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/raid1/www/Hosts/bankrupt/TCRLA_Public/021202.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 Monday, December 2, 2002, Vol. 3, Issue 238 Headlines A R G E N T I N A GRUPO GALICIA: Shares Plummet On Court Decree Reversal News REPSOL YPF: Officially Forms Financial Disclosure Committee TELECOM ARGENTINA: Planned Rate Hikes May Too Little, Too Late TRANSENER: Big Fine Would Follow Deliberate Power Outage Verdict *Lavagna Seeks To Postpone Argentine Debt Payments B O L I V I A GASATACAMA: Plans Bolivian Gas Import B R A Z I L BEC: Auction Delayed Until March Next Year CAIUA: Secures Loan To Pay Notes Due Friday EMBRATEL: Shares Rise On Rumors Of Possible Sale SABESP: Real Depreciation Takes Toll On Improved 3Q02 Numbers SABESP: Shares Soar On Lower-Than-Expected Loss VARIG: May Be Grounded If Restructuring Fails In December * Brazil to Auction $770M of Interest-Rate Swaps * Brazil Expects Debt Reduction Next Year M E X I C O GRUPO COVARRA: Court Extends Time To Tackle Debt Issues GRUPO MEXICO: Sets Copper Production Targets, Updates Refi P E R U BELLSOUTH PERU: Forecasts Improved Sales For Next Year U R U G U A Y URUGUAYAN BANKS: Officials Consider Closure, Replacement - - - - - - - - - - ================= A R G E N T I N A ================= GRUPO GALICIA: Shares Plummet On Court Decree Reversal News --------------------------------------------------------------- Shares of Grupo Financiero Galicia SA plunged on concern the Supreme Court may reverse a government decree that forced dollar deposits to be converted to pesos, which would deepen banks' losses, reports Bloomberg. Galicia, the holding company for Argentina's third-largest bank, fell 8.5 centavos, or 12%, to 60 centavos, the biggest one-day decline since June 18. Argentina's Supreme Court may rule that a government decree that forced dollar deposits to be converted to pesos was unconstitutional. Such a decision would create even more losses for banks, which would be forced to return depositors' dollars while payment on loans issued in dollars would still be made in pesos. "The entire stock market has been affected by the news that the Supreme Court may rule that all deposits should be returned in dollars," said Eugenia Benitez, an analyst at Allaria Ledesma & Cia Sociedad de Bolsa in Buenos Aires. "This could really upset banks like Galicia and Frances. They could lose a fortune." CONTACT:GRUPO FINANCIERO GALICIA S.A. Teniente General Juan D. Per>n 456, Piso 3 1038 Buenos Aires, Argentina Phone: (54 11) 4343 7528 / 9475 Home Page: http://www.gfgsa.com Contacts: Eduardo J. Escasany, Chairman and CEO Sergio Grinenco, CFO, Banco de Galicia y Buenos Aires REPSOL YPF: Officially Forms Financial Disclosure Committee ----------------------------------------------------------- The ENRON, WorldCom, Global Crossing and other recent corporate cases have given rise to a general process of response in the countries with developed stock markets.Countries such as the US are creating measures which make it possible to guarantee that the financial and accounting information published by listed companies accurately portrays their asset value. The purpose of the measures is to improve protecting the rights of shareholders and investors. In Spain, these concepts are governed by Law 44/2002, of 22 November, on Measures to Reform the Financial System, and initiatives such as the creation of The Special Commission for transparency and security of financial markets and listed companies (the "Aldama Commission"; the Proposal for a Code for Trading Companies put forward by the General Codification Commission; and the White Book for Accounting Reform in Spain. Listed companies such as Repsol YPF have included reform measures in their Codes of Conduct. In the European Union, these initiatives have taken the form of the Winter Report on Corporate Governance, sent to the Commission and published at the beginning of November. The USA has been the country to take the most effective measures to date.At the end of July, the Sarbanes Oxley Act 2002 was approved, and is noteworthy because it also applies to foreign companies listed in the USA. One of the measures established by the Sarbanes Oxley Act 2002 is the requirement that the CEO and CFO of listed companies certify the accuracy of the financial information presented.This endorsement also includes the existence and maintenance of procedures for the preparation and internal control of this information.This aspect of the Sarbanes Oxley Act 2002 is developed in the SEC Regulations dated 29 August last ("Certification of Disclosure in Companies' Quarterly and Annual Reports"Release n§ 33-8124) in which the creation of a Disclosure Committee is recommended, and which in its turn should certify before the CEO and CFO the existence of such procedures and controls. Although the creation of this Committee is voluntary, it is considered advisable to propose to a company's board of directors that such a Disclosure Committee should be set up to take on the functions stipulated in the SEC Regulations, and others which would favour the correct preparation and control of financial and accounting data released by the company. Agreement To this effect, the following resolution is presented for the approval of the Board of Directors: First.