TCRLA_Public/040831.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

           Tuesday, August 31, 2004, Vol. 5, Issue 172

                            Headlines

A R G E N T I N A

ATLANTIC SPORT: General Report Due Today
AGENTES COMERCIALES: Claims Verification Deadline Tomorrow
FAVA: Claims Check Ends Tomorrow
FIDAL: Verification of Claims Ends Tomorrow
GRAN DORA: Enters Bankruptcy on Court Orders

JULIAN CALZADA: Liquidates Assets to Pay Debts
LAS TRES: Reports Submission Set
LEACO: Trustee to Complete Validations
MATADERO Y FRIGORIFICO: Court Fixes Assembly Schedule
PAXCO S.R.L.: Verification Deadline Approaches

TENUTA S.A.: Court Orders Liquidation


B R A Z I L

BAXTER INTERNATIONAL: Berger & Montague Files Class Action Suit
ELETROPAULO METROPOLITANA: S&P Raises Global Scale Ratings
NET SERVICOS: Issuing New Shares as Part of Debt Restructuring
TELEMAR: To Declare Winner of $67M Tender in September

USIMINAS: To Pay Interest on Equity Capital
USIMINAS: To Kick Off Construction of Thermo Plant


H O N D U R A S

* HONDURAS: PRGF Program Delivering Results says IMF


M E X I C O

CORPORACION DURANGO: Forges Restructuring Agreement
JAFRA COSMETICS: Moody's Confirms Ratings
NAFIN-BANCOMEXT: Congress Rules Out Merger, Liquidation
PEMEX: Issues Another $44M Short-Term Bonds
VITRO: S&P Affirms Ratings; Outlook Negative


U R U G U A Y

* $204M IMF Credit Line Available for Uruguay


V E N E Z U E L A

CANTV: S&P Upgrades Foreign Currency Corporate Credit Rating

     -  -  -  -  -  -  -  -

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

ATLANTIC SPORT: General Report Due Today
----------------------------------------
A general report on the Atlantic Sport S.A. bankruptcy is due
for court submission today. Mr. Alberto Antonio Vilela, the
trustee supervising the proceedings, prepared this report from
the Company's accounting and business records. The report also
details relevant events during the course of the bankruptcy.

Court No. 22 of Buenos Aires' civil and commercial tribunal has
jurisdiction over this case.

CONTACT: Mr. Alberto Antonio Vilela, Trustee
         Rodriguez Pena 431
         Buenos Aires


AGENTES COMERCIALES: Claims Verification Deadline Tomorrow
----------------------------------------------------------
The verification of claims for the Agentes Comerciales S.A.
bankruptcy will end tomorrow, September 1, 2004. Creditors with
claims against the bankrupt company must present proof of the
liabilities to Mr. Miguel Angel Tregob, the court-appointed
trustee, before the stated deadline.

The bankruptcy will conclude with the liquidation of the
Company's assets to pay its creditors.

CONTACT: Mr. Miguel Angel Tregob, Trustee
         Lima 287
         Buenos Aires


FAVA: Claims Check Ends Tomorrow
--------------------------------
Mr. Abraham Gutt, the trustee overseeing the Fava S.R.L.
liquidation, will close the verification of creditors claims
tomorrow, September 1, 2004. Creditors are required to submit
proofs of their claims to the trustee within the verification
period to qualify for the post-liquidation payments.

Judge Paez Castaneda of Buenos Aires' Civil and Commercial
Tribunal Court No. 21 handles this case with the assistance of
Dr. Rey, Clerk No. 41.

CONTACTS: Fava S.R.L.
          Sucre 2020, Piso 14 "A"
          Buenos Aires

          Mr. Abraham Gutt, Receiver
          Tucuman 1484
          Buenos Aires


FIDAL: Verification of Claims Ends Tomorrow
-------------------------------------------
Creditors of bankrupt Buenos Aires Company Fidal S.A. must
submit proofs of their claims before the verification period
closes tomorrow, September 1, 2004. All documents should be
forwarded to Mr. Gabriel Eduardo Bigal, court-appointed trustee,
before the deadline.

Court No. 7 of Buenos Aires' Civil and Commercial Tribunal
handles this case with assistance from Clerk No. 13.

CONTACT: Mr. Gabriel Eduardo Bigal, Trustee
         Reconquista 1011
         Buenos Aires


GRAN DORA: Enters Bankruptcy on Court Orders
--------------------------------------------
Court No. 9 of Buenos Aires' civil and commercial tribunal
declared Gran Dora S.A. bankrupt after the company defaulted on
its debt payments. The bankruptcy order effectively places the
company's affairs as well as its assets under the control of
court-appointed trustee, Mr. Miguel Angel Troisi.

