TCRLA_Public/040816.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, August 16, 2004, Vol. 5, Issue 161



AGUAS ARGENTINAS: House OKs Interim Contract Freezing Rates
AMPRI S.A.: Court Orders Liquidation
BANCO GALICIA: Posts 1H04 ARP98.3M Net Loss of
CABLEVISION: Viewed as Potential Telmex Target in Argentina
CENTRAL PUERTO: Ends 1H04 With $13M Losses

COINTEL: Fitch Withdraws Ratings Following Notes Repayment
ELECTRONICA: Liquidates Assets to Pay Debts
ESTACION DE SERVICIO: Court Resolves Case to Reorganization
GRUPO LIDER: Enters Bankruptcy on Court Order
LOMA NEGRA: Seeks $1Billion Buyer

MERCE RAMON: Prepares for Reorganization
PARAFINA DEL PLATA: Reorganization Plan Authorized
RIO ALTO: Shareholders Approve Sale of Argentine Assets
SCP: Triples Gross Profit in 1H03

TOWER RECORDS: Creditors Approve Debt Offer




BRASKEM: Releases Board of Directors Meeting Resolutions
VARIG: Government Outlines Rescue Plan
* BRAZIL: Could Terminate IMF Debt Accord in December


PETROECUADOR: Oil Export Revenue Up 29% Through July 2004
* ECUADOR: IMF Concludes Article IV Consultation


C&WJ: Cuts Access Rates by 30%


ALESTRA: Signs Optical Gear Accord With Lucent
AXTEL: Revenue Up 24% in 2Q04 on Expanding Lines
CYDSA: EBITDA Surges 97.2% From 1H03
EMPRESAS ICA: Panama Unit Expects $25.2M From Government
GRUPO MEXICO: Effectively Negotiates Contract Terms With Workers

ISSSTE: Government Seeks Solution to Alleviate Financial Crisis


RCTV: Seniat Denies Closure Talks

       - - - - - - - - -


AGUAS ARGENTINAS: House OKs Interim Contract Freezing Rates
Argentina's Lower House approved Wednesday an interim contract
with water provider Aguas Argentinas SA, ensuring that it passed
into law, says Dow Jones. The transitional agreement was signed
in May by Argentine President Nestor Kirchner and Aguas
Argentinas President Yves-Thibault de Silguy. The agreement is
retroactively effective from Jan. 1, 2004, and is supposed to
remain in effect until year's end. After that, the two sides are
due to negotiate a new, multi-year contract.

Under the agreement, water rates, which were converted from
dollars into devalued pesos and then frozen in early 2002, will
remain unchanged this year. Meanwhile, Suez, Aguas' principal
shareholder, will have to spend ARS242 million on waterworks
investments during 2004.

The deal also requires Suez to suspend its claim against
Argentina in the World Bank's arbitration tribunal, or ICSID.
However, Suez wasn't asked to drop its complaint altogether.

The French utility is among several foreign-owned companies with
Argentine operations that have filed claims against Argentina
for the so-called "pesification" of rates converted from dollars
into devalued pesos.

AMPRI S.A.: Court Orders Liquidation
Court No. 17 of Buenos Aires' Civil and Commercial Tribunal
ruled affirmatively on the liquidation of Ampri S.A. after the
company defaulted on its obligations, Infobae reveals. The
liquidation pronouncement will effectively place the company's
affairs as well as its assets under the control of Mr. Hugo
Alberto Trejo, the court-appointed trustee.

Mr. Trejo will verify creditors' proofs of claims until
September 27, 2004. The verified claims will serve as basis for
the individual reports to be submitted in court on November 9,
2004. The submission of the general report follows on December
21, 2004.

Clerk No. 17 assists the court on this case, which will end with
the disposal of the company's assets in favor of its creditors.

         Avda Medrano 184
         Buenos Aires

         Mr. Hugo Alberto Trejo, Trustee
         Avda Cordoba 744
         Buenos Aires

BANCO GALICIA: Posts 1H04 ARP98.3M Net Loss of
Banco de Galicia y Buenos Aires S.A., a subsidiary of Grupo
Financiero Galicia, suffered a net loss of ARP98.3 million for
the first half of 2004, says Dow Jones Newswires. Net assets
totaled ARP1.29 billion at the end of June.

Meanwhile, parent company Grupo Galicia also remains in the red
with an ARP0.8 million net loss for the second quarter. However,
this figure is a significant improvement from a year ago's net
loss of ARP67.8 million.

Banks across the county are slowly seeing the results of
Argentina's economic recovery. Healthy credit activity enabled
Grupo Galicia to lower its provision for loan loss to ARP41
million this period compared with ARP64.3 million last year.

The Company's brokerage margin surged from last years ARP34.6
million loss to end at ARP214.4 million for the period. Loan
Stock and Deposits also showed modest gains ending at ARP11.56
billion and ARP6.02 billion, respectively.

Grupo Galicia is also making headways in the restructuring of
its debt. Last May, the International Finance Corporation
authorized the restructuring of US$310 million in outstanding
loans. Also, an estimated 50 percent of the preferred rights
issue involving 149 million shares went to Banco Galicia's

CABLEVISION: Viewed as Potential Telmex Target in Argentina
Telmex's buying spree in South America could extend to troubled
Argentine company Cablevision, says Dow Jones Newswires. Like
Brazil, where it recently acquired cable TV outfit Net Servicos,
Telmex is on the road towards creating a comprehensive
telecommunications infrastructure in Argentina. With the
purchase of Metrored, a local data transmission and Internet
service provider, the company now needs cable facilities to make
the last mile connection into the country's households.

Telecommunications consultant Enrique Carrier said that
Cablevision is Telmex's best option if it is looking for such a
facility. Unamed sources cited by local daily El Cronista say
that Telmex's Carlos Slim is already in talks to buy into
Cablevision. The report adds that Mr. Slim could take in US$400
million of Cablevision's US$725 million debt as part of the

However, officers from Cablevision have denied rumors of
negotiations with Telmex. Telmex spokesman Arturo Elias also
said that he was not aware of any ongoing talks with

CONTACT: Cablevision Sociedad Anonima
         Mr. Santiago Pena:
         Mr. Martin Pigretti:

         Cuba 2370
         Buenos Aires

         Web Site:

CENTRAL PUERTO: Ends 1H04 With $13M Losses
Argentine thermo generator Central Puerto reported losses of
ARS38 million (US$12.8mn) in the first half of 2004, reversing
profits of ARS72 million in the same period of 2003. According
to Business News Americas, the Company blames its negative
financial performance for the 1H04 on non-operating losses of
ARS55.3 million, which resulted from higher provisions and
interest payments. In the 1H03, the Company posted non-operating
profits of ARS5.4 million.

Operating profit increased 72.9% to ARS18.5 million in the 1H04
due to a 78% increase in sales that in turn resulted from
increased generation in the 2Q04 because of liquid fuel imports
from Venezuela.

Central Puerto is 63.9% controlled by France's Total.

COINTEL: Fitch Withdraws Ratings Following Notes Repayment
Fitch Ratings affirmed and simultaneously withdrawn the 'CC'
international scale foreign and local senior unsecured ratings,
as well as the 'CCC(arg)' national scale ratings of Compania
Internacional de Telecomunicaciones S.A. (Cointel) following the
repayment of all of its outstanding public debt at their
maturity date. On Aug. 2, 2004, Cointel made the last coupon
payment and paid down the principal amount of its two public
bonds (Series A notes due 2004 and series B notes due 2004),
with outstanding principal amounts of US$36.7 million and AR$175
million. The last coupon payment made by Cointel was US$1.6
million for the series A notes and AR9.1 million for the Series
B notes.

Cointel is a holding company whose primary asset is a 64.8%
equity stake in Telefonica de Argentina S.A. (TASA), an
operating company that provides local-exchange, long-distance,
residential Internet access and directory publishing services in
Argentina. Telefonica S.A. of Spain indirectly controls close to
100% of Cointel.