- To reiterate that it is the company's policy that all information released to its shareholders, the markets on which its shares are negotiated and the regulatory authorities for said markets be true and complete, adequately representing its financial situation and the results of its operations, and be communicated in fulfilment of the deadlines and other requirements established in the relevant standards and general principles governing trade on the markets and the principles of good governance that the company follows. Second.- To set up a Disclosure Committee (in the terminology used by the Securities Exchange Commission -SEC), which will have the following mission: a) To monitor the overall fulfilment of regulations and principles of conduct of voluntary application that may be stipulated or issued in relation to Company Law, especially relating to listed companies, and their good governance; evaluating the degree in which they affect the company and proposing, when convenient, the adoption and instrumentation of the pertinent measures. b) To direct and coordinate the establishment and maintenance of: Procedures for the preparation of accounting and financial information to be approved and registered by the company, in accordance with the regulations in force, or which are generally released to the markets; Systems of internal control, sufficient, adequate and efficient enough to ensure that the company's financial statements included in the annual and quarterly reports, are correct, trustworthy, sufficient and clear, and to do the same with regard the accounting and financial information that the company must approve and register; Processes of significant risk identification in the company's businesses and activities, which may affect the accounting and financial information that the company must approve and register. c) To assume the functions that the laws of the United States and the SEC regulations applicable to the company may attribute to a Disclosure Committee or Internal Committee of a similar nature, and especially those relating to the SEC Regulations dated 29 August 2002 ("Certification of Disclosure in Companies' Quarterly and Annual Reports" Release number 33-8124), and those which modify or substitute these, in relation to the support for the endorsement by the Chairman of the Board and the company's CFO on the existence and maintenance by the company of procedures and controls referring to the elaboration and content of the information included in the Form 20F, and other information of a financial nature. d) To take on similar functions to those stipulated in the SEC Regulations for a Disclosure Committee with regard to the existence and maintenance by the Company of procedures and controls referring to the preparation and content of the information included in the Annual Accounts (which the administrators should formulate in compliance with Spanish Company Law), and any accounting or financial information that should be registered with the Spanish Stock Market Authorities (la Comisi¢n Nacional de Valores), the Argentine Stock Market Authorities (la Comisi¢n Nacional de Valores de Argentina) and other regulators and agents of the markets on which the company's stock is negotiated. e) To revise and supervise the company's preparation and presentation procedures for the following information: Official notices which must be forwarded to the Spanish Stock Market Authorities (CNMV), the SEC, the Argentine Stock Market Authorities, (CNV) and other regulators and agents for the stock markets on which the company's stock is negotiated. Regular financial reports. Press releases containing financial data on results, earnings, large acquisitions, divestments or any other information of relevance to the shareholders. General correspondence sent out to the shareholders. Presentations to analysts, the investment community, rating agencies and lending institutions. f) The elaboration of proposals for a "Code of Ethics" and an "Internal rule of conduct on the stock markets" with the content and coverage resulting from the relevant standards in force or considered appropriate, adapting similar documents currently in use within the company when necessary. g) To supervise the same kind of Committee, with similar responsibilities, that YPF may set up as a company whose stock is negotiated on the USA stock markets. h) To undertake any other function that, in relation to the preparation and release of financial data, which the Board of Directors, its Auditing and Control Commission, the Chairman of the Board or the company's CFO may require of it. Third.