TCRLA_Public/040701.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

             Thursday, July 1, 2004, Vol. 5, Issue 129

                            Headlines


A R G E N T I N A

ALSE ALTA: Court Grants Reorganization Plea
ANGEL CARLISI: Court Converts Bankruptcy to Reorganization
BANCO HIPOTECARIO: Likely to Sell Another Debt in 3Q
BRUMATIC: Court Favors Creditor's Bankruptcy Petition
CHACRAS DE PILARCHICO: Gets Court Ok for Reorganization

CURTIDURIA FUENTES: Reorganization Proceeds To Bankruptcy
DECANO INDUSTRIAL: Files Petition to Reorganize
DIDESSA: Court Grants Reorganization Plea
DISTRIBUIDORA KM 32: Reports Submission Finalized
ENVAPACK: Court Issues Bankruptcy Ruling

FARMAFE ARENALES: Court OKs Creditor's Bankruptcy Call
FRIGORIFICO FERNAROLO: Court Sets Assembly Date
GIAGANTE Y DEL OLMO: Initiates Bankruptcy Proceedings
LEACO: Gears for Reorganization
MANUFACTURA DE PRODUCTOS: Liquidates Assets to Pay Debts

MC AUDIO: Court Converts Bankruptcy to Reorganization
MC INGENIERIA: Court Declares Company Bankrupt
PIONERA: Undergoing Bankruptcy on Court Orders
ROPAR: Verification Deadline Approaches
VENTAS JAQUE: Begins Bankruptcy Proceedings


B E R M U D A

LORAL SPACE: Telstar 18 Satellite Launched



B O L I V I A

COTEL: World Bank To Carry Out Audit
HIDROELECTRICA BOLIVIANA: Restructures Debt To Improve Risk Rtg
* Bolivia Gets $25M Zero-Interest Credit From World Bank



B R A Z I L

EMBRATEL: Initiates Registered Exchange Deal
NORTEL NETWORKS: To Divest Brazilian Manufacturing Operations
USIMINAS: CVRD May Auction Stake to Facilitate Noranda Bid
VARIG: Plans to Open Sao Paulo-Beijing Route by Year-End



C H I L E

TELEFONICA CTC: Shareholders to Vote on Mobile Unit's Sale



C O L O M B I A

EDT: Baranquilla Govt. Affirms Bid to Purchase Local Telco


E C U A D O R

PACIFICTEL: Favors Rocafuerte-Sul America's Insurance Offer


E L   S A L V A D O R

BANCO AGRICOLA: Fitch Ratings Affirms Ratings; Outlook to Stable
BANCO CUSCATLAN: Fitch Ratings Affirms Ratings


M E X I C O

AHMSA: Amicably Resolves Union Strike
* Mexico Beefs Up Savings and Credit With $75.5M WB Loan


U R U G U A Y

ANCAP: Grants One-Year Extension to CGG Exploration Project



V E N E Z U E L A

PDVSA: Fitch Affirms PDVSA Fin Ltd. Ratings
PDVSA: Spends VEB32 Bln to Upgrade Tanker Fleet to IMO Standards

     -  -  -  -  -  -  -  -

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

ALSE ALTA: Court Grants Reorganization Plea
-------------------------------------------
Alse Alta Seguridad S.R.L., a company operating in La Plata,
begins reorganization proceedings after the city's civil and
commercial tribunal granted its petition for "concurso
preventivo".

During the reorganization, the company will be able to negotiate
a settlement proposal with its creditors so as to avoid a
straight liquidation.

According to Argentine news source Infobae, the reorganization
will be conducted under the direction of Mr. Esteban D.
Morganti, the court-appointed trustee.

Creditors with claims against Alse Alta must present proofs of
the company's indebtedness to the trustee before July 12, 2004.
These claims will constitute the individual reports to be
submitted in court on October 4, 2004. The court also requires
the trustee to present an audit of the company's accounting and
business records through a general report due on November 30,
2004.

The informative assembly, the final stage in the reorganization,
is scheduled on February 10 next year.

CONTACT: Alse Alta Seguridad S.R.L.
         Calle 122 Bis Nro. 1848
         Berisso
         La Plata

         Mr. Esteban D. Morganti, Trustee
         Calle 12 Nro. 883
         La Plata


ANGEL CARLISI: Court Converts Bankruptcy to Reorganization
----------------------------------------------------------
Angel Carlisi S.A. will proceed with reorganization after a
local court in Buenos Aires converted the bankruptcy ruling
issued against the company.

Infobae reports that the court assigned Mr. Francisco Guerreno
as the trustee. The credit verification process will be done
"por via incidental", says the report, adding that the trustee
will submit the general report on August 18, 2004.

CONTACT: Mr. Francisco Guerreno, Trustee
         Rodriguez Pena 794
         Buenos Aires


BANCO HIPOTECARIO: Likely to Sell Another Debt in 3Q
----------------------------------------------------
Following the successful issuance of mortgage-backed securities
worth ARS40 million (US$13.6 million) on the local market,
Argentine bank Banco Hipotecario is likely to return to the
market in the next couple of months with the same offering, a
company executive suggested.

Business News Americas recalls that Hipotecario, Argentina's
leading mortgage bank, issued the new debt on the local market
last Friday through a financial trust.

According to Mr. Marcilo Icikson, Hipotecario's capital markets
manager, demand for the papers was very strong at ARS60 million.
In light of this, Mr. Icikson indicated that the bank, which has
a ARS500-million securities program in place, will probably
return to the market in the third quarter with a similar
offering.

The exact amount will depend on demand and market conditions,
Mr. Icikson said.

Banco Hipotecario formally completed a US$971-million debt swap
on Jan. 13, garnering the support of about 94% of creditors.
Early last month, the bank said it has submitted its proposal
for formal legal approval. It also needs clearance from the
Central Bank.

Banco Hipotecario is 44%-owned by the Argentine government. The
Company's other major shareholder is real estate developer IRSA-
Inversiones y Representaciones SA (IRS), which upped its stake
in December after buying out the majority stake it used to share
with financier George Soros.


BRUMATIC: Court Favors Creditor's Bankruptcy Petition
-----------------------------------------------------
Banco Frances S.A. successfully sought the bankruptcy of
Brumatic S.A. after Judge Dieuzeide of Buenos Aires Court No. 1
declared the Company "Quiebra," reports La Nacion. The creditor
sought for the Company's bankruptcy after the latter failed to
pay debts amounting to US$9,636.94.

The Company will now start the bankruptcy process with Mr. Otto
Munch as trustee. Company Creditors must submit their proofs of
claim to the trustee before October 26, 2004 for authentication.
Failure to do so will mean a disqualification from the payments
that will be made after the Company's assets are liquidated.

Clerk No. 2 Dr. Galli, assists the court on the case, which will
culminate in the liquidation of all of its assets.