ELECTRONICA: Liquidates Assets to Pay Debts
Buenos Aires-based Electronica E.C. S.A. will begin liquidating
its assets following the pronouncement of the city's Court No.
20 that the company is bankrupt, reports Infobae. The bankruptcy
ruling places the company under the supervision of court-
appointed trustee, Ms. Susana Graciela Roiter. The trustee will
verify creditors' proofs of claims until August 24, 2004. The
validated claims will be presented in court as individual
reports on November 8, 2004.

The trustee 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 December 21, 2004.

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

CONTACT: Ms. Susana Graciela Roiter, Reuters
         Marcelo T de Alvear 1430
         Buenos Aires

ESTACION DE SERVICIO: Court Resolves Case to Reorganization
Estacion de Servicio El Cruce S.H. will proceed with
reorganization after Court No. 1 of Olavarria's Civil and
Commercial Tribunal 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.

Ms. Norma Edit Stancati, the court-appointed trustee, will
verify creditors' proofs of claims until August 31, 2004. After
the verification period, the trustee will submit individual
reports on October 13, 2004. The court also requires the trustee
to prepare a general report and submit it on November 25, 2004.

CONTACT: Estacion de Servicio El Cruce S.H.
         Ruta 226 Km. 285,5 Olavarria

         Ms. Norma Edit Stancati, Trustee
         Fassina 3157

GRUPO LIDER: Enters Bankruptcy on Court Order
Grupo Lider Asesores de Seguros S.A. (Antes Grupo Lider de
Seguros y Mandatos S.A.) enters bankruptcy protection after
Buenos Aires Court No. 8, with the assistance of Clerk No. 15,
ordered the company's liquidation. The bankruptcy order
effectively transfers control of the company's assets to the
court-appointed trustee who will supervise the liquidation

Infobae reports that the court selected Mr. Pedro Mazzola as
trustee. He will be verifying creditors' proofs of claims until
the end of the verification phase on September 28, 2004.

Argentine bankruptcy law requires the trustee to provide the
court with individual reports on the forwarded claims and a
general report containing an audit of the company's accounting
and business records. The individual reports will be submitted
on November 10, 2004 followed by the general report, which is
due on December 12, 2004.

CONTACT: Mr. Pedro Mazzola, Trustee
         Cerrito 1136
         Buenos Aires

LOMA NEGRA: Seeks $1Billion Buyer
Loma Negra, Argentina's largest cement company, is putting
itself on the block with J.P. Morgan Chase & Co. as adviser to
the transaction, reports Dow Jones.

The Company, which is controlled by Argentina's richest woman,
Amalia Lacroze de Fortabat, is talking about a preliminary sale
figure of US$1 billion, bankers say.

The deal is likely to attract interest from global cement groups
such as France's Lafarge SA and Mexico's Cemex SA - respectively
the world's No. 1 and No. 3 cement makers - and companies such
as Portugal's Cimpor and Brazil's Camargo Correa and Votorantim

Swiss giant Holcim Ltd., the world's second-largest cement
maker, is seen as an unlikely bidder because it already controls
34% of the local market through Minetti SA, Argentina's second-
largest cement group. A Loma Negra takeover would raise the
issue of market concentration.

MERCE RAMON: Prepares for Reorganization
Court No. 2 of Mercedes' Civil and Commercial Tribunal, with
assistance from Clerk No. 3, issued a resolution opening the
reorganization of Merce Ramon y Merce Abelardo Ramon S.H.,
reports Infobae.

The pronouncement authorizes the Company to begin drafting a
settlement proposal with its creditors in order to avoid
liquidation. The reorganization further allows the Company to
retain control of its assets subject to certain conditions
imposed by Argentine law and the oversight of the court
appointed trustee.

Ms. Clorinda Paula Donato will serve as trustee during the
course of the reorganization. She will be validating creditors'
proofs of claims until August 30, 2004.

CONTACT: Merce Ramon y Merce Abelardo Ramon S.H.
         Libertad 740

         Ms. Clorinda Paula Donato, Trustee
         Calle 23 Nro. 540

PARAFINA DEL PLATA: Reorganization Plan Authorized
The settlement plan proposed by Parafina del Plata S.A. for its
creditors acquired the number of votes necessary for
confirmation. As such, the plan has been endorsed by the court
and will now be implemented by the company.

Court No. 3 of Buenos Aires' Civil and Commercial Tribunal,
assisted by Clerk No. 5, has jurisdiction over this case.

CONTACT: Parafina del Plata S.A.
         Buenos Aires

After revealing a plan to sell its unit in Argentina, scandal-
ridden Italian dairy giant Parmalat is now mulling the sale of
other assets in Latin America, according to a Europe
Intelligence Wire report.

Mr. Enrico Bondi, who has been appointed by the Italian
government to oversee Parmalat's bankruptcy process, has created
a plan, which would see the sale of Parmalat's inactive
facilities in Tenio and Paipa, in Colombia; land in Rivas,
Nicaragua; and four inactive factories in Venezuela.

According to the restructuring plan, the Company's strategy in
Latin America will be modified "in accordance with the
implementation of the industrial plan."

Mr. Bondi plans to reduce the Company's debt from EUR14.8
billion (US$18.1 billion) to less than EUR500 million ($612
million) by the end of 2007.

CONTACT: Parmalat Finanziaria
         piazza Erculea 9, 20122
         Milano (MI), ITALIA.
         Phone: +39 02 8068801
         Fax: +39 02 8693863

         Parmalat Partecip. Do Brasil Ltda
         Rua Gomes de Carvalho
         1629 - CEP 04547-005
         Sao Paulo, SP.

         Web Site:

RIO ALTO: Shareholders Approve Sale of Argentine Assets
Rio Alto Resources International Inc. held its Annual and
Special Meeting of shareholders on August 11, 2004. It convened
to approve the previously announced "Plan of Arrangement"
transaction whereby:

(1) shareholders are to provide their approval to the previously
announced dispositions of Rio Alto Resources' Canadian and
Argentine assets, and

(2) approximately 99.4% of each shareholder's Rio Alto Resources
shares are to be acquired by the Company for cash consideration.

In addition, further to the previously announced agreement
entered into by Rio Alto Resources with West Energy Ltd., Rio
Alto Resources' shareholders approved an ordinary resolution to
issue common shares of Rio Alto Resources to acquire all of the
issued and outstanding shares and special warrants of West
allowing West to complete their "reverse takeover", the details
of which are outlined in the information circular mailed in
respect of the Rio Alto Resources Plan of Arrangement. Rio Alto
Resources' shareholders also approved the special resolution to
change the name of Rio Alto Resources to "West Energy Ltd." or
such other name as is approved by Rio Alto Resources' board of
directors and is acceptable to the Toronto Stock Exchange.

Rio Alto's shareholders also approved the appointment of Mssrs.
Richard T. Cones, Robert M. Shaunessy, Lloyd C. Swift, R. James
Brown and John A. Brussa as the directors of the company and
PricewaterhouseCoopers LLP as the auditors of the company.

On August 11, 2004, the Court of Queen's Bench of Alberta
granted a Final Order approving the Rio Alto Arrangement. Rio
Alto Resources expects to complete the share repurchase
transaction on or about August 30, 2004, upon closing the
Canadian and Argentine asset dispositions.

CONTACT:  Rio Alto Resources International Inc.
          Ian J. Towers, President & CEO
          (403) 716-2253

          Robert M. Shaunessy, Chairman, Special Committee
          (403) 770-2504

SCP: Triples Gross Profit in 1H03
Argentine diversified holding company Sociedad Comercial del
Plata more than tripled its gross profit to ARP16.6 million in
the first half of this year from AES4.5 million a year ago,
reports Dow Jones Newswires.