- The Committee will act under the supervision of the Auditing and Control Commission to the Board of Directors, the Chairman of the Board and the company's CFO, who will act as its President.The Chairman of the Board of Directors will attend the Committee meetings whenever the nature of decisions to be taken so require, or whenever he himself deems necessary. The Committee Members will be: The Corporate Vice Chairman The Executive Vice President of Exploration & Production The Executive Vice President of Refining & Marketing The Corporate Director of Legal Affairs The Corporate Director of External Relations The Corporate Director of Planning & Control The Corporate Director of Human Resources The Director of Consolidation and Accounting Regulations The Director of Corporate Auditing TELECOM ARGENTINA: Planned Rate Hikes May Too Little, Too Late -------------------------------------------------------------- Telecom Argentina Stet-France Telecom SA (TECO2 AR), the country's second-biggest phone company, fell 11 centavos, or 6.6%, to ARS1.55, reports Bloomberg. The plunge was attributed to speculation that a possible government plan to raise telephone rates 12% won't be enough to help the Company renegotiate US$3.2 billion of defaulted debt. Argentina banned increases in utility rates earlier this year in an attempt to stem inflation after the government defaulted on US$95 billion in bonds and devalued the currency. The International Monetary Fund has said that Argentine utilities should receive rate increases of at least 30% to offset the effects of the devaluation. The Company, which is controlled by Telecom Italia SpA (TI) and France Telecom SA (FTE), began restructuring talks with creditors in September. Widespread market speculation suggests that foreign banks on the hook for roughly US$1.6 billion in loans will extend maturities and lower interest payments without demanding a debt for equity swap. That would give the Company breathing room to work out a more leisurely settlement with bondholders holding about the same amount in defaulted paper. CONTACT: TELECOM ARGENTINA STET - FRANCE TELECOM SA(TELECOM) Alicia Moreau de Justo 50, 10th Floor Capital Federal (1107) Rep£blica Argentina Phone: +54 11 4968 4000 Home Page: http://www.telecom.com.ar Contacts: Alberto J. Ricciardi, Chief Financial Officer Elvira Lazzati, Finance Director Pedro Insussarry, Investor Relations Manager Phone: (5411) 4968-3626/3627 Fax: (5411) 4313-5842/3109 Email: inversores@intersrv.telecom.com.ar TRANSENER: Big Fine Would Follow Deliberate Power Outage Verdict ---------------------------------------------------------------- Argentine electricity company Transener could face a fine of up to US$100 million if inspectors from the country's electricity regulator Enre find proofs that the Company deliberately cut power to protest the government's slow progress on rates increases, Business News Americas reports. Enre's team of inspectors started an investigation of the incident, a source said, without giving an exact date for when their findings would be available. "The inspectors will determine if fines should be applied in this case, and they could be as much as US$100 million, but we will not know until the inspection is finished," the source said. "The climate in Argentina is such that everything is being questioned and it's hard to know the truth. But we must wait until the inspection team completes its studies before we jump to conclusions," the source added. Transener has asserted that the massive power outage, which left more than a third of Argentina without electricity for three hours on a recent Sunday afternoon, was due to the breakdown of one of its main transformers, not an intentional move to lobby for an increase in frozen utility rates. Argentina's government has frozen electricity rates since January and many companies, with pesified income and dollarized costs, have been pushed to the brink of bankruptcy. Energy companies have called on the government to increase rates by as much as 30% to avoid deterioration in the level of service. But public meetings on the rates increases, which are strongly opposed by consumer groups, have been blocked repeatedly by court injunctions. Transener, which is owned by Pecom Energia and the UK's National Grid, registered consolidated losses of ARS620.4 million (US$174.3mn) for the nine months to September 30, 2002, compared to net profits of ARS51.5 million in the same period