CONTACT: Brumatic S.A.
         Lavalle 1334
         Buenos Aires

         Mr. Otto Munch, Trustee
         Maipu 509
         Buenos Aires


CHACRAS DE PILARCHICO: Gets Court Ok for Reorganization
-------------------------------------------------------
Chacras de Pilarchico S.A. will begin reorganization following
the approval of its petition by a local court in Buenos Aires.
The opening of the reorganization will allow the company to
negotiate a settlement with its creditors in order to avoid a
straight liquidation.

Mr. Luis Hugo de Cesare will oversee the reorganization
proceedings as the court-appointed trustee. He will verify
creditors' claims until September 15, 2004. Afterwards, the
validated claims will be presented in court as individual
reports on October 29, 2004.

The trustee is also required by the court to submit a general
report essentially auditing the company's accounting and
business records as well as summarizing important events
pertaining to the reorganization. This report will be presented
in court on December 13, 2004.

The Informative Assembly, the final stage of a reorganization
where the settlement proposal is presented to the company's
creditors for approval, is scheduled on May 13, 2004.

CONTACT: Mr. Luis Hugo Di Cesare, Trustee
         Viamonte 1336
         Buenos Aires


CURTIDURIA FUENTES: Reorganization Proceeds To Bankruptcy
---------------------------------------------------------
Curtiduria Fuentes S.R.L., a Buenos Aires-based company that was
undergoing reorganization, was declared bankrupt. Argentine news
source La Nacion relates that the city's Court No. 18 issued the
"Quiebra Decretada" ruling.

The report adds that the court assigned Mr. Baldomero Gonzalez
Herrera as trustee, who will verify creditors' proofs of claim
until August 9, 2004.

Dr. Alconada, Clerk No. 38, assists the court on this case.

CONTACT: Curtiduria Fuentes S.R.L.
         Avenida Corrientes 1327
         Buenos Aires

         Mr. Baldomero Gonzalez Herrera, Trustee
         Avenida de Mayo 1260
         Buenos Aires


DECANO INDUSTRIAL: Files Petition to Reorganize
-----------------------------------------------
Decano Industrial S.A. has filed a "Concurso Preventivo" motion,
reports La Nacion. The Company is seeking to reorganize its
finances after failing to pay its debts.

The Company's case is pending before Court No. 1, under Judge
Dieuzeide, who is assisted by Clerk No. 1 Dr. Fernandez Garello.

CONTACT: Decano Industrial S.A.
         Cerrito 1136
         Buenos Aires


DIDESSA: Court Grants Reorganization Plea
-----------------------------------------
Buenos Aires-based Didessa S.A. successfully petitioned for
reorganization after a local court issued a resolution opening
the company's insolvency proceedings.

Under insolvency protection, the company will continue to manage
its assets subject to certain conditions imposed by Argentine
law and the oversight of a court-appointed trustee.

Infobae relates that Mr. Pedro Mazola will serve as trustee
during the course of the reorganization. He will be accepting
creditors' proofs of claims for verification until September 10,
2004.

After the verification deadline, the trustee will prepare the
individual reports and submit it in court on October 25, 2004.
The trustee will also present a general report for court review
on December 6, 2004.

The company will endorse the settlement proposal, drafted from
the submitted claims, for approval by the creditors during the
informative assembly scheduled on June 21 next year.

CONTACT: Didessa S.A.
         Mariano Boedo 385
         Buenos Aires

         Mr. Pedro Mazolla, Trustee
         Cramer 1859
         Buenos Aires


DISTRIBUIDORA KM 32: Reports Submission Finalized
-------------------------------------------------
Mr. Raul Horacio Trejo, the trustee assigned to supervise the
liquidation of Distribuidora Km 32 S.A., will submit the
validated individual claims for court approval on October 26,
2004, reports Infobae. These reports explain the basis for the
accepted and rejected claims. The trustee will also submit a
general report on December 7, 2004.

CONTACT: Mr. Raul Horacio Trejo, Trustee
         Montevideo 205
         Buenos Aires


ENVAPACK: Court Issues Bankruptcy Ruling
----------------------------------------
The civil and commercial tribunal of Buenos Aires has issued a
pronouncement initiating the liquidation of Envapack S.R.L.,
states Infobae.

With the bankruptcy order in place, the Company will turn over
control of its assets to a court-appointed trustee. Creditors of
the Company must present proofs of their claims to the trustee
in order to participate in the payments to be made upon
completion of the liquidation.

CONTACT: Envapack S.R.L.
         Avda. Juan B. Justo 2351
         Buenos Aires


FARMAFE ARENALES: Court OKs Creditor's Bankruptcy Call
------------------------------------------------------
Farmafe Arenales S.R.L., a pharmacy operating in Buenos Aires,
entered bankruptcy after Judge Di Noto of the city's Court No.
15 approved the bankruptcy motion filed by Monroe Americana
S.A., reports La Nacion. The Company's failure to pay
US$149,313.72 in debt prompted the creditor to file the
petition.

Working with Dr. Vitale, Clerk No. 30, the court assigned Mr.
Hector Garcia as trustee for the bankruptcy process. The
trustee's duties include the authentication of the Company's
debts and the preparation of the individual and general reports.
Creditors are required to present their proofs of claims to the
trustee before September 10, 2004.

The Company's assets will be liquidated at the end of the
bankruptcy process to repay creditors. Payments will be based on
the results of the verification process.

CONTACT: Farmafe Arenales S.R.L.
         Arenales 1199
         Buenos Aires

         Mr. Hector Garcia, Trustee
         Montevideo 734
         Buenos Aires


FRIGORIFICO FERNAROLO: Court Sets Assembly Date
-----------------------------------------------
Frigorifico Fernarolo S.A., the Buenos Aires Company undergoing
reorganization, will present its restructuring settlement plan
to creditors during the informative assembly scheduled on June
27 next year.

Infobae reports that Mr. Juan Carlos Vilanova directs the
Company's ongoing reorganization as the court-appointed trustee.
Creditors with claims against Frigorifico Fernarolo must present
proof of the Company's indebtedness to the trustee before
September 27, 2004.

CONTACTS: Frigorifico Fernarolo S.A.
          Tacuari 371
          Buenos Aires

          Mr. Juan Carlos Vilanova, Trustee
          Hipolito Yrigoyen 1349
          Buenos Aires


GIAGANTE Y DEL OLMO: Initiates Bankruptcy Proceedings
-----------------------------------------------------
The Junin civil and commercial tribunal declared local company
Giagante y del Olmo S.R.L. "Quiebra," reports Infobae.

Mr. Hugo Javier Angarolla, who has been appointed as trustee,
will verify creditors' claims until July 1, 2004 and then
prepare the individual reports based on the results of the
verification process.

The individual reports will then be submitted to court on August
6, 2004, followed by the general report on September 6, 2004.

CONTACT: Giagante y del Olmo S.R.L.
         Primera Junta 104
         Junin

         Mr. Hugo Javier Angarolla, Trustee
         Sarmiento 127
         Junin


LEACO: Gears for Reorganization
-------------------------------
Judge Sala of Buenos Aires Court No. 14, with assistance from
Clerk No. 27 Dr. Aleman, issued a resolution opening the
reorganization of Leaco S.A. This pronouncement authorizes the
company to begin drafting a settlement proposal with its
creditors in order to prevent the liquidation of the company.