The Company also reported a significant cut in its net loss from
ARP568.4 million for the first half of 2003 to ARP2.9 million
this year. At the same time, operating loss is down to
ARP749,000 from last year's ARP29.5 million.

Sales for the period totaled ARP57.1 million, a modest increase
from ARP44.1 million in 1H03. However, the increase was offset
by a weak peso, which had slid 1.2 percent against the dollar in

1H04 further saw a rise in income tax expense from ARP7,000 last
year to ARP2 million. Financial holding loss also shaved ARP11
million off the company's bottom line. A year earlier, SCP
recorded a financial holdings gain of ARP151 million.

SCP stated that the effects of its ongoing restructuring
negations as well as a recent judgment concerning its oil and
gas arm, Compania General de Combustibles, are not factored in
the 1H04 statements.

The Company's restructuring case is still pending, after some
creditors appealed the approval issued by a local court last
March. Meanwhile, CGC, 19 percent owned by SCP, is set to pay
U.S. company Reef Explorations Inc. US$175 million once it
completes bankruptcy proceedings.

CONTACT: Sociedad Comercial Del Plata
         Av. Davila 350
         Buenos Aires

         Phone: 54 1 310-0490
         Fax: 54 1 310-0493

TOWER RECORDS: Creditors Approve Debt Offer
The Mouse Company, the firm that holds the license to manage
music store chain Tower Records in Argentina, has managed to
obtain the necessary backing from creditors for its Ps. 3.8
million formal debt restructuring offer. The company proposes to
apply a 50% haircut in the total amount of debt and to pay the
other 50% within five years, after a 2-year grace period. The
approval of the debt offer will pave the way for the sale of the


Global Crossing (NASDAQ: GLBCE) announced Thursday that the
NASDAQ Listing Qualifications Panel granted the company's
request for an extension until September 10, 2004 to return to
full compliance with NASDAQ listing and SEC filing requirements.

Global Crossing provides telecommunications solutions over the
world's first integrated global IP-based network. Its core
network connects more than 300 cities and 30 countries
worldwide, and delivers services to more than 500 major cities,
50 countries and 6 continents around the globe. The company's
global sales and support model matches the network footprint
and, like the network, delivers a consistent customer experience

Global Crossing IP services are global in scale, linking the
world's enterprises, governments and carriers with customers,
employees and partners worldwide in a secure environment that is
ideally suited for IP-based business applications, allowing e-
commerce to thrive. The company offers a full range of managed
data and voice products including Global Crossing IP VPN
Service, Global Crossing Managed Services and Global Crossing
VoIP services, to more than 40 percent of the Fortune 500, as
well as 700 carriers, mobile operators and ISPs.

CONTACTS: Press Contacts

          Ms. Becky Yeamans
          + 1 973-937-0155

          Ms. Tisha Kresler
          + 1 917-270-0079

          Ms. Fernanda Marques
          + 55 21-3820-4712

          Ms. Kirstie Phimister
          + 44 (0) 1256-734063

          Analysts/Investors Contact

          Ms. Mitch Burd
          +1 800-836-0342

          Web Site:


BRASKEM: Releases Board of Directors Meeting Resolutions
On July 28, 2004, at 2:00 p.m, at the Company's headquarters
located at Avenida das Nacoes Unidas, No. 4777, 05477-000, Sao
Paulo, SP, the 490th (four hundred and ninetieth) Meeting of the
Board of Directors of BRASKEM S.A. was held, and the undersigned
members of the Board of Directors were in attendance.

The member of the Board of Directors, Mr. Francisco Teixeira de
Sa, was absent and was replaced by his alternate, Mr. Lucio Jose
Santos Junior. Also attending the meeting were the President
Jose Carlos Grubisich Filho, executive officers Mr. Mauricio
Roberto de Carvalho Ferro, Mr. Rogerio Affonso de Oliveira and
Mr. Jayme Fonseca, as well as Ms. Marcela Drehmer, Ms. Isabel
Figueiredo and Ms. Ana Patricia Soares Nogueira and the
Secretary of the Board of Directors, Mr. Nelson Raso. The
Chairman of the Board of Directors, Mr. Pedro Augusto Ribeiro
Novis, acted as chairman of the meeting, and Ms. Ana Patricia
Soares Nogueira acted as secretary.


I) Matters for deliberation:


1) upon review of the respective subjects, the following
Deliberation Proposals ("PD") were unanimously approved, having
been previously submitted by the Board of Executive Officers to
the members of the Board of Directors, as provided in its
Internal Rules, copies of which have been duly filed at the
Company's headquarters:

A. PD.CA/BAK-15/2004 - Transaction of Securitization of Export
Receivables, authorizing the Board of Executive Officers to:

(i) enter into the Export Prepayment transaction between the
Company, as borrower and debtor, NN Chemical Corporation and the
UFJ Bank Limited, in the amount of US$50,000,000.00 (fifty
million U.S. dollars); and

(ii) execute all documents related to the transaction, including
the "Credit Agreement" and the Commercial Agreement, as provided
in the terms and conditions described in the respective PD;

B) PD.CA/BAK-16/2004 - Financing Transaction for Naphtha
Imports, authorizing the Board of Executive Officers to:

(i) enter into the financing transaction with the ING Bank N.V.,
Curacao Branch, as described in the respective PD, in the amount
of US$100,000,000.00 (one hundred million U.S. dollars);
(ii) perform all acts required for entering into the above-
described financing transaction;

C) PD.CA/BAK-19/2004 - Investment - Re-potentializing of the
Pyrolysis Furnaces, approving the investment of R$106,402,900.00
(one hundred and six million, four hundred and two thousand,
nine hundred reais) over a period of 4 years, as described in
the respective PD;

2) PD.CA/BAK-17/2004 - Election of Executive Officer, (Board
member Mr. Andre Tapajos Cunha abstained from voting), in order

(i) acknowledge the request for resignation submitted by
executive officer Mr. Rogerio Affonso de Oliveira, having been
recorded the appreciation of the Company's Board of Directors to
the resigning executive officer, for his dedication and
contributions during the period in which he performed his duties
in the Company; and

(ii) elect Mr. Roberto Lopes Pontes Simoes to perform all duties
as the Company's executive officer for the remaining period of
the mandate, which will end at the time of the first meeting of
the Board of Directors following the General Shareholders'
Meeting to be held in 2006. The executive officer now elected
assumed his position on this date, and has presented written
statements, as provided in art. 37, sub-paragraph II, of Law No.
8,934 of 11/18/94, under script provided by Law No. 10,194 of
02/14/01, and as provided in the 1st paragraph of article 147 of
Law No. 6,404 of 12/15/76, to the effect that he is not
precluded by special law or sentenced for bankruptcy crimes,
prevarication, bribery or subornation, embezzlement,
speculation, crimes against the public economy, public faith or
property, or by a criminal sentence that would preclude, even
temporarily, his access to public functions, and has further
submitted, in compliance with the provision in CVM Instructions
Nos. 358 of 01/03/02 and 367 of 05/29/02, written statements as
provided in the above-mentioned CVM Instructions, which
statements have been filed at the Company's headquarters.

II) Matters for Acknowledgement:

The matters of Item II were presented by the respective
executive officers and managers responsible for the subjects
contained in this Item, as follows:

1) Company's results for the 1st Semester of 2004, having been
recorded that the members of the Company's Auditing and
Financial Committees had previously analyzed the subject;

2) Conclusion of the follow-up on the Synergies Program and
information concerning the "Braskem + Program";

3) Report by the Finance and Investments Committee concerning
the follow-up on investments approved by the Board of Directors;

III) Matters of Interest to the Company: None to be recorded;

IV) CLOSING OF THE MINUTES - With no other matters to discuss,
these minutes were drafted and, after being read, discussed and
found conforming, were signed by all members of the Board of
Directors in attendance, the Chairman and the Secretary. Sao
Paulo/SP, July 28, 2004. (Signatures: Pedro Augusto Ribeiro
Novis - Chairman; Ana Patricia Soares Nogueira - Secretary;
Alvaro Fernandes da Cunha Filho - Vice President; Alvaro Pereira
Novis; Andre Tapajos Cunha; Carlos Alberto de Meira Fontes;
Fernando de Castro Sa; Jose de Freitas Mascarenhas; Lucio Jose
Santos Junior; Luiz Fernando Cirne Lima; Margareth Feijo
Brunnet; Newton Sergio de Souza).