of 2001. Sales revenues during the period decreased 34.4% to ARS220.8 million due largely to the freeze on power rates. For the nine months ended Sep. 30, the Company also recorded non-operating losses of ARS666.3 million, of which exchange rate differences on liabilities accounted for ARS505.1 million. Transener defaulted on debt payments in 2002 and holds some US$460 million in dollar-denominated debt. The Company remains in default, but in a recent statement, said it "continues working towards the objective of evaluating the restructuring of its debt and maintaining fluid conversation with its creditors." Morgan Stanley is Transener's financial advisor. Transener owns the concession to operate the extra high voltage electricity transmission network in the Argentine Republic. Since its creation in 1993, the Company has remained a leader in the field. CONTACT: COMPANIA DE TRANSPORTE DE ENERGIA ELECTRICA EN ALTA TENSION (Transener S.A.) Av. Paseo Colon 728, 6"Piso - (1063) Buenos Aires, Argentina Tel. (5411) 4342-6925 Business Development: Carlos A. Jeifetz (jeifecar@transx.com.ar) Gerardo Baseotto (baseoger@transx.com.ar) Tel.: (54-11) 4334-0182 / 4342-6925 Fax: (54-11) 4342-4861 MORGAN STANLEY, DEAN WITTER & COMPANY 1585 Broadway New York, New York 10036 United States Phone: +1 212 761-4000 Home Page http://www.msdw.com * Lavagna Seeks To Postpone Argentine Debt Payments ---------------------------------------------------- Argentina'a Economy Minister Roberto Lavagna said that the country needs to postpone payments on US$9 billion of debt due to various multinational lenders next spring. According to Lavagna, the debt corresponds to 100 percent of the country's reserves. After suffering through years of deep recession, Argentina defaulted on most of a US$141 billion of public debt in September last year. Then failed negotiations for an International Monetary Fund loan forced the country to default on US$805 million loan payment due to the World Bank earlier this month. Mr. Lavagna is traveling to Europe to bolster support for his country's economy. According to the report, talks with German Finance Minister Hans Eichel and Deputy Finance Minister Caio Koch-Weser were positive. The Minister will also meet with German Economics Minister, Wolfgang Clement. Meanwhile the country has postponed the deadline for finding a bank to act as a financial advisor in restructuring of about US$50 billion of the country's debt. The latest deadline is set for December 9. ============= B O L I V I A ============= GASATACAMA: Plans Bolivian Gas Import ------------------------------------- GasAtacama chief executive Rudolf Araneda revealed that the Company bagan paying to import Bolivian gas to supply a petrochemicals project, as well as three other mining projects. Mr. Araneda was cited by Business News Americas saying the gas would be brought in through a hook-up to the Argentine side of the Company's trans-Andean pipeline. However, the project may be facing a number of obstacles, including the strained relationship between Bolivia and Chile. The move would increase Chile's chances of hosting a terminal to export Bolivian LNG to North America, and supports the Company's plans to export electricity to Bolivia's San Cristobal mining project. According to the company's CEO, it is better to push the Pacific LNG project through first, and then the Company's electric project would be considered a "small thing". The Company has also prepared for the possibility of failure of the gas transport project. GasAtacama would be supporting the LNG project and offer to transport natural gas liquids from Bolivia to the Pacific, since that would be requiring at least two transmission lines. Mr. Araneda added that the GasAtacama or the Norandino piplines could by extended to Bolivia from Argentina without much difficulty. The lines would then be converted to allow transport of liquids, which also solves the capacity surplus problems the Company is facing. Chilean generator Endesa and US power company CMS own GasAtacama on a 50:50 basis. =========== B R A Z I L =========== BEC: Auction Delayed Until March Next Year ------------------------------------------ The Brazilian central bank hasn't issued an official announcement yet but, according to local press reports, the sale of Banco do Estado Do Ceara SA (BEC) has been postponed from Dec. 9 to March next year. Exactly why the process will be delayed once again is still not known. BEC operates 70 branches, of which 26 are in the state capital Fortaleza. The company was supposed to go on the block November 26 with a minimum bid price of BRL274 million. However, the central bank decided to delay the process to December 9 after the local government took issue with certain points in the bidding rules. At the end of September 