Further, the reorganization allows the troubled construction
firm to retain control of its assets subject to certain
conditions imposed by Argentine law and the oversight of the
court appointed trustee.

Mr. Anibal Carillo will serve as trustee during the course of
the reorganization. He will be validating creditors' proofs of
claims until September 1, 2004.

Leaco reports assets totaling US$1,361,008.67 and liabilities
amounting to US$1,057,578.26.

CONTACT: Leaco S.A.
         Viamonte 1546
         Buenos Aires

         Mr. Anibal Carillo, Trustee
         Juncal 615
         Buenos Aires


MANUFACTURA DE PRODUCTOS: Liquidates Assets to Pay Debts
--------------------------------------------------------
Manufactura de Productos Insecticidas S.R.L. will begin
liquidating its assets following the bankruptcy pronouncement
issued by a local court in Buenos Aires, says Infobae.

The bankruptcy ruling places the company under the supervision
of court-appointed trustee, Mr. Javier Marcelo Espineira. The
trustee will verify creditors' proofs of claims until September
27, 2004. Afterwards, the validated claims will be presented in
court as individual reports on November 12, 2004.

Mr. Espineira will also submit a general report, containing a
summary of the company's financial status as well as relevant
events pertaining to the bankruptcy, on February 16, 2005.

The bankruptcy process will end with the disposal company assets
in favor of its creditors.

CONTACT: Mr. Javier Marcelo Espineira, Trustee
         Viamonte 783
         Buenos Aires


MC AUDIO: Court Converts Bankruptcy to Reorganization
-----------------------------------------------------
Mc Audio, Video y Hogar S.A. will proceed with reorganization
after a Buenos Aires Court converted the Company's ongoing
bankruptcy case into a "concurso preventivo", states Infobae.

Under Insolvency protection, the Company will be able to draft a
proposal designed to settle its debts with creditors. The
reorganization also prevents the Company's outright liquidation.

Mr. Roberto Isidro Sapir, the court-appointed trustee, will
verify creditors' proofs of claims until August 18, 2004. After
the verification the trustee will submit the individual reports
on September 29, 2004 and the general report on November 11,
2004.

CONTACT: Mr. Roberto Isidro Sapir, Trustee
         Uriburu 1010
         Buenos Aires


MC INGENIERIA: Court Declares Company Bankrupt
----------------------------------------------
Judge Guttierez Cabello of Buenos Aires Court No. 7 declared
local company Mc Ingenierˇa y Construcciones S.A. bankrupt,
relates local daily La Nacion. The court approved the bankruptcy
petition filed by Banca Nazionale del Lavoro S.A., to whom the
Company failed to pay debts amounting to US$123,580.29.

The Company will undergo the bankruptcy process with Mr.
Guillermo Ickowicz as its trustee. Creditors are required to
present their proofs of claims to the trustee for verification
before September 20, 2004. Creditors who fail to have their
claims authenticated by the said date will be disqualified from
the payments that will be made after the Company's assets are
liquidated at the end of the bankruptcy process.

Clerk No. 7, Dr. Giardinieri, assists the court on the case.

CONTACT: Mc Ingenierˇa y Construcciones SA
         Aguero 1229
         Buenos Aires

         Mr. Guillermo Ickowicz, Trustee
         Talcahuano 768
         Buenos Aires


PIONERA: Undergoing Bankruptcy on Court Orders
----------------------------------------------
Buenos Aires-based Pionera S.A. will proceed with the
liquidation of its assets after the city's civil and commercial
tribunal issued a bankruptcy ruling against the troubled
company, Infobae states.

Under bankruptcy protection, a court-appointed trustee will
supervise the company's affairs. The Infobae notice did not
reveal the name of the trustee nor the end of the credit
verification period.

CONTACT: Pionera S.A.
         Avenida de Mayo 1370
         Buenos Aires


ROPAR: Verification Deadline Approaches
---------------------------------------
The verification of claims for the Ropar S.R.L. bankruptcy will
end on September 9, 2004 according to Infobae. Creditors with
claims against the bankrupt company must present proof of the
liabilities to Mr. Marcos Livszyc, the court-appointed trustee,
before the deadline.

After the verification phase, the trustee will prepare the
individual reports and submit them in court on October 7, 2004.
The court presentation of the general report follows on November
8, 2004.

CONTACT: Ropar S.R.L.
         Belgrano 2072
         Buenos Aires

         Mr. Marcos Livszyc, Trustee
         Nunez 6387
         Buenos Aires

VENTAS JAQUE: Begins Bankruptcy Proceedings
-------------------------------------------
The Buenos Aires civil and commercial tribunal declared Ventas
Jaque S.R.L. bankrupt after the company defaulted on its debt
payments, reports Infobae. The bankruptcy order effectively
places the company's affairs as well as its assets under the
control of court-appointed trustee, Mr. Francisco Cipriotti.

As trustee, Mr. Cipriotti is tasked with verifying the
authenticity of claims presented by the company's creditors. The
verification phase is ongoing until September 13, 2004.

Following claims verification, the trustee will submit the
individual reports based on the forwarded claims for final
approval by the court on October 26, 2004. A general report will
also be submitted on December 7, 2004.

CONTACT: Mr. Francisco Cipriotti, Trustee
         Avenida Belgrano 615
         Buenos Aires



=============
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LORAL SPACE: Telstar 18 Satellite Launched
------------------------------------------
Loral Space & Communications announced Tuesday that Telstar 18,
a powerful and flexible satellite designed to provide
communications services across Asia, was launched last night at
11:59 pm EDT. The satellite was sent into space on a Sea Launch
Zenit-3SL rocket from the Odyssey Launch Platform, positioned on
the equator in the Pacific Ocean.

According to Sea Launch, the spacecraft separated from the
rocket's upper stage prematurely and was placed into a lower
than expected transfer orbit. However, current data indicates
the satellite has sufficient on-board fuel to bring it to its
final orbital position and exceed its 13-year specified life.
Telstar 18 has deployed its solar arrays and all systems on the
spacecraft are operating normally.

Built by Space Systems/Loral (SS/L) and operated by Loral Skynet
-- both subsidiaries of Loral Space & Communications -- Telstar
18 will be located at 138 degrees East longitude and carry a
total of 54 active transponders, sixteen high-power Ku-band
transponders and thirty-eight
C-band transponders. Over the next month, SS/L engineers will
put Telstar 18 through a comprehensive series of in-orbit tests
in preparation for the satellite's service start in August.

In consideration for funding a portion of the satellite
project's cost, APT Satellite Company Limited, Hong Kong, will
initially acquire use of 68.5 percent of Telstar 18's capacity
for Apstar V services. The number of transponders used by APT
will be reduced over time, ultimately to 54 percent of the
satellite's capacity.

Loral's other Asia satellite, Telstar 10/Apstar IIR, hosts one
of the largest video communities in Asia at 76.5 degrees East
longitude.