CONTACT: Braskem S.A.
         Rua Eteno, 1561
         Polo Petroquimico de Camacari
         Camacari,  05477
         Phone: (212) 688-5144
         Fax: (212) 688-5213

         Web Site:

VARIG: Government Outlines Rescue Plan
Brazil's Viacao Aerea Rio-Grandense SA (Varig) has been notified
of the federal government's plan to rescue the ailing airline
transportation company, says Valor Economico. The Troubled
Company Reporter - Latin America earlier reported about
Brazilian President Luiz Inacio Lula da Silva's intention to
bail out the country's biggest airline.

According to the report, the Brazilian National Development Bank
(BNDES) has been engaging in talks with five foreign and
Brazilian investors over a rescue plan for Varig.

Under the plan, Varig, would swap BRL3 billion of its BRL6-
billion debt into equity, which would account for two-thirds of
the Company's capital.

In addition, the Company would have to abandon up a lawsuit
against the government in order to renegotiate payment on
another BRL3 billion of debt owed the government.

The president wants to bail out Varig because its bankruptcy
could damage the country's image abroad.

In the meantime, Varig awaits a ruling from the Brazilian
Administrative Council for Economic Defense, Cade, for the
creation of a joint venture with TAM, namely Voa Brasil.

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:
              Dorival Ramos Schultz, EVP Finance and CFO

              Investor Relations:
              Av. Almirante Silvio de Noronha,
              n  365-Bloco "B" - s/458 / Centro
              Rio de Janeiro, Brazil

* BRAZIL: Could Terminate IMF Debt Accord in December
Continued economic growth will likely wean Brazil from a US$14.8
billion Loan Agreement with International Monetary Fund that
expires in December, reports Bloomberg. Ms. Lisa Schineller,
director of sovereign ratings at Standard and Poor's says that
the country can attract enough financing from foreign markets to
give up its accord with the IMF.

In fact, Finance Minister Antonio Palocci and Treasury Secretary
Joaquim Levy have said that the government will not be renewing
the IMF credit line agreement, which it had not touched since
September 2003.

However, some analysts contend that such a decision could be
premature. Mr. Christian Stracke of CreditSights Inc. said:
``Brazil has $17 billion in external debt coming due in the last
five months of the year, so it can't sustain another few months
of limited access to foreign capital.''


PETROECUADOR: Oil Export Revenue Up 29% Through July 2004
Petroecuador revealed Wednesday that oil export revenue in July
totaled US$113.76 million, 3% higher than the US$110.28
registered in the same month last year, reports Dow Jones.
In terms of volume, Ecuador exported 3.49 million barrels of
crude oil in July, down 17% from 4.23 million barrels registered
in July of 2003.

In the first seven months of the year, Petroecuador's oil export
revenue totaled US$831.76 million, a 29% increase from US$645.28
million registered in the same period of last year.

Petroecuador exported 26.49 million barrels of crude oil up 9%
from 24.23 million barrels registered in the same period of

* ECUADOR: IMF Concludes Article IV Consultation
On July 26, 2004, the Executive Board of the International
Monetary Fund (IMF) concluded the Article IV consultation with


Ecuador's macroeconomic performance over the past year has been
generally positive, aided by a favorable external environment,
the completion of the new oil pipeline, and the implementation
of the new Fiscal Responsibility and Transparency Law. The
opening up of the new pipeline in October 2003 has boosted oil
production by private companies by almost one half. As a result,
overall real GDP grew by 2.7 percent in 2003 and 5.9 percent in
the first quarter of 2004, even as non-oil GDP growth slowed to
below 2 percent. Inflation has continued to decline, falling
below 3 percent in June 2004.

The external current account deficit declined sharply in 2003,
reflecting high international oil and commodity prices, a
reduction in the real effective exchange rate related to the
depreciation of the U.S. dollar, and the end of imports related
to construction of the pipeline. Oil and non-oil exports grew by
27 percent and 14 percent, respectively, while imports increased
by 1 percent. In the capital account, foreign direct investment
increased to just under 6 percent of GDP reflecting mainly
pipeline-related investments. However, net capital flows to the
public sector remain negative, mainly on account of amortizing
debt to official creditors and continued lack of access to
international credit markets.

Financial intermediation increased significantly in the 12
months ended May 2004. Deposits and credit to the private sector
increased by 20 percent and 14 percent, respectively. The
fastest growing segments of the lending market in the last six
months have been housing and microenterprise lending, albeit
from a very low base. Nonperforming loans as a proportion of
total loans decreased between end-2002 and April 2004. Domestic
lending rates declined by 150 basis points to 10 percent during
the year ended May 2004.

High oil prices and restraint by the central government on
nonwage spending helped improve fiscal performance in 2003. The
primary surplus of the nonfinancial sector (NFPS) rose to 4.7
percent of GDP in 2003, compared with 4.5 percent in 2002. At
the same time, however, the non-oil primary deficit rose from
1.2 percent of GDP in 2002 to 1.4 percent of GDP. Real primary
expenditure of the central government fell by 5 percent in
relation to 2002, reflecting declines in both capital and
nonwage current spending, but such spending increased by 14
percent in the rest of the NFPS, including a real increase in
pension benefits of over 50 percent. Helped by a doubling of
lending by multilateral agencies, the government was able to
clear external arrears and reduce its large stock of domestic
payments arrears.

The central government experienced liquidity problems in the
first half of 2004, including an accumulation of domestic
nondebt arrears. The liquidity problems are related to the
structural cash flow problem faced by the central government
arising from the large earmarking of revenues and subsidies,
which amount to almost 11 percent of GDP, or about 60 percent of
gross central government revenue. The problem has been
exacerbated by the reallocation of oil revenues to the oil
stabilization fund (FEIREP) that previously accrued to the
central government (equivalent to 1.2 percent of GDP). In April,
the authorities implemented measures to ease the cash flow
problem and to achieve a primary surplus target of around 5
percent of GDP for the NFPS. They announced spending cuts at the
central government level of about US$150 million and a plan to
use the 20 percent of the FEIREP assets reserved for emergencies
for financing in 2004. However, in July, a decision to increase
pension benefits by about « percent of GDP has made the
attainment of the fiscal target more difficult.

Progress on the structural agenda has been mixed. In the fiscal
area, new customs legislation approved by congress created a
stronger and more effective board of directors but failed to
exclude customs workers from the civil service, which has made
it difficult to carry out much needed personnel changes. A civil
service reform that was implemented this year has brought more
clarity to the wage structure and made it more coherent but has
put upward pressure on the wage bill.

On public enterprise reform, attempts to auction rights for
increased private sector participation in specific PetroEcuador
oil fields failed in the absence of a new hydrocarbons law to
provide a clear and adequate legal framework. In the electricity
and telecommunication sectors, efforts to introduce private
sector management to the sectors have made little progress for a
similar reason.

In the financial sector, the authorities sent to liquidation
five of 18 closed financial institutions. However, among those
left are two of the largest banks, with deposits of more than
US$70 million still to be returned to depositors. The process of
bringing Banco del Pacifico, the only remaining publicly-owned
commercial bank, to the point of sale has been delayed.