As the trustee, Mr. Troisi is tasked with verifying the
authenticity of claims presented by the company's creditors. The
verification phase is ongoing until September 27, 2004.

Following claims verification, the trustee will submit the
individual reports based on the forwarded claims for final
approval by the court on November 9, 2004. A general report will
also be submitted on December 22, 2004.

Infobae reports that 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.

CONTACT: Mr. Miguel Angel Troisi, Trustee
         Cerrito 146
         Buenos Aires


JULIAN CALZADA: Liquidates Assets to Pay Debts
----------------------------------------------
Julian Calzada y Hermano S.A.I.C. y F. liquidates its assets
following the bankruptcy pronouncement issued by Court No. 7 of
Cordoba's civil and commercial tribunal, Infobae reports.

The bankruptcy ruling places the company under the supervision
of court-appointed trustee, Mr. Alejandro Aureli. The trustee
closed the verification of creditors' proofs of claims Monday,
August 30, 2004.

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

CONTACT: Mr. Alejandro Aureli, Trustee
         Duarte Quiros 977
         Cordoba


LAS TRES: Reports Submission Set
--------------------------------
Mr. Aldo Ruben Maggiolo, the trustee assigned to supervise the
liquidation of Las Tres Z Construcciones S.R.L., will submit the
validated individual claims for court approval on November 9,
2004. These reports explain the basis for the accepted and
rejected claims. The trustee will also submit a general report
on December 12, 2004.

Infobae reports that Court No. 23 of Buenos Aires' Civil and
Commercial Tribunal has jurisdiction over this bankruptcy case.
Clerk No. 45 assists the court

CONTACT: Mr. Las Tres Z Construcciones S.R.L.
         Paraguay 610
         Buenos Aires


LEACO: Trustee to Complete Validations
--------------------------------------
Mr. Anibal Carillo, serving as trustee for the Leaco S.A.
bankruptcy, will be validating creditors' proofs of claims from
the case until tomorrow, September 1, 2004. Failure to comply
with the validation deadline will mean disqualification from the
payments to be made after the company's assets are liquidated.

Leaco reported liabilities totaling to US$1,057,578.26 when it
filed for bankruptcy protection. Judge Sala of Buenos Aires
Court No. 14, with assistance from Clerk No. 27 Dr. Aleman, has
jurisdiction over this case.

CONTACT: Leaco S.A.
         Viamonte 1546
         Buenos Aires

         Mr. Anibal Carillo, Trustee
         Juncal 615
         Buenos Aires


MATADERO Y FRIGORIFICO: Court Fixes Assembly Schedule
-----------------------------------------------------
Court No. 4 of Lomas de Zamora's civil and commercial tribunal
scheduled the informative assembly for the Matadero y
Frigorifico Federal S.A. bankruptcy on October 13, 2004, reports
Infobae. The company will present a completed settlement plan
during the assembly for the approval of its creditors.

CONTACT: Matadero y Frigorifico Federal S.A.
         Buenos Aires


PAXCO S.R.L.: Verification Deadline Approaches
----------------------------------------------
The verification of claims for the Paxco S.R.L. bankruptcy will
end on October 19, 2004 according to local news source Infobae.
Creditors with claims against the bankrupt company must present
proof of the liabilities to Mr. Roberto Leonardo Sapollnik, the
court-appointed trustee, before the deadline.

Court No. 7 of Buenos Aires' civil and commercial tribunal
handles the company's case with assistance from Clerk No. 13.
The bankruptcy proceedings will conclude with the liquidation of
the company's assets to pay its creditors.

CONTACT: Mr. Roberto Leonardo Sapollnik, Trustee
         Parana 851
         Buenos Aires


TENUTA S.A.: Court Orders Liquidation
-------------------------------------
Tenuta S.A. prepares to wind-up its operations following the
bankruptcy pronouncement issued by Court No. 24 of Buenos Aires'
civil and commercial tribunal. The declaration effectively
prohibits the company from administering its assets, control of
which will be transferred to a court-appointed trustee.

Infobae reports that the court appointed Mr. Ricardo Felix
Fernandez as trustee. He will be reviewing creditors' proofs of
claims until October 15, 2004. The verified claims will be the
basis for the individual reports to be presented for court
approval on November 26, 2004. The trustee will also submit a
general report on February 11 next year.

Clerk No. 47 assists the court on this case, which will end with
the disposal of the company's assets to cover its liabilities.

CONTACT: Mr. Ricardo Felix Fernandez, Trustee
         Tucuman 1567
         Buenos Aires



===========
B R A Z I L
===========

BAXTER INTERNATIONAL: Berger & Montague Files Class Action Suit
---------------------------------------------------------------
On August 13, 2004, the law firm of Berger & Montague, P.C.
(http://www.bergermontague.com)filed a class action suit
against Baxter International Inc. ("Baxter" or the "Company")
(NYSE: BAX) (CUSIP:071813109) and certain of its officers, in
the United States District Court for the Northern District of
Illinois on behalf of all persons or entities who purchased
Baxter securities from April 19, 2001 through July 21, 2004 (the
"Class Period").