Telstar 10, also built by SS/L, together with Telstar 18 will
offer cable, broadcast video and IP-enabled data service
coverage to a vast geographic area that stretches from Europe
across Asia to Australia and Hawaii for satellite or fiber
connectivity to the U.S through Skynet's Kapolei teleport.

Building on the success of Telstar 10, the new Telstar 18
satellite has pre-launch lease agreements from a number of
regional and international companies, including:

- Smart Digital Communications Bhd, Kuala Lumpur, Malaysia,
which provides direct access Internet services to customers
throughout Malaysia;

- PSVN, Inc., based at Hawaii Pacific Teleport, a provider of
new public switched videophone network (PSVN) services that uses
a demand assigned multiple access (DAMA) platform to provide low
cost videoconferencing services between dozens of countries in
the Asia region with interconnection to the US ISDN network.

In addition to transmitting innovative new applications, cable
programming and direct-to-home broadcasting services, Telstar 18
is scheduled to begin hosting Skynet's SkyReach(SM) in 2005.
SkyReach is Skynet's two-way IP-based networking solution.
SkyReach, which is already available and in use by several
customers throughout the Americas, allows organizations to
create an instant infrastructure using a VSAT network,
connecting offices within a city or around the globe.

Telstar 18 is a version of SS/L's space-proven 1300 satellite
platform, which has an excellent record of reliable operation.
The geostationary 1300 has a specified service life of 13 years
and maintains station-keeping and orbital stability by using
bipropellant propulsion and momentum-bias systems. In all, SS/L
satellites have amassed more than 1,000 years of on-orbit
service.

A pioneer in the satellite industry, Loral Skynet continues to
deliver the superior service quality and range of satellite
solutions that have made it an industry leader for more than 40
years. Through the broad coverage of the Telstar satellite fleet
in combination with its hybrid VSAT/fiber global network
infrastructure, Skynet is a source for all broadcast, data
network, Internet access, IP and systems integration needs.

Headquartered in Bedminster, New Jersey, Loral Skynet is
dedicated to providing secure, high-quality connectivity and
communications. Space Systems/Loral is a premier designer,
manufacturer, and integrator of powerful satellites and
satellite systems. SS/L also provides a range of related
services that include mission control operations and procurement
of launch services. Based in Palo Alto, Calif., the company has
an international base of commercial and government customers
whose applications include broadband digital communications,
direct-to-home broadcast, defense communications, environmental
monitoring, and air traffic control. SS/L is ISO 9001:2000
certified. Loral Skynet and Space Systems/Loral are both
subsidiaries of Loral Space & Communications (OTCBB: LRLSQ).

CONTACT: Mr. John McCarthy
        (212) 338-5345

         Web Sites: www.loralskynet.com
                    www.ssloral.com
                    www.loral.com



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B O L I V I A
=============

COTEL: World Bank To Carry Out Audit
------------------------------------
Mr. Jaime Siles, oversight committee president at La Paz
telephony cooperative Cotel, announced that Bolivia's President
Carlos Mesa has authorized the World Bank (WB) to conduct an
audit of the last five years of operations at the Company,
relates Business News Americas.

Cotel used to operate under the management of German consultancy
Detecon, which was forced to hand back its contract in April
2003 due to public dissent. In October 2003, a new management
team under company president Pierre Chain took over the
administration of the Company.

Although the government is happy with audits performed by local
firms on the previous Cotel boards that were purely Bolivian,
doubts remain over locally commissioned audits of Detecon, Siles
said. Detecon itself said it could not accept any audit carried
out by a local firm and the WB would be the only organization
that could guarantee an impartial approach.

The interim Cotel board agreed and got as far as getting a
valuation for the WB's auditing services, which would mean an
outlay of US$245,000, Siles said.

However, the bank's audit depended on official approval by
central government, which until now has shied away from spending
on additional audits and feared legal attacks against an
external audit.


HIDROELECTRICA BOLIVIANA: Restructures Debt To Improve Risk Rtg
---------------------------------------------------------------
Hidroelectrica Boliviana will restructure its debts in order to
improve its risk rating, which had plummeted after a supposed
dumping of energy selling. Fears about the Company's ability to
face debts payments of US$3.4 million and US$5.1 million that
will mature on October 2004 and April 2005 have also affected
the company.

Investments for the Bolivian power company had reached US$105
million when it started its operation. However, the Company fell
into rough times when demand for power did not materialize as
expected. On May 2004, the Company issued bonds worth US$65
million in the Bolivian Stock Market.


* Bolivia Gets $25M Zero-Interest Credit From World Bank
--------------------------------------------------------
The World Bank Board of Executive Directors approved Tuesday a
US$25 million, zero-interest credit to support the Government of
Bolivia's social development agenda.

The Social Sectors Programmatic Structural Adjustment Credit
will help the Government of Bolivia maintain progress in the
social sectors and improve access of the poor to basic services
in health and nutrition, education, water and sanitation, and
social protection in a time of fiscal crisis.

"Human development is a central element for achieving sustained
growth, poverty reduction and more equity in Bolivia," said
Marcelo Giugale, World Bank Director for Bolivia, Ecuador, Peru
and Venezuela. "In the current social and fiscal situation,
Bolivia needs to ensure it has the necessary means to help the
poor and reduce social tensions."

The credit will support the following objectives in each sector:

- Health and Nutrition: expand coverage of primary health care
to further reduce maternal and child mortality, malnutrition and
anemia; reduce the incidence of communicable diseases and
increase the coverage of immunizations;

- Education:  develop the Bolivian Educational Strategy with
popular participation, increase completion rates in primary
education and improve secondary education;

- Water and Sanitation:  implement new financing and technical
assistance policies to improve the management and efficiency of
service providers and increase access to water and sanitation
services;

- Social Protection:  create and implement a social protection
network, improve the efficiency of the Emergency Employment
Program (PLANE), and introduce incentives for the achievement of
the Millennium Development Goals (MDGs);

- Accountability and Transparency:  increase citizen access to
information on public social sector expenditures and social
results, for the participatory monitoring and evaluation of
progress towards achieving the MDGs.

"This Program will help Bolivia achieve the Millennium
Development Goals by reducing disparities in outcomes across
different regions, ethnic groups and income groups," said Juan
Pablo Uribe, World Bank task manager for the project. "It will
also make social programs more effective and sustainable, with
greater results orientation and accountability, through
increased civil society engagement."

This International Development Association (IDA) programmatic
structural adjustment credit is the first in a series of three
single tranche Social Sectors Programmatic Structural Adjustment
Credits (SSPSAC). It is repayable in 20 years and has a ten-year
grace period.  The total project cost is approximately $34.5
million.