Executive Board Assessment

Directors welcomed indications that growth is accelerating,
particularly in the oil sector, inflation is declining,
confidence in the financial sector is broadening, and fiscal
performance is strengthening, aided by higher international oil
prices and export volumes and the ongoing global recovery. At
the same time, Directors noted that important challenges remain
to reduce existing vulnerabilities in the context of a
dollarized economy and to raise long-run growth potential,
particularly in the non-oil sector. They called on the
authorities to take the opportunity presented by the current
favorable external environment to accelerate the implementation
of reforms to address the economy's persistent structural
weaknesses, in particular in the fiscal accounts, financial
sector, and the public enterprises.

Directors concurred with the authorities' plans to run
substantial primary surpluses in the nonfinancial public sector,
which will bring down the public debt-to-GDP ratio and help
Ecuador regain access to international capital markets. They
noted that the adoption of the Fiscal Responsibility and
Transparency Law (FRL) and the FEIREP oil stabilization fund
provided a framework for controlling expenditure and reducing
the non-oil deficit and overall debt. Pressures to weaken the
FRL should be resisted, and resources in the FEIREP should begin
to be used for external debt buybacks, as intended.

Directors expressed concern about the ongoing cash flow problems
in the central government, which seemed to have contributed to
further increases in domestic arrears. They stressed the
importance of controlling spending on pensions and public sector
wages, both of which had increased rapidly in recent years.

Directors commended the authorities' intention to present a 2005
budget fully compliant with the FRL. Successful implementation
of such a budget will be crucial to reduce the stock of domestic
payments arrears, increase transparency about spending in the
public sector, and build confidence in the authorities' ability
to sustain prudent fiscal policies. Directors emphasized the
need to further strengthen the fiscal policy framework over the
medium term. They welcomed the authorities' initiatives to
upgrade their public expenditure management, including plans to
implement the recent fiscal Report on the Observance of
Standards and Codes (ROSC) recommendations. They urged the
authorities to phase out widespread revenue earmarking, reduce
tax exemptions and central government subsidies to the social
security system, and take measures to place the pension system
on an actuarially sound basis. Poorly targeted subsidies for oil
derivatives should be replaced with better-focused poverty
reduction measures. It will also be crucial to implement the
planned public sector wage realignment in a prudent way, and to
develop a coherent civil service reform strategy.

Directors recommended that, to support economic diversification
and private sector employment growth, the authorities take
further actions over the medium term to improve the business
climate. These should include, in particular, strengthening the
legal system and the rule of law, resolving conflicts in
regulations, fighting corruption, and laying the basis for a
more efficient financial system.

Directors called for the authorities to make faster progress in
strengthening the performance of the public enterprises. The
authorities were encouraged to persevere with their plans to
modernize and restructure PetroEcuador, and to liberalize the
domestic petroleum derivatives markets. Directors supported the
authorities' efforts to implement a new legal framework to
increase private sector participation in the oil sector. They
stressed the need for reforms in the electricity sector, to
reduce costs and to attract much-needed private investment to
increase capacity. Toward this end, the electricity tariff-
setting framework should be depoliticized, stronger sanctions
should be imposed on delinquent customers, and the cross-debts
in the sector should be resolved. Directors were encouraged by
the growing confidence in the financial sector, as shown by
increased intermediation through the banking system, and
commended the authorities' intention to follow up on the
recommendations of the recently completed Financial Sector
Assessment Program (FSAP). They observed that enforcement of
creditor rights and enhanced corporate sector transparency could
encourage more lending by banks, and help lower the current high
interest rates on loans. Directors urged the authorities to move
expeditiously to complete the process of liquidating closed
banks. They welcomed the authorities' plans to lower the real
estate transfer tax, which would facilitate the sale of assets
of closed banks by the Deposit Guarantee Agency, and speed up
the removal of the deposit freeze in these banks.

Directors considered that preserving competitiveness in a
dollarized economy such as Ecuador's will continue to present
the authorities with policy challenges. They urged the
authorities to implement fiscal and structural reforms that
would help control costs and invigorate the non-oil economy.
They welcomed the authorities' efforts to negotiate a free trade
agreement with the United States, and encouraged them to
participate in the multilateral trade liberalization process.

Directors recognized the political difficulties facing the
authorities in advancing reforms, but encouraged them to
prioritize the reforms and persevere with them. Indications that
the government was galvanizing support for its reform agenda
across Ecuadoran society, and thereby strengthening the
likelihood of its success, could lay the groundwork for closer
collaboration with the international financial institutions.

Directors noted that Ecuador has subscribed to the Special Data
Dissemination Standard (SDDS), but its statistical base still
needs improvement. They urged the authorities to address
shortcomings in the quarterly national accounts and the
nonfinancial public sector data in order to enhance the ability
to monitor policy effectiveness.

To view financial indicators:

CONTACT: IMF External Relations Department
         Public Affairs
         Phone: 202-623-7300
         Fax: 202-623-6278

         Media Relations
         Phone: 202-623-7100
         Fax: 202-623-6772


C&WJ: Cuts Access Rates by 30%
Telecommunications services provider Cable & Wireless Jamaica
(C&WJ) reduced by 30% its high-speed dedicated Internet access
(DIA) rates, the Jamaica Observer reports, adding that the rate
cuts are retroactive and begin on August 1. Moreover, the
Company introduced term discounts offering customers 10% and 15%
off if they sign service contracts for two and three years

For the month of August, C&WJ is offering free installation and
waiving upgrade fees for customers who sign up for DIA service
or upgrade to a higher bandwidth on a minimum one-year contract.
Both offer savings to consumers of up to US$1,000, according to
the company.

DIA is a broadband Internet service ideally suited for corporate
entities which require constant, high-speed connection to the
Internet to support business operations.

"This latest reduction in rates is in keeping with the company's
continuing commitment to pass on to our customers, the benefits
of improved efficiencies and investment in new technologies in
order to facilitate savings, growth and enhanced productivity,"
says Lloyd Distant, C&W's vice-president of corporate affairs
and business.


ALESTRA: Signs Optical Gear Accord With Lucent
Lucent Technologies (NYSE: LU - News) announced Thursday that
Alestra has selected Lucent's next-generation optical networking
solutions to improve its network capacity and launch new revenue
generating services in Mexico.

Under the terms of the agreement, Lucent will supply the
Metropolis(R) ADM MultiService Mux, a next-generation
multiplexer to help Alestra support new high-speed service
offerings including Ethernet private lines, local area networks
(LANs), as well as other data services for its Transport
Backbone Network. This is the first deployment of the advanced
Metropolis(R) ADM (universal shelf) in Latin America.

"Our clients require us to provide the highest quality and most
reliable service for their voice, data and video transmission
requirements," said Alejandro Irigoyen, vice president of
Network Operations and Systems, of Alestra. "The Lucent solution
allows us to seamlessly integrate our Transport Backbone and
metro-optical networks enabling us to provide more capacity to
our customers, roll out new services more quickly and manage our
network more efficiently."

The new multi-service platform will support business and
residential customers' growing demand for data and IP
applications, which require dramatically more bandwidth.

"We're delighted to have the opportunity to work with Alestra in
expanding the capacity of their network and service offerings in
this increasingly sophisticated market," said Osvaldo di Campli,
Lucent Technologies' regional vice president for Mexico, the
Caribbean and Central America. "This contract signals Lucent's
commitment to bring the latest technology to the Mexican market
and support our growing customer base."