The complaint alleges that defendants violated Sections 10(b)
and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5
promulgated thereunder by the SEC by issuing materially false
and misleading statements throughout the Class Period that had
the effect of artificially inflating the market price of the
Company's securities.

More specifically, the complaint alleges that defendants failed
to disclose and misrepresented the following material adverse
facts which were known to defendants or recklessly disregarded
by them:

   (1) that the Company's financial results during the Class
       Period were materially overstated;

   (2) that the overstatement occurred because the Company
       improperly and "incorrectly" recognized $40 million in
       revenues and maintained inadequate and "incorrect"
       provisions for bad debts relating to its Brazilian
       operations;

   (3) that as a result of this, the Company's financial results
       were in violation of Generally Accepted Accounting
       Principles ("GAAP");

   (4) that the Company lacked adequate internal controls; and

   (5) that as a result of the above, the Company's financial
       results, including its net income figures, were
       materially and artificially inflated at all relevant
       times.

On July 22, 2004, Baxter announced that it planned to restate
its financial results for the years 2001 through 2003, and for
the first quarter of 2004. The restatement was primarily the
result of incorrect revenue recognition and inadequate
provisions for bad debts in Brazil during that period, which
would result in a decrease in net income over the restatement
period by an amount expected to be no more than $40 million, or
$0.07 per diluted share. News of this shocked the market. Shares
of Baxter fell $1.48 per share, or 4.59 percent, to close at
$30.79 per share on unusually heavy trading volume.

If you purchased Baxter securities during the period from April
19, 2001 through July 21, 2004, inclusive, you may, no later
than September 27, 2004, move to be appointed as a Lead
Plaintiff. A Lead Plaintiff is a representative party that acts
on behalf of other class members in directing the litigation. If
you have sustained substantial losses in Baxter securities
during the Class Period, please contact Berger & Montague, P.C.
for a more thorough explanation of the Lead Plaintiff selection
process.

CONTACT:  Sherrie R. Savett, Esquire
          Douglas M. Risen, Esquire
          Diane Werwinski, Investor Relations Manager
          BERGER & MONTAGUE, P.C.
          1622 Locust Street
          Philadelphia, PA 19103
          Phone: 888-891-2289 or 215-875-3000
          Fax: 215-875-5715
          Website: http://www.bergermontague.com
          E-mail: InvestorProtect@bm.net


ELETROPAULO METROPOLITANA: S&P Raises Global Scale Ratings
----------------------------------------------------------
Standard & Poor's Ratings Services raised its global scale
foreign and local currency ratings on Brazilian utility
Eletropaulo Metropolitana Eletricidade de Sao Paulo S.A.
(Eletropaulo) to 'B' from 'CCC-'.

At the same time, Standard & Poor's raised its national scale
corporate credit rating on Eletropaulo and its national scale
issue rating on Eletropaulo's 7th debentures to 'brBB+' from
'brCCC-'.

The ratings were removed from CreditWatch, where they were
placed with positive implications on June 22, 2004. The outlook
on all Eletropaulo ratings is now stable.

The rating action reflects the reassessment of Eletropaulo's
creditworthiness following the conclusion of the debt
restructuring the company had started in 2002. The company
refinanced some BrR2.3 billion in debt in March 2004. In June
2004 Eletropaulo also completed the exchange offer on a US$2.3
million portion of a euro commercial paper issue still in
default (over 99.9% of bondholders accepted the exchange).

"The ratings reflect that, although the new terms and conditions
of the debt restructuring are more favorable and the
amortization schedule is smoother than before, Eletropaulo still
faces fairly tight cash flow to handle its debt maturities in
2005, and will need to raise additional debt to refinance debt
amortizations in 2007," said credit analyst Marcelo Costa. "Even
though Eletropaulo demonstrates resilient cash generation, as
the company has just completed far-reaching debt renegotiations,
its credit access has not been fully restored or tested so far."

The stable outlook assigned to Eletropaulo's ratings reflects
the expectation that the company will continue to present
financial indicators that are in-line with the rating category
(minimum EBITDA margin of 18%, minimum FFO to interest coverage
of 2.0x, FFO to total debt higher than 12%). The ratings also
include Standard & Poor's expectation that the company should
not need external sources of funding before 2007, and the
foreign currency exposure on financial debt should not
materially increase.

Eletropaulo's creditworthiness should improve as the company
shows better financial flexibility and market perception,
accesses new funding (banks or capital markets), and delivers
more sustainable cash flow protection ratios. Conversely, the
ratings would come under downward pressure if the company fails
to deliver the financial performance required for the current
rating.