CONTACTS: La Paz
          Ms. Erika Bruzonic
         (591-2) 215-3300
          Ebruzonic@worldbank.org

          Washington
          Ms. Alejandra Viveros
         (202) 473-4306
          Aviveros@worldbank.org



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B R A Z I L
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EMBRATEL: Initiates Registered Exchange Deal
--------------------------------------------
Embratel Participacoes S.A. (BOVESPA: EBTP3 EBTP4) ("Embrapar"),
which holds 98.8 percent of Empresa Brasileira de
Telecomunicacoes S.A. ("Embratel"), announced Tuesday that its
subsidiary Embratel has commenced an offer to exchange up to
$275 million aggregate principal amount of Embratel's registered
11.0% Guaranteed Notes due 2008 (the "New Notes") for any and
all of Embratel's outstanding unregistered 11.0% Guaranteed
Notes due 2008 (the "Old Notes"). The expiration date for the
exchange offer will be 5:00 p.m., Eastern Standard Time (EST),
on July 28, 2004, unless extended.

The New Notes are substantially identical to the Old Notes,
except that the New Notes have been registered under the
Securities Act of 1933, as amended, and will not bear any legend
restricting their transfer.
The terms of the exchange offer and other information relating
to Embrapar and Embratel are set forth in a prospectus dated
June 29, 2004. Copies of the prospectus and the related letter
of transmittal may be obtained from the exchange agent --
Deutsche Bank Trust Company Americas, Corporate Trust and Agency
Group, 60 Wall Street, New York, New York 10005, Attn: Corporate
Market Services, telephone 1(800) 735-7777, fax number 1(615)
835-2700.

This announcement is neither an offer to sell nor a solicitation
of an offer to buy or exchange the New Notes or the Old Notes.
The exchange offer is made solely by the prospectus dated June
29, 2004.

Embratel is the premium telecommunications provider in Brazil
and offers an ample variety of telecom services -- local and
long distance telephony, advanced voice, high-speed data
transmission, Internet, satellite data communications, and
corporate networks. The company is a leader in the country for
data services and Internet, and is highly qualified to be an
all-distance network carrier in Latin America. Embratel's
network spreads countrywide, with almost 29 thousand kms of
optic cables, which represents about one million and sixty-nine
thousand km of fiber optics.

CONTACTS: Ms. Silvia M.R. Pereira
          Investor Relations
          tel: (55 21) 2121-9662
          fax: (55 21) 2121-6388
          email: silvia.pereira@embratel.com.br
                 invest@embratel.com.br

          Web site: www.embratel.net.br


NORTEL NETWORKS: To Divest Brazilian Manufacturing Operations
-------------------------------------------------------------
By Moving Towards a 100-Percent Variable Cost Structure for
Manufacturing, Nortel Networks Will Achieve Even Greater
Operational, Financial Agility

-- Nortel Networks to complete five-year plan to divest
substantially all manufacturing activities

-- Flextronics to manage approximately US$2.5 billion of Nortel
Networks annual cost of sales; Nortel Networks to receive
estimated cash proceeds of approximately US$675-US$725 million

Nortel Networks (NYSE:NT) (TSX:NT) has reached an agreement with
Flextronics (Nasdaq:FLEX) regarding the divestiture of certain
Nortel Networks manufacturing operations and related activities
in Canada and Brazil. It is also anticipated that Flextronics
will acquire Nortel Networks manufacturing operations in France
and Northern Ireland, subject to the completion of the required
information and consultation process. These operations and
activities have been the subject of discussions between the two
companies since Nortel Networks announced in January 2004 that
it was in discussions with Flextronics.

"With today's announcement, we have completed our five-year plan
to divest substantially all of our manufacturing activities to
world-class electronics manufacturing services companies -- a
supply chain strategy that has provided, and is expected to
continue to provide, significant benefits to Nortel Networks,"
said Chahram Bolouri, president, Global Operations, Nortel
Networks. "We have been able to lower our cost of sales, reduce
our fixed-cost infrastructure, and significantly reduce
inventory levels and associated carrying costs."

"Most importantly, this strategy will continue to enable us to
respond with increasing effectiveness to significant ups and
downs in market demand and customer needs," Bolouri said. "That,
together with the other benefits, has been critical in today's
highly competitive global telecommunications industry. Today's
announcement is consistent with Nortel Networks commitment to
having one of the industry's most efficient and responsive
business operations."

Under the terms of the agreement, Flextronics will acquire
substantially all of Nortel Networks remaining manufacturing
operations, including product integration, testing and repair
operations carried out in the Nortel Networks Systems Houses in
Calgary and Montreal (Canada) and Campinas (Brazil), and will
also acquire certain activities related to these locations,
including the management of the supply chain, related suppliers
and third-party logistics. In Europe, Flextronics has made an
offer to purchase similar operations at the Nortel Networks
Monkstown (Northern Ireland) and Chateaudun (France) Systems
Houses, and, as required by law, this offer will be subject to
completion of appropriate information and consultation processes
with the relevant employee representatives.

Under the terms of the agreement and offer, Flextronics would
also acquire Nortel Networks global repair services, as well as
certain design assets in Ottawa and Monkstown related to
hardware and embedded software design, and related product
verification for certain established optical products. These
design assets are being coupled with the manufacturing
operations that are being divested so as to enable faster
product cost reduction and improved time-to-market for new
features that further leverage the lifecycle of these successful
established optical products. This, in turn, will enable Nortel
Networks to focus on next generation optical architectures,
products and solutions -- areas where Nortel Networks believes
it can gain the most competitive advantage.

Upon the successful completion of the agreement and offer,
Nortel Networks expects to realize even further benefits from
its divestiture strategy, including:

-- moving towards a 100-percent variable cost structure for
manufacturing, which leads all of Nortel Networks major
competitors and which will provide even greater operational and
financial agility;

-- estimated proceeds of approximately US$675-US$725 million in
cash payments to be received in the fourth quarter of 2004 and
during 2005 which is comprised of approximately US$475-US$525
million for inventory and equipment, dependent on the asset
value at closing, and US$200 million for intangible assets
relating to the design and engineering transfer. These cash
payments would be offset by related estimated transaction costs
(including transition, potential severance, information
technology implementation and real estate costs) of
approximately US$200 million;

-- an increase in inventory management efficiency moving toward
best in class; and

-- by year four, targeting US$75-US$100 million positive impact
on net earnings before tax on an annualized basis which includes
savings from related internal efficiencies expected to be
realized.

As part of today's announcement, both companies would also enter
into a four-year supply agreement for manufacturing services
(whereby Flextronics will manage approximately US$2.5 billion of
Nortel Networks annual cost of sales) and a three-year supply
agreement for design services.

"By divesting our manufacturing activities to companies whose
core competency lies in this area, we have been able to focus
our supply chain resources and investments on those areas of the
business where we believe we can gain the greatest competitive
differentiation," Bolouri said. "Going forward, these areas will
include the introduction of new products and the deployment,
network integration and support of complex, multi-technology
network solutions."

In line with this direction, Nortel Networks also announced
today that it will create Solutions Operations Centers in
Calgary and Montreal and, pending the completion of information
and consultation processes in Europe, in Monkstown and
Chateaudun. These Centers will have overall responsibility for
the strategic management and control of Nortel Networks various
supply chains, including all customer interfaces, customer
service, order management, quality assurance, product cost
management, new product introduction, and network solutions
integration, testing and fulfillment.

