraft maker Empresa Brasileira de Aeronautica SA is
reportedly close to a deal with Chinese counterpart Harbin
Aircraft Manufacturing Co. over a joint production venture in

The primary goal of the project is to jointly design and build
40- to 60-seat regional passenger planes in China, says
Bloomberg.  The idea is in line with China's ambition to start
making commercial aircraft with a range of 3,000 km to meet
domestic travel demands.

"China's rapid urbanization and the growth of its tourism
industry means there's a lot of demand here for a smaller,
medium-range aircraft," says Liu Haisheng, in an interview with

Mr. Liu, a deputy director of the Economic and Trade Commission
of Heilongjiang, says a Chinese delegation will be in Sao Paolo
in the first week of May to hold more talks with Embraer.  He
says Heilongjiang's initial investment to design the jet would be
about US$73 million.

By Embraer's estimates, demand in China will account for half the
500 regional jetliner sales in Asia during the next decade as the
domestic aviation industry expands.

Accordingly, China's market clout has given them substantial
leverage in forcing suppliers to transfer plane technology to its
own aerospace companies.  Under this particular deal, the Chinese
government apparently pressured Embraer into agreeing to this
production-sharing project by making it a precondition to an
order for 30 jetliners.

Harbin Aircraft Manufacturing Co. is a unit of AVIC II, a Chinese
state-run aerospace company.


WACKENHUT CORPORATION: To Absorb Huge Loss Due to Unit's Failure
Business service-provider Wackenhut Corp. anticipates a pretax
write-off of US$14 million to US$17 million in the first quarter
arising from the bankruptcy of its affiliated company in Chile.

According to Wackenhut, the charge will include the write-off of
all remaining cash advances, notes receivables and estimated
related expenses. Pretax losses related to the Chilean operations
totaled US$29.2 million during fiscal 2001.

The bankrupty of the Chilean affiliate was "a significant
disappointment," according to President and Chief Executive
Richard Wackenhut in a statement.

The company had tried to restructure the operations of its
Chilean affiliate by attaining majority ownership of the
affiliated company and selling certain non-core businesses in

In a press release, Wackenhut said the affiliate is at a
condition where they could no longer generate sufficient cash
either from ongoing operations or the sale of assets to repay
their obligations.

During the first quarter of last year, Wackenhut had a loss of
1.5 million, or 10 cents a share before charges, on revenue of
US$663.5 million.


PAZ DEL RIO: Chief Says Japanese Solution Still Two Years Away
Paz del Rio President Enrique Tobon says the investment proposals
of Japan's Kobe Steel to help resuscitate the bankrupt Colombian
steel-maker could take up to two years to be fully implemented.

In the meantime, he says, the company will try to jumpstart
earlier attempts to share continuous casting facilities with
Hornos Nacionales.

"The decision could be made to renew technical feasibility tests
done with Hornos Nacionales to make best use of their continuous
casting capability, which obviously could be used in our casting
process," Mr. Tobon told Business News Americas.

The Japanese firm plans to pour in new technology in the company,
which is the only steel mill in Latin America that do not have
ladle and continuous casting systems.  

Mr. Tobon says pending the completion of the Japanese investment,
the company will try to explore alternatives like operating its
electric furnace.  This, however, will depend on market
conditions and the availability of scrap, whose volumes have
fallen sharply on the world market.

He says until a couple of years ago the US was supplying 12
metric tons a year of scrap metal, but today this figure has
dropped to 6 metric tons.  The European Union, however, is still
placing 30 metric tons a year on the market.  

But even if scraps were available, the electric furnace still
needs repair and a more powerful transformer, he says.

The other alternative to using the electric furnace is buying
steel slabs.  This, however, would require rethinking the Kobe
Steel investment plan, Mr. Tobon says.

The paper says the Japanese company is already done with the
third phase of its review on the company's operations.  The
recent review dealt with problems related to mining, coking and
sintering, as well as blast furnace and rolling processes.

Paz del Rio is currently under a form of bankruptcy protection,
the paper says.  