The Metropolis(R) ADM MultiService Mux is part of the Lucent
Metropolis(R) family of metro optical solutions designed to
eliminate bottlenecks in existing metro networks. It serves as
an integrated Ethernet over SDH metro access multiplexer, which
enables service providers to migrate seamlessly from existing
time-division multiplexed (TDM) networks to data-aware packet
networks -- avoiding the need for an overlay network. The
Metropolis(R) ADM integrates seamlessly into a carrier's
existing infrastructure, and its low power consumption and small
footprint helps carriers save on operating expenses. The
Metropolis(R) ADM (universal and compact shelves) currently have
more than 1,500 systems deployed with more than 90 customers.
For more information:

Lucent will also expand Alestra's embedded base of high-capacity
WaveStar(R) OLS 80Gs to interconnect all Alestra Backbone Rings
across the country. This DWDM backbone will support a wide range
of optical and data-formatted channels simultaneously, and will
provide efficient, low-cost transport of data between multiple
regional and metro sites by interworking with multi-vendor IP
and storage equipment using universal broadband and muxing
transponders. The WaveStar(R) OLS 80G supports in-service
upgrades from 16 to 32 wavelengths, enhancing the operator's
service capabilities while reducing network downtime. Lucent
Worldwide Services will provide systems integration and
installation services. Lucent Technologies de Mexico, a
subsidiary of Lucent Technologies, will provide the products and
services outlined in this agreement.

About Lucent Technologies

Lucent Technologies designs and delivers the systems, services
and software that drive next-generation communications networks.
Backed by Bell Labs research and development, Lucent uses its
strengths in mobility, optical, software, data and voice
networking technologies, as well as services, to create new
revenue-generating opportunities for its customers, while
enabling them to quickly deploy and better manage their
networks. Lucent's customer base includes communications service
providers, governments and enterprises worldwide. For more
information on Lucent Technologies, which has headquarters in
Murray Hill, N.J., USA, visit

About Alestra

Alestra offers in Mexico broadband, IP and value added services
with the backing of the AT&T brand. Alestra's network in Mexico,
with a core optical network based in state-of-the-art
technology, provides seamless access to the AT&T global
intelligent network carrying over 250 million voice and data
messages every day in more than 280 countries and territories.
Alestra is the first telecommunications operator in Mexico to
obtain ISO 9002 certification for all of its processes.

AXTEL: Revenue Up 24% in 2Q04 on Expanding Lines
AXTEL, S.A. de C.V., a Mexican telecommunications company,
announced Wednesday its non-audited financial results for the
second quarter of 2004.


- Increases revenues in 24% as compared to the second quarter of

- Earning from operation goes from $14 million pesos to $65
million pesos.

- Reports 388 thousand lines in service at the end of June.

The company reported that its revenues increased in 24% with
respect to the second quarter of 2003, reaching $894.4 million
pesos. Likewise, the revenues for the last 12 months at June 30,
2004 were $3,333.4 million pesos, 24% more than the revenues for
the same period last year.

Accordingly, the earning from operation reported a significant
increase, going from $14 million pesos in the second quarter of
2003 to $65 million for the same period in this year.

AXTEL also reported 388 thousand lines in service, that is, 25%
more than those reported for the same period in 2003, which
represents a considerable increase.

Patricio Jimenez Barrera, AXTEL Director of Finance,
Administration, and Human Resources, said: "The financial
results for the second quarter show a consistently favorable
trend that confirm that the company is going in the right
direction. This has been possible thanks to the excellent
condition of our financial structure and to our flexibility and
promptness to serve our customers always with quality and
attention to detail, which has laid solid foundations for a
successful outset of our growth plan started this year."

AXTEL started operations in the cities of Queretaro and San Luis
Potosi in last July, and now it has expansion plans that include
the cities of Aguascalientes, Juarez, Saltillo, and Tijuana for
the last quarter of this year, as part of its aggressive growth

AXTEL is a Mexican telecommunications company that provides
local telephone services, national and international long
distance services, data, internet, virtual private nets, and
value added services. AXTEL has provided Mexico with a basic
telecommunications infrastructure through an intelligent net
that offers wide coverage to all markets. At present, it is
operating in Mexico City, Monterrey, Guadalajara, Puebla, Leon,
Toluca, and Queretaro.

AXTEL has brought to the market various access technologies that
include fixed wireless telephony, point-to-point radio links,
point-to-multipoint radio links, and fiber optics, all of which
are offered to match the communication solutions that its
customers require.

Fifty eight percent of AXTEL capital is Mexican. The remaining
42% belongs to foreign investors, among which are, mainly, AIG-
GE Capital Latin American Infrastructure Fund (LAIF); AIG Latin
American Equity Partners; Blackstone Group; American
International Underwriters Overseas Ltd., and Soros Group.

CONTACT: Mr. Jose Manuel Basave
         Corporate Communication Director

         Web Site:

CYDSA: EBITDA Surges 97.2% From 1H03
Comments on operations for the first half of 2004 (Figures in
constant pesos as of June 30, 2004 unless otherwise indicated)

Domestic and International Economic Environment:

Domestic Economic Environment

During the first quarter of 2004, Mexico's Gross Domestic
Product (GDP) grew 3.7% compared to the same period of 2003,
thus reaching the highest increase in the past thirteen
quarters. Analyses of Mexico's Central Bank show an estimated
growth rate of 3.9% for the second quarter of 2004, meaning a
recuperation of the Mexican economy based on the economic growth
of the USA.

Inflation has remained under control, in spite of the fact that
as of June 2004, the National Consumer Price Index increased
slightly with an annual rate of 4.4%, compared to the 4.0%
reported in December 2003.

The exchange rate of the Mexican peso against the US dollar
averaged $11.19 pesos per dollar during the first half of 2004,
a depreciation of 5.2% with respect to the average rate of
$10.64 pesos reported for the same period of the prior year.

International Economic Environment

The dynamism of the US economy during the first quarter of 2004,
with a reported annualized GDP growth rate of 3.7% is projected
to continue, since the expected growth rate is 4.3% for the
second quarter.

Insofar as energy costs are concerned, international oil prices
have continued the upward trend observed since 2003. As a
reference, during the first half of 2004 the West Texas
Intermediate (WTI) crude oil price registered an average price
of US$36.84 per barrel, 17.1% higher than the US$31.47 reported
for the same period of the previous year. (Source: US Energy

Likewise, natural gas prices in the USA continue in high levels,
despite the end of the winter season when consumption rises. Due
to the fact that these rates are used as reference to establish
the price of this energy source in our country, prices of
natural gas in Mexico during the first six months of 2004
averaged $5.54 dollars per million BTU's.

Although this level is lower than the US$5.70 per million BTU's
observed during the first half of 2003, it is higher than the
US$4.58 average estimated for the second half of 2003, and
represents an 83% higher price when compared to the average of
US$3.03 reported for 2002 (Source: PEMEX).

Due to the facts described in the preceding paragraphs,
international prices of petrochemical products have maintained
relatively high levels. This situation combined with high
natural gas prices added to its effect on electric power rates,
have decreased or at least limited the recovery of margins on
sales in several important CYDSA businesses like Acrylic Fiber,
Salt, PVC Resins, Chlorine and Caustic Soda.

Impact on CYDSA of the Domestic and International Economic

During the first half of 2004, the weighted average of CYDSA's
sales volumes increased by 7.8%, when compared with those of the
first six months of 2003.

Products reporting volume increases in the first half of 2004
compared to the same period of 2003 follow: salt, PVC resins,
PVC pipes and fittings and acrylic fiber.

On the other hand, businesses reporting volume reductions
include Chlorine, Caustic Soda, Refrigerant Gases, Polypropylene
Films and Yarns.

Prices of the majority of CYDSA products have increased during
the first six months of 2004, compared with the same period of
the prior year.

As part of CYDSA's portfolio restructuring process, oriented
towards the consolidation of its operations in products with
higher value added, during 2003 and 2004 the following
divestitures and shut-downs were carried out:

1) Industrias Cydsa-Bayer.

On February 27, 2003, CYDSA reached an agreement with Bayer,
A.G. to terminate the joint venture they had in Industrias
Cydsa-Bayer. This firm located in Coatzacoalcos, in the state of
Veracruz, produced toluen di-isocyanate, TDI, a raw material
used in the manufacture of polyurethane foams.

2) Home Textiles.