"We couldn't be more pleased to be entering into an even larger
transaction with one of the world's leading telecommunications
providers," said Michael Marks, chief executive officer,
Flextronics. "The Nortel Networks manufacturing and design
people who work within these activities bring intimate knowledge
and experience with complex, carrier-grade-quality products and
processes. This know-how and capability is absolutely critical
to the future of Flextronics."

"We are excited about expanding our relationship with
Flextronics, and about the competitive advantages this
relationship will bring to Nortel Networks," Bolouri said. "We
believe that Flextronics has the necessary vertical supply chain
expertise, resources, and global presence to meet our time-to-
market, quality, and product cost-reduction objectives and to
take our supply chain to new levels of performance and
competitive differentiation."

Under the terms announced today, it is also intended that
approximately 2,500 employees would transfer to Flextronics. Of
those employees, approximately 900 in Montreal, 650 in Calgary,
100 in Ottawa and 30 in Campinas will transfer to Flextronics.
Under the terms proposed in Europe, approximately 440 in
Monkstown (including approximately 55 designers) and 330 in
France would transfer.

The portion of the transaction related to the manufacturing
activities in Montreal and the optical design activities in
Ottawa and Monkstown are expected to close in the fourth quarter
of 2004. The balance of the transaction is expected to close in
the first half of 2005. This phased closing will allow the time
necessary for both companies to implement all systems and
processes to ensure a smooth transition without adverse impact
to either business. The discussions and closing date
expectations are subject to the completion of the required
information and consultation processes. All transactions are
also subject to customary conditions and regulatory approvals.

Nortel Networks is an industry leader and innovator focused on
transforming how the world communicates and exchanges
information. The Company is supplying its service provider and
enterprise customers with communications technology and
infrastructure to enable value-added IP data, voice and
multimedia services spanning Wireless Networks, Wireline
Networks, Enterprise Networks, and Optical Networks. As a global
company, Nortel Networks does business in more than 150
countries.

Web site: http://www.nortelnetworks.com
          http://www.nortelnetworks.com/media_center


USIMINAS: CVRD May Auction Stake to Facilitate Noranda Bid
----------------------------------------------------------
Brazilian iron ore miner Companhia Vale do Rio Doce SA (CVRD)
announced Monday that it will sell assets in order to raise
funds to finance a bid for the assets owned by Canada's Noranda
Inc., a major copper and nickel miner with investments in
aluminum and zinc.

Speculation is rife that the sale will include CVRD's 23% stake
in Usinas Siderurgicas de Minas Gerais SA (Usiminas), Brazil's
largest steelmaker. The stake is worth about US$270 million.

CVRD earlier said that it will sell its stake in another local
steelmaker to joint controller Arcelor for US$578.5 million.

CONTACTS:  Bruno Seno Fusaro
           E-mail: brunofusaro@usiminas.com.br
           Tel: +55 (31) 3499-8710

           Paulo Esteves
           E-mail: paulo.esteves@thomsonir.com.br
           Tel: +55 (11) 3897-6466/6857


VARIG: Plans to Open Sao Paulo-Beijing Route by Year-End
--------------------------------------------------------
Brazilian carrier Varig will become the first South American
airline to offer a direct service connection to China when it
inaugurates a Beijing-Sao Paulo route in tandem with Air China
by year-end.

Mr. Cesar Yu, head of operations for Varig in China, stated in
an EFE article that the Company intends to carry out daily
flights between the two cities by 2005. Varig will initially
kick-off its service with four flights per week.

Varig and Air China's partnership will open doorways in Asia and
South America. The new service, according to Mr. Yu, will
provide travelers with a comprehensive range of destinations
"from Sao Paulo to other South American countries and from
Beijing to other parts of China and Asia,"

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



=========
C H I L E
=========

TELEFONICA CTC: Shareholders to Vote on Mobile Unit's Sale
----------------------------------------------------------
Shareholders of Chilean telecoms company Telefonica CTC Chile
will decide in a July 15 meeting whether to accept an offer by
CTC's parent, Spanish telecom Telefonica SA (TEF), to buy CTC's
mobile unit.

TEF, through Telefonica Moviles, offered to buy the mobile unit
Telefonica Movil for US$1.25 billion. The board has already
voted in favor of the deal but two-thirds majority vote by
shareholders is needed to close the transaction.

Some shareholders have publicly said they consider Telefonica's
offer insufficient.

However, two separate studies by ABN Amro and JP Morgan
commissioned by CTC and published by the Santiago stock exchange
say the deal is fair. CTC will book some US$420 million from the
transfer, and it seeks shareholder approval for the disbursement
of US$800 million in dividends on 2003 and 2004 earnings.

Meanwhile, CTC rivals have said they want local antitrust
authorities to block the deal, through which Telefonica Moviles
would become the top mobile carrier in the Andean country.

CONTACT: TELEFONICA CTC CHILE
         Sofia Chellew
         E-mail: schelle@ctc.cl
         Tel.:56-2-691 3867

         Veronica Gaete
         E-mail: vgaete@ctc.cl
         Tel.:56-2-691 3867

         M.Jose Rodriguez
         E-mail: mjrodri@ctc.cl
         Tel.:56-2-691 3867

         Florencia Acosta
         E-mail: macosta@ctc.cl
         Tel.:56-2-691 3867



===============
C O L O M B I A
===============

EDT: Baranquilla Govt. Affirms Bid to Purchase Local Telco
----------------------------------------------------------
Sociedad de Telecomunicaciones del Caribe (Caribetel), the
company formed by Colombia's Municipality of Baranquilla, will
bid for the assets of bankrupt municipal telco EDT, reports
Business News Americas.

Mayor Guillermo Hoenigsberg Bornacelly stated in the article
that the city aims to raise US$5.6 million through local private
investments to purchase EDT. Baranquilla proposes to maintain 51
percent ownership of the Company but will consider reducing its
stake if enough private sector interest arises.

EDT was declared bankrupt earlier this year and its operations
were transferred to Barranquilla Telecomunicaciones, a new
company. The Colombian government intends to pay EDT's COP275
billion debt by selling its assets.



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

PACIFICTEL: Favors Rocafuerte-Sul America's Insurance Offer
-----------------------------------------------------------
Pacifictel, the Ecuadorian state telephone company, has signed a
one-year insurance contract with the Rocafuerte - Sul America
consortium, says Business News Americas

Mr. Fernando Naranjo, Pacifictel press director, said in the
report that the insurance company "complied with all
requirements of the law and generated a savings of US$1.7mn for
Pacifictel in comparison with the cancelled policy with La
Uni˘n."

The La Union contract was terminated in March because of
disagreements over coverage terms. The resulting controversy led
to the resignation of Pacifictel president Mauricio Galindo.