2001, BEC had total assets of BRL978 million, a loan portfolio of BRL127 million, deposits of BRL513 million, and net equity of BRL158 million. Pre-qualified bidders include Brazil's top three private banks in terms of assets: Bradesco, Itau and Unibanco. Meanwhile, the privatization of Brazil's Espirito Santo state bank Banestes has been set for Dec. 10, according to bidding rules published by the state government. Local banks Bradesco, Itau and Safra have pre-qualified to bid in the auction, with the starting price fixed at BRL347.5 million (US$96.2mn). Ten percent of the shares have been reserved for the bank's employees. CAIUA: Secures Loan To Pay Notes Due Friday ------------------------------------------- Caiua Servicos de Eletricidade said that it has secured a syndicated loan to cover a US$55 million payment in Euro medium- term notes due this Friday. The Brazilian power company would not reveal details on the loan, saying the revelation of any details nay harm the negotiation process, according to Business News Americas, citing Rede corporate marketing manager Paulo Ribeiro. Rede is Caiu's controlling shareholder. Caiua had previously proposed to amend the terms and conditions of the medium-term notes, but the report indicated that the Company appears to have abandoned the idea. Moody's Investors Service downgraded the Company's ratings earlier this week, citing its poor financial performance and high leverage. CONTACT: Caiua Servicos de Electricidade SA Registered Office Avenida Paulista, 2439 - 5o Andar Cerqueira Cesar 01311-936 Sao Paulo - SP Brazil Tel +55 11 3066-2000 Fax +55 11 3060-9550 Telex 32058 Contact: Jorge Queiroz de Moares Junior, Chairman EMBRATEL: Shares Rise On Rumors Of Possible Sale ------------------------------------------------ Embratel Participacoes SA (EBTP4 BS), Brazil's largest long- distance telephone service provider, were up 8 centavos, or 2.9%, to BRL2.85, says Bloomberg. Some investors are optimistic the Company, a unit of bankrupt U.S. carrier WorldCom Inc., will be sold, which "could improve its debt profile," said Ricardo Magalhaes, who helps manage about BRL2.5 billion ($640 million) in equities with Mellon Global Investments in Rio de Janeiro. Reports have surfaced that Brazil's three local service giants - Telefonica SA's (TEF) Telesp (TSP) unit, Brasil Telecom Participacoes SA (BRP) and Tele Norte Leste Participacoes SA (TNE)- are planning to form one group to acquire the ailing long- distance carrier. While Embratel continues to deny such a plan, citing local antimonopoly regulations that ban fixed line incumbents from buying the Company, loopholes exist for rules on mergers in the sector, which is set to further deregulate in June 2003. If sold, analysts say Embratel might be valued at just above its debt load. The money-losing company ended the third quarter with BRL2.36 billion ($1=BRL3.60) in short-term debt and BRL2.82 billion in long-term debt. While the deal might raise antitrust concerns, the government's rulings on the matter would likely take into account Embratel's difficult strategic position. And Cade, Brazil's top antitrust body, has been soft on some mergers in the past. CONTACT: EMBRATEL PARTICIPACOES S.A. Investor Relations Silvia Pereira Tel. (55 21) 2519-9662 Fax: (55 21) 2519-6388 Email: Silvia.Pereira@embratel.com.br invest@embratel.com.br or Press Relations: Helena Duncan/Mariana Palmeira Tel: (55 21) 2519-3653/3654 Fax: (55 21) 2519-8010 Email: hduncan@embratel.com.br mpalm@embratel.com.br SABESP: Real Depreciation Takes Toll On Improved 3Q02 Numbers ------------------------------------------------------------- Cia. de Saneamento Basico do Estado de Sao Paulo (NYSE: SBS; Bovespa: SBSP3), the largest water and sewage utility company in the Americas and the third largest in the world (in terms of number of customers), announced Thursday its financial results for the third quarter 2002 (3Q02). The following financial and operating information, unless otherwise indicated, is presented in nominal Reais pursuant to Brazilian Corporate Law. Comparisons, unless otherwise stated, refer to the third quarter of 2001 (3Q01). Highlights - Net operating revenue was R$ 963.3 million, a growth of 13.0% - EBITDA reached R$ 480.6 million, a 15.4% increase; and margin EBITDA was 49.9%, 1.1 percentage point higher that 3Q01 - EBIT totaled R$ 350.2 million, a growth of 20.1% - Net Loss of R$ 663.6 million, strongly influenced by the effect of the Brazilian Real depreciation on the Company's dollar- denominated debt. The total amount of loans to be repaid by the end of 2002 is R$205.6 million. Total debt coming due in 2003, both short- and long-term and originated domestically and abroad amounts to R$1,326.0 million, R$ 295.7 million of which in the first half-year. In the second half, the