On May 3, 2004, CYDSA started the shut-down process of San
Marcos Textil S. A. de C.V. a plant located in Aguascalientes,
Ags. Dedicated to the manufacture of blankets. This company
constituted CYDSA's Home Textiles Business Unit. In spite of
capital expenditures in new process technologies and new
products, this shut-down derives from lack of competitiveness
and positive cash flows in recent years, as well as what could
be foreseen for the medium and long-term horizons.

3) Printed and Laminated Film.

On May 26, 2004, Masterpak S.A. de C.V., a CYDSA subsidiary,
concluded the sale of assets and operations of its Printed and
Laminated Film business (Tultitlan Plant), to Bemis Flexible
Packaging de Mexico S.A. de C.V., a subsidiary of Bemis Company,
Inc., a company located in Minneapolis, Minnesota in the USA.

In accordance with generally accepted accounting principles in
Mexico, for comparability purposes, when a Business Segment is
discontinued it must be excluded from the consolidated Operating
Income. Therefore, Operating Income, as well as Sales, Cost of
Sales and Operating Expenses for the years 2003 and 2004, do not
include the results of Discontinued Operations.

Restructuring of Bank Debt and Euro-Medium-Term-Notes (EMTN's)
As informed in the First Quarter, 2004 Report, on March 16,
2004, CYDSA signed a Restructuring Agreement with Banco Nacional
de Mexico; BBVA Bancomer; California Commerce Bank; Citibank and
Comerica Bank, comprising US$192.6 million of CYDSA's operating
subsidiaries Bank Debt. This restructuring involves CYDSA's
Chemicals and Plastics, Flexible Packaging as well as Fibers and
Home Textiles as of that date.

In addition, on June 7, 2004 CYDSA signed a Tem Sheet with
Fintech Advisory Inc., as representative of the Euro-Medium-
Term-Note Holders.
The Issue's face value amounts to US$158,997,000.00, carries an
annual coupon rate of 9.375% with original maturity in 2009.

According to the Term Sheet, subject to certain conditions,
including the negotiation and execution of the final
documentation, the authorization of the Mexican Securities and
Exchange Commission and the approval of the Creditor Banks,
CYDSA will request the consent of the required majority of the
Note Holders to exchange all outstanding Euro-Medium-Tem-Notes
(US$158,997,000.00) for:

a) New shares of stock issued by Cydsa, representing 60% of its
capital stock, and

b) A convertible floating rate promissory note with a principal
amount of US$25.5 million with maturity date May 1, 2007,
subject to extension, under certain conditions, until May 1,

Under the Agreement, the new shares will represent a combination
of common stock and shares without voting rights and if the
convertible floating rate promissory note should not be paid,
will be converted into shares representing up to an additional
20% of the company's capital stock.

CYDSA's Board of Directors approved this transaction. In
addition, Mr. Tomas Gonzalez Sada shall remain as Chairman of
the Board and Chief Executive Officer.


Total Sales

CYDSA's Total Sales during the first half of 2004, amounted to
3,258 million pesos, an increase of 17.9% when compared, in
constant pesos, to the figure reported for the same period of
the prior year.

In dollar terms, Sales for the January-June period of 2004
reached an equivalent to US$290 million, a 16.0% growth when
compared to those of the same period of the previous year.

As discussed in the section "Impact on CYDSA of the Domestic and
International Economic Environment" (page 2 of this Report), the
increase in CYDSA's Total Sales in pesos during the first six
months of 2004, resulted from the fact that sales in units, as
well as the great majority of the product's prices grew in
comparison with the levels reported for the same period of 2003.

Domestic Sales

During the January-June period of 2004, unit sales to the
Domestic Market grew an average of 2.5%, compared to those
reported for the same period of the previous year.

Measured in constant pesos, Sales to the Domestic Market during
the first half of 2004 reached 2,270 million, an increase of
8.1% against those of the first semester of 2003.

Export Sales

Units sold to export markets during the first six months of
2004, grew 23.0% when compared to those of the same period of
the preceding year.
Exports for the first half of 2004 amounted to US$88 million, an
improvement of 41.9% over the US$62 million reported for the
first six months of 2003.

Sales for Chemicals and Plastics added to 2,120 million pesos
during the first half of 2004, a 17.1% growth when compared to
those of the first six months of the previous year.

This Segment's Sales benefited from an increase in units sold
mainly of Salt, PVC Resins and PVC Pipes and Fittings. Likewise,
the great majority of this Segment's products registered
significant price increases when compared to the same period of
the preceding year.

During the first six months of 2004, Total Sales for Fibers and
Textile Products reached 975 million pesos, an amount 25.6%
higher than those reported for the same period of 2003.

The sales increase in this Segment is explained by volume and
price increases in Acrylic Fiber, compensated by decreases in
Yarns, the latter negatively affected in exports due to the
decrease in demand for Mexican textiles in USA, as well as by
competing imports in the domestic market, mainly of Asian
products frequently using unfair market practices.

Finally, Total Sales of Flexible Packaging amounted to 163
million pesos during the first six months of 2004, a drop of
7.9% when compared to those reported for the same period of the
prior year.

Operating Income

CYDSA's Gross Profit during the first half of 2004, increased by
10.7% going from 568 million in the January-June period of 2003
to 629 million during the same period of 2004.

The austerity plans implemented by CYDSA, continue. These plans
have allowed Operating Expenses to drop 7.3% in real terms
during the first six months of 2004, reaching the sum of 587
million in the first half of 2004 while during the same period
of the previous year they amounted to 633 million.

During the first six months of 2004 CYDSA registered an
Operating Income (EBIT) in the amount of 42 million pesos, a sum
that compares favorably with the Operating Loss of 65 million
reported for the first half of 2003.

Operating Cash Flow

Operating Cash Flow (EBITDA)1, added up to 237 millions of
current pesos during the January-June period of 2004, an
improvement of 112% when compared to the 112 million obtained in
the same period of 2003.

In dollar terms, EBITDA reached the sum of US$21.1 million, a
97.2% increase against the US$10.7 million reported for the
first six months of the previous year.

Total Financing Cost

Total Financing Cost for the first half of 2004 amounted to 257
million pesos, a figure that compares to 119 million reported
for the first six months of 2003. A breakdown follows:

                                     2004    2003       Change
                                                   (millions of

Net Financial Expenses               (170)   (174)         4
Financing Allowances to Clients       (20)    (22)         2
Net Exchange Loss                    (135)     (3)      (132)
Net Monetary Gain                      68       80       (12)
Total Financing Cost                 (257)    (119)     (138)

As can be noted in the preceding table where the main variables
integrating the Total Financing Cost are analyzed, the Exchange
Loss represents the most significant line item. During the first
half of 2004, an Exchange Loss in the amount of 135 million
resulted from a 2.6% devaluation of the Mexican peso, whereas in
the course of the first six months of 2003 an Exchange Loss for
3 million derived from a 0.02% currency revaluation.

Other Income, Net

In the first six months of 2004 other expenses and products have
been registered. A 20 million pesos net result is reported in
Other Income, net.

Loss from Continuing Operations before Taxes and Employee
Statutory Profit Sharing When Total Financing Cost of 257
million is subtracted from the Operating Income of 42 million,
and after adding Other Income, Net in the amount of 20 million,
a 195 million Loss results from Continuous Operations before
Taxes and Employee Statutory Profit Sharing.

Taxes and Employee Statutory Profit Sharing

Following the methodology of Bulletin D-4 of the Mexican
Institute of Public Accountants, the Loss from Continuing
Operations before Taxes and Employee Statutory Profit Sharing in
the amount of 195 million, generated a Deferred Tax benefit.

During the first half of 2004, the line item of Taxes and
Employee Statutory Profit Sharing shows an accrued benefit of 59

Loss derived from Discontinued Operations (Net of Income Tax)

In the first half of 2004, a Loss derived from Discontinued
Operations (Net of Income Tax) in the amount of 376 million
resulted, generated mainly from the sale of assets of the
Printed and Laminated Film business and the asset write-off
derived from the shut-down of Home Textiles.