In an interview with local daily Expreso, La Union Lawyer
Leonidas Plaza claimed that La Union offered US$2 million for a
new contract compared with Panamericana's US$5 million and
Rocafuerte - Sul America's US$2.8 million offers. Pacifictel has
not released a statement regarding these assertions.



=====================
E L   S A L V A D O R
=====================

BANCO AGRICOLA: Fitch Ratings Affirms Ratings; Outlook to Stable
----------------------------------------------------------------
Fitch Ratings affirmed Tuesday Banco Agricola's (Agricola)
ratings at long-term foreign currency 'BB', short-term foreign
currency 'B', individual 'D', and support '5'. The Outlook on
the long-term foreign currency rating has been changed to Stable
from Negative. The change in Outlook is based on a more stable
performance and some improvement in asset quality. The ratings
are also supported by the bank's dominant market position in El
Salvador, as well as on its broad and diversified retail deposit
base.

Agricola is El Salvador's largest bank, with a market share of
30% of assets and 29% of deposits at year-end 2003. Founded in
1955, Agricola is part of one of the largest financial groups in
Central America. Agricola focuses the majority of its
distribution network within its home market in El Salvador but
maintains four agencies in the U.S. that handle remittances and
has a controlling stake in a bank in Nicaragua. Agricola is held
by Inversiones Financieras Banco Agricola (IFBA), which controls
88% of the bank. Additionally, IFBA owns 50% of Asesuisa, El
Salvador's second largest insurance company, and 99.9% of
Bursabac, a brokerage house. IFBA is held by BanAgricola S.A.,
the holding company that was established in Panama for the sole
purpose of holding the Salvadorian operations through IFBA in
addition to the Panamanian bank.

CONTACT: Akiko Kudo +1-212-908-0819, New York
         Gustavo Lopez +1-212-908-0853, New York
         Raul Castellon +011 503 263 1300, El Salvador

MEDIA RELATIONS: Kenneth Reed +1-212-908-0540, New York


BANCO CUSCATLAN: Fitch Ratings Affirms Ratings
----------------------------------------------
Fitch Ratings affirmed Banco Cuscatlan de El Salvador, S.A.'s
(BC) long-term foreign currency at 'BB [Negative Outlook]',
short-term foreign currency at 'B', individual at 'D', and
support at '5'. The ratings reflect the bank's well established
domestic and regional franchise, as well as a stable retail
deposit base, but also moderate profitability and asset quality
concerns, given BC's relatively high levels of nonperforming,
restructured, and foreclosed assets. The bank's management
states that the asset quality issues are currently being
addressed.

BC is El Salvador's second largest bank, with an asset and
deposit market share of 24.1% and 22.6%, respectively, at year-
end 2003. Locally, BC is held by Inversiones Financieras
Cuscatlan (96%), which, in turn, is controlled by Corporacion
UBCI (100%, [UBCI]), itself predominantly owned by Central
American investors. In addition, the IFC held a 2% stake in the
regional holding company at year-end 2003. Corporacion UBCI,
which was registered in Panama in 2001, also holds the shares of
other financial groups in Guatemala, Costa Rica, and Panama that
operate under the same name but do not consolidate the results
into BC. BC is the largest of the regional group companies, with
68% of Corporacion UBCI's consolidated assets, 58% of its
equity, and 73% of its net income at year-end 2003.

CONTACT: Akiko Kudo +1-212-908-0819, New York
         Gustavo Lopez +1-212-908-0853, New York
         Raul Castellon +011 503 263-1300, El Salvador


Media Relations: Kenneth Reed +1-212-908-0540, New York



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

AHMSA: Amicably Resolves Union Strike
-------------------------------------
Work at Ahmsa's Plant No. 1 and Plant No. 2 in Monclova was
briefly interrupted on Monday when picketing union members
blocked the entry of around 2,000 construction workers.

According to El Norte, the stoppage, which began at 7:00 A.M.,
ended an hour later after Ahmsa reached an agreement with the
union leaders. The Union went on strike to compel the Mexican
steelmaker to contract unionized construction workers.

Ahmsa(Altos Hornos de M‚xico), is controlled by Mexico's GAN
Group and has capacity of roughly 3Mt/y.




* Mexico Beefs Up Savings and Credit With $75.5M WB Loan
--------------------------------------------------------
The World Bank approved Tuesday a $75.5 million loan to
strengthen Mexico's savings and credit institutions, including
those in marginal areas to improve access to financial services
for the poor.

"The project supports Mexico's efforts to expand the non-bank
financial sector and widen access to financial services by the
underserved Mexican population, especially in rural areas," said
Isabel Guerrero, the World Bank's Country Director for Mexico.
"Access to financial services by the poor won't only integrate
them into the national economy, but will also contribute to
their financial empowerment by enhancing their ability to save,
invest and manage risks."

The Second Phase Savings & Rural Finance (BANSEFI) Project
complements the on-going $64.4 million Savings and Credit Sector
Strengthening and Rural Microfinance Capacity Building Project,
which was approved by the Board of Directors on July 16, 2002.
This second phase seeks to assist the government of Mexico in
strengthening the savings and credit institutions sector with
entities that are compliant with the Popular Savings and Credit
Law (effective June 4, 2001), financially viable, operationally
effective, and technologically upgraded to better reach the
underserved Mexican population.

The project aims to:

- Strengthen sector institutions through the provision of
technical assistance to about 200 institutions. In addition,
this component will support an outreach strategy to deepen
access to financial services by the "unbanked" Mexican
population.

- Develop a technology platform that extends the information
technology activities already being funded under the on-going
first phase of the project. This component will also finance the
national roll-out of the technology platform in the
participating entities and federations.

- Support monitoring and evaluation, studies, and information
dissemination. This component will extend the monitoring and
evaluation study under the on-going project. Additionally, it
help refocus the content of the on-going advertising campaign to
existing and potential clients, marketing the benefits of
financial intermediation through a certified entity, and
disseminating the range of new financial products.

"Strengthening non-bank financial intermediaries, including
credit cooperatives, will significantly expand the level of
financial services available to an additional five million
Mexicans, including deposit services and remittances coming from
abroad," said Harideep Singh, World Bank task manager of the
project.

The $75.5 million, fixed-spread loan from the International Bank
of Reconstruction and Development (IBRD) has a repayment period
of 15 years, including a 5-year grace period. Disbursements will
run from 2004 to 2009.

CONTACTS: Mexico
          Ms. Gabriela Aguilar
         (5255) 54-80-4252
          Gaguilar2@worldbank.org

          Washington
          Ms. Alejandra Viveros
         (202) 473-4306
          Aviveros@worldbank.org



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

ANCAP: Grants One-Year Extension to CGG Exploration Project
-----------------------------------------------------------
Compagnie Generale de Geophysique(CGG) has been granted a one-
year extension to search for crude oil deposits in the
territorial waters off Uruguay's coast. State-owned Ancap
commissioned the exploration, which began in early 2002.

El Pais reports that CGG has covered only 20% of the total
survey area equivalent to a seismic profile of an area of 1,850
kilometers. The exploration has been held back by the lack of
funds. Oil companies are unwilling to finance the search
although they are interested in the survey results.