ANALYST:  Marcelo Costa, Sao Paulo (55) 11-5501-8955
          Milena Zaniboni, Sao Paulo (55) 11-5501-8945


NET SERVICOS: Issuing New Shares as Part of Debt Restructuring
---------------------------------------------------------------
Brazil's Net Servicos de Comunicacao (Sao Paolo: PLIM4.SA -
Nasdaq NM:NETC), the largest Pay-TV multi-service operator in
Latin America, will seek regulators' permission next month to
issue up to 1.8 billion new shares, reports Reuters.

Net Servicos plans to issue the new shares by November.
According to Leonardo Pereira, head of investor relations, the
company will register the local stock issue with Brazil's CVM
securities regulator. But it is yet to decide whether it would
also register the new issue in the United States, where its
stock trades on Nasdaq.

The move to issue new shares is part of the company's wider
effort to restructure or pay down BRL1.4 billion (US$474
million) in debt. The share issue and debt restructuring will
eventually allow Mexico's Telefonos de Mexico (Telmex) to buy a
yet-to-be decided stake in Net Servicos as part of an aggressive
expansion throughout Latin America.

CONTACT: Net Servicos de Comunicacao SA
         R. Verbo Divino, 1356 First Floor
         Sao Paulo - SP,
         Phone: (212) 688-6840
         Fax: (212) 437-5749

         Web Site: www.nettv.globo.com


TELEMAR: To Declare Winner of $67M Tender in September
------------------------------------------------------
Brazilian telecom operator Telemar will announce by September 20
the results of a tender to supply telephones as part of
Telemar's BRL200-million (US$67.6mn) project, Business News
Americas reports, citing local daily Valor Economico.

Telemar must install telephones in approximately 5,500 locations
in the 16 states where it operates to meet the 2005 requirements
of Brazilian telecom regulator Anatel's universal access plan.

Nineteen (19) suppliers have submitted their bids. Some
suppliers think Telemar will probably need to invest much more
than BRL200 million in the project and possibly as much as
BRL500 million. But according to a Telemar executive, the
company does not want to make more than BRL200 million available
for the project and suppliers will have to adjust.

Telemar required bidders to present a turnkey proposal,
including infrastructure based on either a cable or radio
network such as cellular or even satellite service, which can
reach remote areas.

CONTACT: TNE - INVESTOR RELATIONS
         Mr. Roberto Terziani
         (terziani@telemar.com.br)
         55 21 3131 1208
                 or
         Mr. Carlos Lacerda
         (carlosl@telemar.com.br)
         55 21 3131 1314
         Fax: 55 21 3131 1155

         The Global Consulting
         Mr. Kevin Kirkeby
         Tel: 1 646.284.9416
         (kkirkeby@hfgcg.com)

Web site http://www.telemar.com.br/ir


USIMINAS: To Pay Interest on Equity Capital
-------------------------------------------
We hereby notify shareholders that, pursuant to deliberations at
a meeting of the Board of Directors held on 8/26/2004, we will
begin the payment, as of 9/14/04, of Interest on Equity Capital
related to the first half of 2004, in the amount of R$ 1.17318
per common share and R$ 1.29050 per preferred share, to all
those shareholders holding shares on 8/27/04.

Shares transferred as of 8/30/2004 (that date inclusive) will be
made without interest on equity capital. The amounts now paid
will be computed in the calculation for the minimum dividend
required for the 2004 fiscal year. Income withholding tax will
also be deducted at a rate of fifteen percent (15%), subject to
applicable legal exceptions.

Form and Location of Payments:

Shareholders that maintain bank accounts with BRADESCO or OTHER
BANKS and communicate this fact will receive this credit
automatically on the first date of payment. All other
shareholders with addresses on file will receive a form by mail
entitled NOTICE FOR RECEIPT -- PROCEEDS OF BOOK ENTRY SHARES.

To receive the credit, these shareholders should proceed to the
Bradesco agency of their choice, together with the above-
mentioned form, RG identity card and CIC taxpayer identity card.

Shareholders not receiving the NOTICE OF CREDIT or NOTICE FOR
RECEIPT should proceed to any Bradesco agency to receive this
credit and update their personal file information. The credit
related to shares held in deposit by the Stock Exchanges'
Fungible Custody Service will be credited to the respective
Stock Exchanges through the member brokerage houses responsible
for paying the respective shareholders.