amount is R$ 1,030.3 million, including US$ 200 million in Eurobonds due in July next year. - Foreign Exchange Loss was up by R$ 605.9 million or 124.5%, due to the 36.9% depreciation of the Real against the dollar in 3Q02 compared to 15.9% in 3Q01, with a higher impact on BID loans, Eurobonds and Deutsche Bank Luxembourg - Volume billed to the retail market reached 628.5 million cubic meters, a growth of 9.5%. Water and sewage connections grew 3.2% and 4.0%, respectively. CONTACT: Sabesp Helmut Bossert,(5511) 3388-8664 hbossert@sabesp.com.br Marisa Guimaraes, (5511) 3388-9135 marisag@sabesp.com.br Website: www.sabesp.com.br SABESP: Shares Soar On Lower-Than-Expected Loss ----------------------------------------------- News of a lower-than-expected loss and higher revenue in the third quarter boosted Sabesp's shares 4.1% or BRL3.20 to close at BRL82, the biggest one-day gain this month, on the Sao Paulo stock exchange, reports Bloomberg. "People were expecting the Company to post an even bigger loss because a large amount of its debt is in foreign currency," said Marcelo Afonso, who helps manage about BRL750 million in assets at Banco BNL do Brasil SA in Sao Paulo, including Sabesp shares. "But the net revenue increased more than people were expecting." Sabesp revenue climbed 13% to BRL963 million from BRL852 million last year. Gustavo Gattass, an analyst with UBS Warburg in Rio de Janeiro, forecasted a BRL686-million loss and BRL890-million in revenue for Sabesp. VARIG: May Be Grounded If Restructuring Fails In December --------------------------------------------------------- Brazilian airline Varig, which is struggling with a debt load of US$900 million, will not survive beyond December if a restructuring plan is not implemented soon, EFE reports, quoting Economist Roberto Gianetti da Fonseca. Mr. Fonseca is acting as mediator between Latin America's biggest airline and its creditors. The Varig group, which also includes the Rio Sul and Nordeste regional airlines, generates more than US$3 billion per year, which should serve to ensure smooth negotiations on its debt. However, a negotiated agreement struck last month between the administrative council and creditors was rejected last week by the Ruben Berta Foundation, which controls 87% of the airline. Leaders of the employee-controlled foundation disagreed with the new repayment schedule, objected to the plan's favoring certain creditors over others and said they sought fresh loans from the BNDES development bank. The foundation's refusal to accept the deal prompted the resignation of Varig's president and board of directors. Now, creditors are pushing to expedite the debt negotiations, while the Brazilian government, which has offered to kick in US$300 million to help resolve the matter, says the Company must restructure itself before it will pour in any more money. The Company's new interim president, Manuel Guedes, described the situation at the Company as delicate but he stressed that the US$900-million debt Varig struggled under early this year had dropped to US$764 million by September and can be renegotiated. "We need to renegotiate payment periods with our creditors and reduce the interest rates being charged," Guedes said Wednesday, upon being introduced as the airline's third president within as many months. During the first half of the year, Varig suffered losses of close to US$315 million - double those recorded in all of 2001. Varig, Brazil's flagship airline, has a fleet of 100 planes, employs 15,000 people and serves 110 domestic and 27 international destinations. CONTACT: VARIG (Viacao Aerea Rio-Grandense, S.A.) Rua 18 de Novembro No. 800, Sao Joao 90240-040 Porto Alegre, Rio Grande do Sul, Brazil Phone: (51) 358-7039/7040 (51) 358-7010/7042 Fax: +55-51-358-7001 Home Page: www.varig.com.br/english/ Contacts: Dorival Ramos Schultz, EVP Finance and CFO E-mail: dorival.schultz@varig.com.br Investor Relations: Av. Almirante Silvio de Noronha, n 365-Bloco "B" - s/458 / Centro Rio de Janeiro, Brazil KPMG Brazil Belo Horizonte Rua Paraba, 1122 13th Floor 30130-918 Belo Horizonte MG Telephone 55 (31) 3261 5444 Telefax 55 (31) 3261 5151 or Brasilia SBS Quadra 2 BL A N 1 Edificio Casa de Sao Paulo SL 502 70078-900 Braslia - DF Telephone 55 (61) 223 2024 Telefax 55 (61) 224 0473 BAIN & CO Primary Contact: Wendy Miller Two Copley Place, Boston, MA 02116 USA Phone: +1-617-572-2000 Fax: +1-617-572-2461 Email: miles.cook@bain.com URL: http://www.bain.com * Brazil to Auction $770M of Interest-Rate Swaps ------------------------------------------------ Brazil will sell about US$770 million of interest rate swaps to refinance contracts maturing in the following weeks, according to a report from Bloomberg's Thursday edition. About US$315 million of the swaps would be due on February 