Net Loss

By subtracting from the 195 million Loss derived from Continuing
Operations before Taxes and Employee Statutory Profit Sharing,
the 59 million benefit from Deferred Taxes, and adding the 376
million Loss derived from Discontinued Operations (Net of Income
Tax), during the January-June 2004 period a Net Loss in the
amount of 512 million resulted, a figure that compares with the
net loss for 183 million reported for the same period of the
prior year.

Financial Condition

A summary of the relevant items of the Balance Sheets as of June
30, 2004 and 2003 follows:

                             June 30    June 30     Change
                               2004       2003

Current Assets                 2,567      2,570          (3)
Fixed and Deferred Assets      6,703      7,764      (1,061)
Total Assets                   9,270     10,334      (1,064)
Current Liabilities            4,624      5,899      (1,275)
Long-term Liabilities          2,246        881       1,365
Total Liabilities              6,870      6,780          90
Shareholders' Equity           2,400      3,554      (1,154)

An explanation of the main changes in the Balance Sheet accounts
is presented below, comparing June 2004 with June 2003:


Current Assets dropped 3 million pesos, going from 2,570 million
in June 2003 to 2,567 million in June 2004. On the other hand,
Fixed and Deferred Assets amounting to 6,703 million on June 30,
2004 decreased 1,061 million when compared with the amount
reported on June 30, 2003.

This reduction is mainly explained by a charge derived from the
write-off of obsolete and unused fixed assets in the Packaging
and Textiles businesses carried out during the last quarter of
2003, and the asset's sale of the Printed and Laminated Film
business and the shut-down of Home Textiles brought about during
the second quarter of 2004.


Due to the Debt Restructuring agreed upon with the Creditor
Banks dated March 16 2004, Short-Term Bank Debt in the amount of
1,393 million pesos reclassified into Long-Term Bank Debt. These
liabilities belong to the subsidiaries of the Sub-Holding
Company Valores Quˇmicos, S.A. de C.V.

For this reason Short-Term Bank Debt dropped from 3,914 million
as of June 30, 2003 to 2,611 million at the close of June 2004.
On the other hand, Long-Term Bank Debt grew from 327 million to
1,637 million during the same period.

Shareholders' Equity

Shareholders' Equity as of June 30, 2004 reached 2,400 million.
Comparing this figure with the 3,554 million reported as of June
30, 2003, a 1,154 million decrease results.

The drop in Shareholder's Equity is due mainly to the
Accumulated Net Loss of the last 12 months in the amount of
1,109 million, derived largely from write-down of obsolete or
unused Fixed Assets carried out during the last quarter of 2003,
as well as from the shut-down of several businesses during the
second quarter of 2004, mentioned in the "Assets" section (page
10 of this Report).

Treasury Policies

It is a CYDSA policy to manage from a central treasury all
Temporary Investments of Excess Cash both in pesos and in
dollars. These Investments are carried on account of each one of
the Companies integrating the Group, using modules for cash
centralization, debt centralization and cash forecasts.

Temporary investments are made both in Mexican Pesos as well as
in Dollars of the United States of America Internal Control
CYDSA has an Internal Audit department, whose objective is to
inform Management on the Compliance with Corporate Policies and
Practices, Financial Information Quality and Asset Care, both of
the Holding Company as well as its Subsidiaries.

This function is carried out through an Annual Internal Audit
Program. In the course of this process, the companies'
compliance is thoroughly reviewed and appraised. In addition,
opportunity areas for improvement of effectiveness of control
systems as well as the application and follow-up of action
plans, are determined.

In addition, the Company's Board of Directors has an Audit
Committee. The Chairman of this Committee and the majority of
its members are Independent Board Members. The Company's
Examiners attend the Committee meetings and have voice, but no
voting rights. The Audit Committee meets periodically in order
to review the status of the Internal Audit Program. It also
meets to examine the External Auditors' Report on the Financial

To view financial statements, please visit:

          Ave. Ricardo Margain Zozaya # 565
          Parque Corporativo Santa Engracia, Edificio B,
          66267 Garza Garcˇa, Nuevo Leon

          Mr. Oscar Casas Kirchner
          Financing Manager
          Direct Phone: (52) (81) 81-52-46-04
          Fax: (52) (81) 81-52-48-13

          Mr. Alberto Balderas Calderon
          Administrative Information Manager
          Direct Phone:(52) (81) 81-52-46-08
          Fax: (52) (81) 81-52-48-13

          Web Site:

EMPRESAS ICA: Panama Unit Expects $25.2M From Government
The Panama Chamber of Commerce and Industry ruled that the
government must pay the local unit of Mexican construction
company Empresas ICA Sociedad Controladora SA (ICA) US$25.2
million in relation to a dispute over a highway contract.

ICA filed a formal arbitration demand against Panama's
government in December of last year to cover "additional
investment" and "higher costs" related to a 30-year concession
to build, maintain and operate Corredor Sur, a 19.5-kilometer,
four-lane highway.

The concession, which was awarded in August 1996 to ICA's
Panamanian subsidiary, had a book value of US$207.4 million at
the end of June.

CONTACT:  Empresas ICA Sociedad Controladora SA de CV
          Mineria No. 145, Edificio Central
          11800 Mexico, D.F.,
          Phone: (212) 688-6840
          Web Site:

GRUPO MEXICO: Effectively Negotiates Contract Terms With Workers
The National Mining, Metallurgical and Similar Workers Union
voted to accept Grupo Mexico's labor contract terms, eliminating
the threat of a strike scheduled for Friday, reports Dow Jones
Business News. In a press release, the union said it managed to
negotiate a profit-sharing agreement and other benefits for the

Cananea is Grupo Mexico's largest copper mine, having turned out
about 65,000 metric tons of the metal in concentrate in the
first six months of this year. It also has an SX-EW facility
that produced 25,000 metric tons of refined copper in the same

CONTACT:  Mr. German Larrea Mota Velasco
          Chairman & CEO
          GRUPO MEXICO
          Av. Baja California No. 200
          Colonia Roma Sur
          06760 Mexico, D.F.
          Tel. Conm. 52 (55) 5080-0050

ISSSTE: Government Seeks Solution to Alleviate Financial Crisis
The Mexican government is now working on a reform to the Social
Security and Services Institute for State Workers (ISSSTE) to
reduce the burden of its financial situation and to deal with
the country's labor liabilities, reports El Economista.

Without providing any details of the proposals, National Action
Party (PAN) Senator Fauzi Hamdan Amad, president of the Treasury
Commission of the Senate, said that a bill would be sent to
Congress by President Vicente Fox by October at the latest.

The government's goal is to stop the economic deterioration of
ISSSTE and continue modifying the pension system.

Hamdan also said that with the attitude shown by Senator Joel
Ayala Almeida, president of the Federation of Unions of Workers
in the Service of the State (FSTSE), it would be easier to carry
out a reform to ISSSTE.

Hamdan Amad also clarified that the bill is not intended to
affect the current contract rights of workers.


RCTV: Seniat Denies Closure Talks
Venezuelan tax authority Seniat (Integrated National Customs and
Tax Administration Service) denied reports that it plans to
close Radio Caracas Television (RCTV), says El Universal. A
group of journalists from the TV station has filed an appeal at
the Supreme Court of Justice to counter the supposed closure.
RCTV Counsel Pedro Pereira claims that they have sufficient
proof showing Seniat's intentions to close the station because
of unpaid taxes.

However, Tax Superintendent Jose Vielma Mora said: "Seniat works
in close relationship with businessmen, owners of small
businesses and tax payers. We have no intention to close

Seniat is seeking RCTV's payment for taxes on donations of
spaces to opposition group Democratic Coordinator. The donations
were allegedly given during the two-month oil strike that
started in December of 2002.


S U B S C R I P T I O N   I N F O R M A T I O N

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