Mr. Paulo Penido Pinto Marques
Investor Relations Director

Contact: USINAS SIDERURGICAS DE MINAS GERAIS S/A - USIMINAS
         Rua Prof. Jose Vieira de Mendonca 3011, Eng Nogueira
         Belo Horizonte , MG 31310-260
         Brazil
         Phone: +55 31 499 8000
         Fax: +55 31 441 7710
         Web Site: http://www.usiminas.com.br


USIMINAS: To Kick Off Construction of Thermo Plant
--------------------------------------------------
Brazilian flat steelmaking group Usiminas has gained approval
from its board to build a 60MW thermoelectric plant to increase
power generation capacity, Business News Americas reports,
citing an unnamed company spokesperson.

The spokesperson didn't provide details on the investment
required for the construction of the plant, but company
executives earlier indicated that the thermoelectric project
would involve about US$60 million.

The power project should be ready for commercial operation in
2007, she added. With the new plant, Usiminas will produce 53%
of the power it uses, up from the current 24%.



===============
H O N D U R A S
===============

* HONDURAS: PRGF Program Delivering Results says IMF
----------------------------------------------------
The following statement was made in Tegucigalpa on August 25,
2004 by an International Monetary Fund (IMF) mission staff:

"An IMF mission has visited Tegucigalpa over the past week to
conclude discussions for the first semi-annual review of the
PRGF program. As in the past, our discussions with the
authorities, private sector representatives, and representatives
of the international community were very useful and
constructive.

"Since the approval of the PRGF in February 2004, the
authorities have shown great determination in implementing their
program, in a difficult social and political environment and
against the additional burden of sharply higher oil prices to
which Honduras is particularly vulnerable. The quantitative
targets of the program have been met, and the program is already
delivering favorable results, with a broad-based recovery of
growth and employment, and a major improvement in the external
position. Nonetheless, high oil prices remain a source of
strain, and inflation-buoyed also by the stronger-than-expected
balance of payments inflows-has increased above the program
path.

"In reviewing the macroeconomic policy framework, the mission
was reassured by the favorable fiscal performance under the
program. Revenues have been buoyant, benefiting from the
economic recovery, as well as the strengthening of tax
administration. On the expenditure side, appropriate restraint
in managing non-essential current spending has allowed poverty-
related outlays and public investment to rise, while keeping the
overall fiscal program on track.

"The recent increase in inflation reflects mainly the impact of
oil prices and the liquidity created by the strong international
reserves inflows. The mission supports the authorities' strategy
to accommodate the direct impact of the oil-price increase,
while avoiding any second-round effects. Therefore, the
inflation target for this year has been raised somewhat from the
initial program objective, while the Central Bank will maintain
prudent policies to stem further upward pressures on prices,
including through appropriate monetary operations to curtail the
impact of higher reserve inflows.

"Financial sector reforms are moving ahead, with important
progress in strengthening banking regulations and supervision.
The recent approval by the National Congress of three financial
laws is a significant step in improving the legal and
institutional framework of the financial sector. It is now
important that Congress also approve the Financial System Law,
which is a key element in the efforts to consolidate the health
of the financial sector.

"Following the mission's return to Washington, and once Congress
has approved the pending Financial Institutions Law, the
Executive Board is expected to discuss the first review of the
PRGF arrangement in September. Completion of the review will
permit disbursement of the next tranche under the PRGF
arrangement for the equivalent to about US$15 million."

CONTACTS: International Monetary Fund
          700 19th Street, NW
          Washington, D.C. 20431
          USA

          Public Affairs:
          Phone: 202-623-7300
          Fax: 202-623-6278

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



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

CORPORACION DURANGO: Forges Restructuring Agreement
---------------------------------------------------
Corporacion Durango, S.A. de C.V.'s financial restructuring plan
will reflect the terms and conditions announced by the Company
through this PLAN SUPPORT AGREEMENT:

Agreement (together with the Exhibits and Schedules hereto, this
"Agreement"), dated as of August 13, 2004, by and among
Corporacion Durango, S.A. de C.V. ("Corporacion Durango", or the
"Company"), the Note Guarantors listed on Schedule 2 hereto
(collectively, the "Note Guarantors"), certain subsidiaries of
the Company listed on Schedule 3 hereto that hold claims against
the Company (collectively, the "Intercompany Creditors"), the
individual signatories listed on Schedule 4 hereto, each in his
or her capacity as a creditor and/or shareholder of the Company,
as the case may be (collectively, the "Individual Signatories"),
Banco Nacional de Mexico, S.A., Integrante del Grupo Financiero
Banamex, Bank of America, N.A., JPMorgan Chase Bank, California
Commerce Bank, and Banc of America Securities LLC (collectively,
the "Bank Lenders"), and the holders of the Company's
(i) 13 1/8% Senior Notes due 2006; (ii) 13 1/2% Senior Notes due
2008;
(iii) 12 5/8% Senior Notes due 2003; and/or (iv) 13 3/4% Senior
Notes due 2009 (collectively, the "Existing Notes") who have
executed this Agreement on the signature pages hereto
(collectively, the "Initial Signatory Noteholders"), and other
holders of Existing Notes who from time to time become bound by
this Agreement (collectively, together with the Initial
Signatory Noteholders, the "Noteholders" and, together with the
Bank Lenders, the Intercompany Creditors and the Individual
Signatories, the "Supporting Creditors"). Corporacion Durango's
obligations to each of the Bank Lenders are referred to herein
collectively as the "Existing Bank Debt." Corporacion Durango,
the Note Guarantors, the Bank Lenders, the Intercompany
Creditors and the Noteholders are referred to herein
collectively as the "Parties."