3 next year, while US$220 million of swaps would mature on the first day of April. The rest would come due on July 1. As of Thursday, all offers for July 1 contracts were declined. According to the report, the swap, known locally as the ``cupom cambial,'' or exchange- rate coupon, is used by investors to hedge against declines in the value of the real against the dollar, by swapping local real-based interest rates on a fixed amount of dollars for local dollar-indexed rates. The government would be obliged to pay contract holders the equivalent losses from any decline in the fixed amount of the Brazilian currency against the dollar, plus a premium. However, contract holders would have to pay the government in the event the value of the dollar falls below that of the reais. The contracts settle daily on Sao Paulo's BM&F commodities and futures exchange until maturity. To compensate for any change in the local currency, the government will resort to settle the securities from cash reserves, if the investors refuse to buy new contracts. The country faces more than US$4 billion of contracts and dollar- indexed bonds maturing before the end of the year, said the central bank. * Brazil Expects Debt Reduction Next Year ----------------------------------------- The central bank of Brazil is forecasting a reduction of government debt as the cost of servicing liabilities linked to the US dollar will be reduced. The easing would come as a result of an expected stabilization of the Brazilian currency, reports Bloomberg News. Altamir Lopes, head of the central bank's economic research said that the total debt may fall to about 76.5 percent of the gross domestic product, if the currency holds its gains after a 4 percent rise last month. As of October, the country's total debt was BRL1.13 trillion (US$314.7 billion), about 78 percent of GDP. However, some economists said that increasing borrowing costs may stop a decline in total debt. The report indicated that debt servicing jumped last month after the central bank raised its overnight interest rate 300 basis points to 21 percent and the government paid about US$1.7 billion in principal and interest to foreign bondholders. About four-fifths of the country's debt is linked to interest rates and the dollar, and the new administration, led by Inacio Lula da Silva needs to pay about one-third of the total debt next year. A weakening of the currency or an increase in interest rates, or both may force the country to default on its debt, the largest ever in history. An analyst said that the 22 percent increase in the overnight rate last week will cost the government about BRL3.3 billin per year, but the central bank still expects the currency to strengthen, enough to compensate for the rise in floating- and fixed-income notes linked to the benchmark rate. Brazil's budget deficit widened to BRL8.3 billion last month due to higher cost of credit, however, Lopes expects that this should narrow this month. =========== M E X I C O =========== GRUPO COVARRA: Court Extends Time To Tackle Debt Issues ---------------------------------------------------------- A court in Cuernavaca (Morelos) granted Mexican textile company Grupo Covarra more time to reach a deal with its more than 155 foreign creditors and avoid bankruptcy, reports El Financiero. The company has been in the first stage of legal insolvency since March. Grupo Covarra, which is dealing with US$100 million in debt, originally had until October 20 to reach an agreement with creditors but the magistrate gave it a 30-day extension. The 30- day extension however was extended to 90 days due to the complexity of the Company's problems. Even after taking up the legal insolvency process, Grupo Covarra has continued to suffer from losses. The downturn in the textile market, both domestically and internationally, and the increase in the costs of raw materials have complicated its financial condition. CONTACT: GRUPO COVARRA-RIVITEX, S.A. DE C.V. Carr. Federal Cuernavaca - Cuautlan Km 0.5 Col. Flores Magon 62370 Cuernavaca, MOR Phone: (73) 22 29 00 Fax: (73) 22 29 00 http://www.adnet.com.mx/covarra GRUPO MEXICO: Sets Copper Production Targets, Updates Refi ---------------------------------------------------------- Mining giant Grupo Mexico expects to produce about 900,000t of copper this year, says Reuters. Citing Xavier Garcia de Quevedo, the news agency reveals that some 350,000t will come from the Company's 54.2%-owned Southern Peru Copper Corp., 300,000t from Mexican operations and 245,000t will come from its US subsidiary Asarco. According to the executive, the Mexico City-based company would probably turn out 300,000t of semi-manufactured copper products this year, mainly copper wire. Meanwhile, Grupo Mexico announced Wednesday that it is close to concluding