=================
V E N E Z U E L A
=================

PDVSA: Fitch Affirms PDVSA Fin Ltd. Ratings
-------------------------------------------
Following the review of the proposed tender offer and amendments
to the PDVSA Finance Ltd (PDVSA Finance) transaction, Fitch
Ratings has affirmed the structure's foreign currency rating at
'BB-'. This rating is three notches above the 'B-' foreign
currency rating of the sovereign rating of The Bolivarian
Republic of Venezuela as the structure mitigates certain
sovereign risks associated with the country. The amendments to
the transaction are associated with the tender offer by
Petroleos de Venezuela S.A. (PDVSA) to retire at least 50% of
the outstanding PDVSA Finance notes, which currently total $2.2
billion and EUR88.4 million. Associated with the proposed
deleveraging of the PDVSA Finance vehicle, PDVSA has requested
several amendments that allow them to free up certain export
flows from designated customers. Acceptance of the proposed
amendments would require a simple majority (50%+1) vote by the
current PDVSA Finance noteholders. For the tender and amendments
to go through, at least 50% of the outstanding notes must be
retired. Fitch has reviewed the proposed amendments and the
potential impact they could have on the PDVSA Finance
transaction. While the amendments contemplate the removal of
some of the collateral associated with PDVSA Finance, Fitch
believes the overall deleveraging of the vehicle compensates
investors and allows it to re-affirm its current rating.

The original structure securitizes the majority of PDVSA's
existing and future receivables generated from sales of crude
oil and oil products to designated customers. PDVSA Petroleo,
the principal operating subsidiary of PDVSA, sells these
receivables to PDVSA Finance, and designated customers sign
notice and acknowledgment (N&A) agreements to make payments to a
collection account in the names of PDVSA Finance and PDVSA
Petroleo. Prior to the tender offer, it is a requirement that
oil exports going to designated customers during any consecutive
12-month period be the lesser of 80% of eligible export sales of
oil are less than 30 degrees gravity and 27 million barrels of
oil are less than 30 degrees gravity.

The most significant change to the PDVSA Finance structure is
the removal of two of the largest customers, Citgo Petroleum
(Citgo) and Hovensa LLC (Hovensa). The other amendments change
the covenants and events of default to reflect the removal of
collateral and provide PDVSA with additional flexibility
regarding financial reporting. The primary amendment reduces the
export revenue requirement mentioned in the previous paragraph.
The new requirement would be that oil exports going to
designated customers be the lesser of 40% of eligible export
sales of oil less than 30 degrees gravity and 4.5 million
barrels of oil less than 30 degrees gravity.

Fitch has reviewed these proposed amendments and analyzed the
potential effects they could have on the transaction. While
Fitch has some concerns associated with the removal of the
collateral, we believe the overall reduction in debt will offset
these issues. Given the reduction in customers, Fitch estimates
the $11 billion of flows, which went through the collection
account in 2003, will be reduced by approximately 50%. However,
Fitch believes there is high likelihood that the debt will be
reduced by greater than 51%, and this will more than offset the
reduction in collateral. It is difficult to estimate the
projected amortization schedules; however, given the above
assumptions, Fitch believes the average DSCRs should not be
materially affected. These coverage ratio's, which are
approximately 20 times (x), not only protect against significant
volume and price reductions, but the excess collections provide
a disincentive for the sovereign and company to interfere in the
transaction.

The fact that the PDVSA Finance vehicle will no longer represent
such a significant portion of the sovereign's total debt is a
positive development related to the tender. Prior to this
reduction, the total program size represented more than 12% of
the Venezuela sovereign's foreign currency debt. After the
tender, Fitch estimates this level to be approximately 5% of the
sovereign's foreign currency debt. Fitch believes the likelihood
for government interference decreases when the obligation, as a
percentage of the sovereign's overall debt, decreases.

Additional strengths of the transaction that remain unchanged
involve the commercial relationships between PDVSA and several
of the remaining designated customers, the notice and
acknowledgements, which obligate these buyers to make payments
into the collection account, the company's dependency on the
U.S. for a large part of its crude oil and refined product
exports, and a variety of covenants and triggers, including a
DSCR trigger of 4.0x. While the covenant thresholds for oil
exports to designated customers have been reduced, Fitch
believes the 'BB-' rating is based entirely on the company's
commercial need to export oil to the remaining designated
customers. However, the amendments are removing two major
customers, and the economic argument underpinning the deal has
shifted as Citgo and Hovensa represent a significant part of the
North American heavy crude oil refining market. Both entities
are consistent buyers of heavy crude oil and make up
approximately 50% of historic exports and 50% of heavy exports.
With the exception of Conoco Phillips, Lyondell Citgo, and a few
others, the remaining customers can be considered rather small,
dispersed, and potentially volatile contributors to collections.
It can no longer be said that PDVSA Finance, on behalf of
investors, controls all of the key Venezuela oil exports.

As in all future flow export receivables securitizations, this
transaction is exposed to product and payment diversion by the
company or the sovereign. Fitch believes this risk increased
when the Venezuelan government tightened its control over the
oil company after the oil strikes in early 2003. This proposed
removal of these two customers could potentially increase
diversion risk as exports to Citgo and Hovensa could be
increased and the PDVSA Finance vehicle would not benefit from
this. While this risk might exist, Fitch believes this risk to
be remote in the short to medium term as there is currently not
significant unused refining capacity at these companies.

With that said, diversion risk remains the constraining factor
to the 'BB-' rating, and there are a variety of potential
actions that could be taken to disrupt the cashflows of the
transaction.

Fitch will continue to monitor this transaction and the outcome
of the proposed tender offer and amendments. Fitch will update
its view once the final results of the tender offer have been
completed and the new amortization schedule is set.

CONTACT: Greg Kabance +1-312-368-2052, Chicago
         Jennifer Conner +1-312-368-2080, Chicago
         Jason Todd +1-312-368-3217, Chicago
         Carlos Fiorillo +58 212 286 3356, Venezuela


PDVSA: Spends VEB32 Bln to Upgrade Tanker Fleet to IMO Standards
----------------------------------------------------------------
Venezuela's state oil giant Petroleos de Venezuela SA (PDVSA)
announced it has upgraded its tanker fleet to meet the most
recent international standards for safety and anti-terrorism set
by the International Maritime Organization (IMO), relates Dow
Jones Newswires.

PDVSA, which has 21 associated tankers and 11 international
ports, revealed in a statement that it spent 32 VEB billion on
the upgrade.

The IMO, a United Nations agency responsible for improving
international shipping safety, set up new security standards for
shipping since the terrorist attacks in the U.S. in 2001.



                            ***********


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 America is a daily newsletter
co-published by Bankruptcy Creditors' Service, Inc., Fairless
Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick,
Maryland USA. John D. Resnick, Edem Psamathe P. Alfeche and
Lucilo Junior M. Pinili, Editors.

Copyright 2004.  All rights reserved.  ISSN 1529-2746.

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