WHEREAS, on April 30, 2004, the Parties entered into that
certain agreement (the "Initial Plan Support Agreement") to
support a financial restructuring of the Company's unsecured
indebtedness upon the terms set forth in the term sheet (the
"Initial Term Sheet") attached to such agreement; and

WHEREAS, the Initial Plan Support Agreement has been terminated;
and

WHEREAS, on May 18, 2004, the Company initiated a voluntary
insolvency proceeding (the "Concurso Proceeding") under Mexico's
Ley de Concurso Mercantiles (the "Mexican Business
Reorganization Act") with the Federal District Court of Durango
(the "Durango District Court"), and on May 21, 2004, commenced
an ancillary case (the "304 Case") under section 304 of title 11
of the United States Code (the "Bankruptcy Code") with the
United States Bankruptcy Court for the Southern District of New
York (the "Bankruptcy Court"); and

WHEREAS, on June 30, 2004, the Bankruptcy Court entered, as to
the Bank Lenders and Noteholders, a consensual preliminary
injunction (the "Preliminary Injunction") enjoining the
commencement or continuation of any action against the Company
and certain subsidiaries of the Company,as well as their assets,
which Preliminary Injunction is set to expire at midnight on
August 16, 2004, unless further extended by order of the
Bankruptcy Court;

WHEREAS, the Parties have agreed to a revised restructuring
proposal, as set forth more fully in the Term Sheet attached
hereto as Exhibit A (the "Term Sheet") which provides for a
restructuring of the Company's capital structure (the
"Restructuring"); and

WHEREAS, the Term Sheet provides that the Parties will implement
the Restructuring through the prosecution and confirmation of a
plan of reorganization under the Mexican Business Reorganization
Act on terms substantially similar to those set forth in the
Term Sheet (the "Plan") so long as the Company obtains the votes
necessary under the Mexican Business Reorganization Act to
confirm the Plan.

NOW, THEREFORE, in consideration of the premises and mutual
covenants and agreements set forth herein, and for other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, each of the Parties hereby agrees as
follows:

1. Initial Signatories. It shall be a condition to the
effectiveness of this Agreement that each of the Initial
Signatory Noteholders, each Bank Lender, the Company, the Note
Guarantors, the Intercompany Creditors and the Individual
Signatories shall have entered into this Agreement.

2. Definitions. Capitalized terms used but not defined herein
shall have the meanings ascribed to such terms in the Term
Sheet.

3. Pursue Restructuring. Upon an entry of declaration of
concurso by the Durango District Court in the Concurso
Proceeding, the Company will use commercially reasonable efforts
to implement the Restructuring in the Concurso Proceeding,
including without limitation:

(a) supporting applications by the ad hoc committee of Existing
Notes (the "Ad Hoc Bondholders Committee") and the Bank Lenders,
acting through their respective counsel, to appoint one
conservator for each of the Ad Hoc Bondholders Committee and the
Bank Lenders, respectively, pursuant to Article 63 of the
Mexican Business Reorganization Act with the powers set forth in
Article 64 of the Mexican Business Reorganization Act, including
the right to be heard in the Concurso Proceeding;

(b) on or before fourteen (14) days prior to the deadline for
creditors to file proofs of claim in the Concurso Proceeding,
delivering to the Indenture Trustee for further dissemination to
the holders of Existing Notes, an English language explanation
containing: (i) a description of the concurso mercantil process
under the Mexican Business Reorganization Act and of the
Concurso Proceeding; (ii) the procedure for filing proofs of
claim in the Concurso Proceeding, including a discussion of the
powers of attorney and other documentation required under the
Mexican Business Reorganization Act or in the Concurso
Proceeding in connection with the filing of proofs of claim; and
(iii) information on how holders of Existing Notes may contact
either the Indenture Trustee or counsel to the Ad Hoc
Bondholders Committee for further information regarding how to
file proofs of claim;