GRUPO MEXICO: Regulator to Veto Ferromex-Ferrosur Merger
The Mexican antitrust authority CFC has nixed the planned merger
of railroad operators Ferromex and Ferrosur, a source told
Business News Americas early this week.

According to the CFC insider, the authority sees the combination
as violating the rules and concession ownership limits set when
the industry was privatized in the late 1990s.  Current
regulations prohibit any of the country's three major railroad
operators from owning more than 5% stake in either of the other
two, as a means of safeguarding competition.

Ferromex, a unit of Grupo Mexico, operates the network that
connects the Valley of Mexico with northern destinations
including Monterrey, Guadalajara, Torreon, the ports of
Manzanillo and Altamira and the Mexico-US border.  

Ferrosur, owned by telecommunications and retail holding giant
Grupo Carso, holds the concession for the key Valley of Mexico-
Coatzacoalcos railroad axis.

The merger would have created a new company to be named ITM,
which will be majority owned by Ferromex, with Grupo Carso
retaining 20% interest.  

The regulator will publish its findings next month.  The source
says the antitrust office will invoke the antimonopoly law and
kill the merger should it receive clearance from the transport

GRUPO MEXICO: Finally Resolves Salary Disputes, Ends Strike
Grupo Mexico, the world's third largest copper producer, finally
settled the six-week old worker's strike at La Caridad plant in
northwestern Sonora state.

Workers at La Caridad accepted the same 5.25 percent direct wage
increase and 0.5 percent more in benefits that were offered to
strikers at other units.

Workers at four units of Grupo Mexico walked out March 5,
demanding the Company improve its offer of a 5 percent salary
increase to between 8 percent and 10 percent.

Strikes in Zacatecas, San Luis Potosi and Coahuila had already
been settled following agreements in increases in salary and

Grupo Mexico, which also operates in the United States and Peru,
said all its units are now working at 100 percent capacity.

ICONSA: Follows Parent Bufete Industrial to Bankruptcy Court
Mexican engineering and construction concern Grupo Iconsa
(Ingenieros Y Contratistas S.A. De C.V.) confirmed it would file
for bankruptcy protection to restructure its debts.

The company accumulated losses of MXN255 million (US$28 million)
over the past two years as infrastructure sales in Mexico
decreased severely.  

In 2001, Iconsa recorded a MXN159.6 million net loss on sales of
MXN748.9 million. The company's total liabilities stood at
MXN675.9 million.

Company officials are planning to meet with creditors as soon as
the bankrupty petition was approved.

Grupo Iconsa is a subsidiary of Mexican construction Bufete
Industrial, which initiated pre-bankruptcy proceedings in late
January this year.


EDELNOR: Privatization Body to Sell Remaining State Shares in May
Divestiture of the remaining government stake in Edelnor will
continue next month, as Peru's privatization body Copri plans to
place 110 million shares on the auction block.

Business News Americas says, if the auction goes well, the
remaining 208 million shares will be sold as well.  Copri capital
markets manager Alberto Rojas told the paper that the public sale
will happen during the first 10 days of May, depending on
regulator approval.

Last month, Copri grossed US$24 million for selling 110 million
Edelnor shares at 0.76 soles (US$0.22) each, the minimum price
per share set by the body.

Edelnor is the largest private distributor in Peru and serves
almost 4 million people in Lima and the nearby port Callao.
Spain's Endesa acquired 60% of Edelnor in 1994 and controls and
runs the company.  

The government still owns 27.1% of the company.


BANCO INDUSTRIAL: Governent Stops Hemorrhage With VEB125 Billion
The Venezuelan government has reportedly taken steps to stop the
bleeding at its largest development bank by injecting it with
VEB125 billion cash.

Business News Americas says Banco Industrial de Venezuela
Chairman Jorge Castillo was recently quoted confirming the

The bank booked losses of VEB53 billion last year and already its
loses for the year has amounted to VEB15.6 billion, the paper
says.  Mr. Castillo hopes his cost-cutting plan will bring the
bank back into black with a projected profit of VEB3 billion this


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 Ma. Cristina Canson, Editors.

Copyright 2002.  All rights reserved.  ISSN 1529-2746.

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