talks with U.S. authorities to transfer its majority stake in SPCC from Asarco to the mining holding Americas Mining Corp. The transfer could reach a total value of US$800 million, according to market estimates. Officials said it was gathering some US$600 million in credits to help in purchasing the 54.2% stake in SPCC, which is the principal copper company in Peru. Executives from Grupo M‚xico said the Company had secured US$200 million through its rail affiliate from "a financial institute" and is negotiating another US$300 million from another group whose name was not revealed. The purchase of SPCC stock will allow Asarco to increase its liquidity to pay a revolving credit for US$450 million that comes due Jan. 31, but was originally due this month. CONTACT: GRUPO MEXICO S.A. DE C.V. Avenida Baja California 200, Colonia Roma Sur 06760 M,xico, D.F., Mexico Phone: +52-55-5264-7775 Fax: +52-55-5264-7769 Home Page: http://www.gmexico.com Contacts: Germ n Larrea Mota-Velasco, Chairman and CEO Xavier Garca de Quevedo Topete, President and COO Alfredo Casar P,rez, COO, Ferrocarril Mexicano Daniel Ch vez Carre n, COO, Industrial Minera M,xico Daniel Tellechea Salido, VP and Administration and Finance President ASARCO 2575 E. Camelback Rd., Ste. 500 Phoenix, AZ 85016 Phoenix City Phone: 602-977-6500 Fax: 602-977-6701 Home Page: http://www.asarco.com Contacts: Germ n Larea Mota-Velasco, Chairman and CEO Genaro Larrea Mota-Velasco, President Daniel Tellechea Salido, VP and CFO ======= P E R U ======= BELLSOUTH PERU: Forecasts Improved Sales For Next Year ------------------------------------------------------ Bellsouth Corp.'s unit in Peru expects to boost sales by 10 percent next year, according to its president Juan Saca on Thursday, adding that the company may target new areas of business beyond mobile phones. According to Mr. Saca, the company had increased sales this year, as a result of an increase of its client base and call volume after an improvement of the country's economy. Mr. Saca was quoted by Reuters saying the company now has 550,000 clients, and 30 percent of the mobile market income. BellSouth Peru, which has invested about US$550 million since it started in the country 5 years ago, faces competition from the Peruvian unit of Telecom Italia Mobile. The report also indicated that Telefonica del Peru, claiming 59 percent market share, dominates the telecommunications industry in the country, which some say is worth about US$380 million per annum. Last year, the company reported a net loss of US$41.5 million, compared to a loss of US$62.5 million in 2000. BellSouth Corporation, which is based in the United States, also has units in Ecuador, Colombia, Nicaragua, Panama, Guatemala, and Uruguay. CONTACT: BELLSOUTH CORPORATION 1155 Peachtree St. NE Atlanta, GA 30309-3610 Phone: 404-249-2000 Fax: 404-249-5599 Home Page: http://www.bellsouth.com/ Contacts: Investor Relations Phone (US): 800.241.3419 Fax: 404.249.2060 E-mail: investor@bellsouth.com ============= U R U G U A Y ============= URUGUAYAN BANKS: Officials Consider Closure, Replacement -------------------------------------------------------- Defunct Uruguayan banks Banco Comercial SA, Banco de Montevideo SA and Banco La Caja Obrera SA will be shut down. The move is viewed as part fulfillment of a promise made by the government in August to obtain a US$3.8 billion credit line from the International Monetary Fund, World Bank and Inter-American Development Bank. According to Bloomberg, following the closure, a new entity, to be named Nuevo Banco Comercial, will rise from the ashes of the three failed banks. The government will send a proposal to Congress "over the next few days", Economy Minister Alejandro Atchugarry said without revealing whether the new bank would be state-owned or private. Banco Comercial -- majority owned by J.P. Morgan Chase & Co., Credit Suisse First Boston and Dresdner Bank AG -- Banco Montevideo, Banco Caja Obrera were suspended by the country's central bank earlier this year, due to capital and liquidity problems. A fourth bank, Banco de Credito was also suspended and according to Atchugarry, the government is still considering a proposal from St. George Ltd., an investment arm of the Rev. Sun Myung Moon's Unification Church, to reopen the said bank. CONTACT: BANCO COMERCIAL Cerrito No. 400, 11100 Montevideo Phone: 960-394/97 Fax: 963-569 Home Page: www.bancocomercial.com.uy/ BANCO MONTEVIDEO Misiones 1399 - Montevideo Fax: 9162880 E-mail: info@bm.com.uy Home Page: http://www.bancomontevideo.com.uy Contact: Sr. Marcelo Pestarino, President *********** 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 Oona G. Oyangoren, Editors. Copyright 2002. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. 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