(c) (i) supporting and not objecting to (x) the Indenture
Trustee (as defined herein) (or any other lawfully authorized
representative who would be recognized in the Concurso
Proceeding as such, collectively, the "Authorized
Representative"), on behalf of all holders of Existing Notes,
and (y) any holder of Existing Notes or any Bank Lender who
executes this Agreement, becoming recognized creditors (as such
term is contemplated under the Mexican Business Reorganization
Act) in the Concurso Proceeding; and (ii) cooperating with any
reasonable requests of the Authorized Representative for
ordersin the 304 Case for procedures to facilitate (x) the
filing of proofs of claim by the Authorized Representative on
behalf of holders of Existing Notes (other than Noteholders)
including any powers of attorney or other documentationthat may
be required under the Mexican Business Reorganization Act or in
the Concurso Proceeding in connection therewith; and (y) the
execution of the Plan within the time period set forth in
Article 161 of the Mexican Business Reorganization Act by the
Authorized Representative on behalf of and pursuant to the
instructions (whether through electronic instruction through the
DTC or other clearing system, as applicable, or otherwise, so
long as any such method is legally valid, acceptable to the
Authorized Representative, and does not require any disclosure
obligations on the part of the Company other than that set forth
in Sections 3(b) and 3(d) hereof) of holders of Existing Notes
(other than Noteholders), or by individual holders of Existing
Notes who have timely filed proofs of claim separately;

(d) (x) supporting the dissemination to creditors who become
recognized creditors (as such term is contemplated under the
Mexican Business Reorganization Act) (the "Recognized
Creditors") of (i) a summary of the Restructuring, (ii) the
Plan, and (iii) the other Restructuring Documents by the person
appointed by the Institute (as defined below) to act as
conciliador in the Concurso Proceeding; and (y) in the e vent
the documents listed in this

Section 3(d) are disseminated by the conciliador without an
English language translation of same, (i) promptly preparing an
English language translation of such documents and (ii)
disseminating such English language translation to all
Recognized Creditors no less than five (5) business days prior
to the deadline for such Recognized Creditors to communicate to
the conciliador their assent to the Restructuring; and (e)
timely file in the United States with the Securities and
Exchange Commission its quarterly and annual consolidated
financial statements for the Company in scope and format
consistent with its historical practices.

4. Cooperation and Support. Each of the Parties covenants and
agrees to negotiate in good faith to arrive at mutually
agreeable definitive documents to implement the Restructuring
and to agree upon non-binding target dates for the drafting and
exchange of such documents. The Supporting Creditors shall have
the opportunity to review drafts of each Restructuring Document
prior to its presentation to the Durango District Court. Each
Restructuring Document shall be subject to each Supporting
Creditor's approval, which will not be unreasonably withheld or
delayed so long as it is (i) consistent in all material respects
with, and at least as favorable to the Supporting Creditor in
all material respects as, the Term Sheet and (ii) consistent in
all material respects with the information previously provided
to the Supporting Creditors. So long as this Agreement remains
in effect, and except as may otherwise be provided below, each
Supporting Creditor shall:

(a) (i) timely complete and file a proof of claim in the form
approved by the Instituto Federal de Especialistas de Concursos
Mercantiles (the "Institute") in respect of its Holdings; (ii)
grant a duly executed power of attorney exercisable in Mexico in
favor of its respective Mexican counsel in order that such
counsel may take all reasonably necessary action on behalf of
the Supporting Creditor in respect of the Concurso Proceeding;
and(iii) in the case of a Noteholder, obtain from its brokerage
or depositary institution certification letters, and a position
listing from the DTC listing the amount of bonds held by such
Noteholder as of the date of such certification;

(b) so long as such Supporting Creditor shall have approved the
Restructuring Documents as provided in Section 4 hereof, timely
vote all of its Holdings (as such term is defined hereinafter)
to accept the Plan by delivering its duly executed and completed
signature to the Plan, and not change, revoke or withdraw (or
cause to be changed,revoked or withdrawn) such assent to the
Plan, except as permitted by the terms of this Agreement;

(c) so long as such Supporting Creditor shall have approved the
Restructuring Documents as provided in Section 4 hereof, (i) not
object to the Plan filed by the Conciliator and vote in favor of
the Plan, in accordance with Articles 161 and 162 of the Mexican
Business Reorganization Act; (ii) not (y) object to the Plan or
support any such objection by any third party, or otherwise
commence any proceeding or take any action to oppose or alter
the Plan or (z) propose, file, support or vote for any
restructuring, workout, or plan of reorganization for the
Company other than the Plan; and
(iii) perform any other reasonable requirement under the Mexican
Business Reorganization Act reasonably necessary to obtain
confirmation of the Plan by the Durango District Court;

(d) not object to or oppose any proof of claim filed by a
Supporting Creditor in the Concurso Proceeding;

(e) not (nor will it encourage any other person to), directly or
indirectly, delay, interfere, impede, or take any other action
that could reasonably be expected to delay, interfere or impede,
or that is inconsistent in any respect with, acceptance,
confirmation or implementation of the Plan;

(f) with respect to a Noteholder, neither (i) send, (ii) join in
or support, nor (iii) instruct any indenture trustee for the
Existing Notes (the "Indenture Trustee"), to send a written
notice (under section 502 of any indenture governing the
Existing Notes) accelerating the Company's or a Note Guarantor's
obligations under the Existing Notes (each, an "Acceleration
Notice"); and in the event an Acceleration Notice is sent to the
Company, shall provide, to the extent permitted in the
Indenture, written notice to the Indenture Trustee rescinding
and annulling any such Acceleration Notice pursuant to Section
513 of the respective indenture;

(g) with respect to its respective Existing Bank Debt or
Existing Notes,not take any action or exercise any remedy,
whether at law or in equity, against any of Los Cuatro; and

(h) (y) support the Preliminary Injunction entered in the 304
Case and any and all extensions to such order through and
including February 28, 2005 (collectively, the "Injunctive
Relief"), so long as any such Injunctive Relief is substantially
in accordance with the Preliminary Injunction and further
provides that (i) such order does not enjoin the Supporting
Creditors from, in the case an event of termination set forth in
Section 7 hereof has occurred and not been cured by the Company
and/or any of the Note Guarantors, terminating this Agreement or
commencing any action in Mexico against Los Cuatro and (ii) a
Supporting Creditor that so terminates this Agreement may seek
from the Bankruptcy Court in the 304 Case relief from the
Injunctive Relief for any and all remedies or other enforcement
actions in the United States, and that the Company and its
subsidiaries shall have the burden of proof for justifying the
continuation of such Injunctive Relief should any of the
Supporting Creditors seek to terminate or modify the Injunctive
Relief; and (z) except as provided for in such Injunctive
Relief, not object to the Injunctive Relief or support any
objection by any third party or otherwise file any pleading or
commence any proceeding or take any action to oppose the
Injunctive Relief; provided, however, that each Supporting
Creditor may raise and be heard on any issue arising in the
Concurso Proceeding so long as it is not attempting to oppose or
alter a Restructuring Document approved by it. A Supporting
Creditor may, but shall not be required to, use commercially
reasonable efforts to obtain the joinder of other creditors to
this Agreement or an agreement substantially similar to this
Agreement.

5. Holdings and Transfers.

(a) Each Supporting Creditor severally represents and warrants
to the Company that it is the beneficial owner, owner of record
with the power to bind the beneficial holder and/or the
investment advisor or manager on behalf of the beneficial owner,
of Existing Bank Debt, Existing Notes or Intercompany Claims, as
the case may be, of the issues and in the principal amounts (i)
in the case of a Bank Lender or Intercompany Creditor, set forth
on such Supporting Creditor's signature page and (ii) in the
case of a Noteholder, disclosed to U.S. counsel to the Ad Hoc
Bondholders Committee, Bingham McCutchen LLP ("Bingham"), in the
manner described in the following sentence (collectively, the
"Holdings"), and has the power to vote and dispose of the
Holdings in accordance with this Agreement on behalf of such
beneficial owners, and that the amount of the Holdings
constitutes the principal amount of all of such Supporting
Creditor's unsecured claims against the Company at the time this
Agreement becomes effective. Notwithstanding anything in this
section to the contrary, each Noteholder shall only be required
to disclose its Holdings to Bingham. Bingham shall (i) on the
date of the execution and delivery of this Agreement by the
Initial Signatory Noteholders, (ii) if a termination event under
Section 7 hereof occurs, and (iii) as may be reasonably
requested by U.S. counsel to the Company, certify in writing to
the Company (with a copy to counsel for the Bank Lenders) the
aggregate Holdings of the Initial Signatory Noteholders or
Noteholders, as the case may be, as certified to Bingham by such
Initial Signatory Noteholders or Noteholders.

(b) Each Supporting Creditor severally agrees that it will not
sell, pledge, assign, hypothecate, or otherwise transfer any
Holdings, and any such attempted sale, pledge, assignment,
hypothecation, or other transfer shall be void and without
effect unless the transferee executes and there is delivered to
the Company and to the other notice parties listed in Section 18
hereof, a written undertaking (in the form of the Transferee
Signature Page attached hereto as Schedule 1) agreeing to become
a party to this Agreement with respect to the Holdings being
transferred (but not any claims against the Company previously
owned or thereafter acquired), and such transferee (hereinafter
a "Transferee") shall thereupon be deemed to be a Supporting
Creditor with respect to the amount of such transferred Holdings
for purposes of this Agreement, and the transferor shall no
longer be a Supporting Creditor with respect to such transferred
Holdings. The Company hereby agrees that any Transferee
executing such an undertaking shall be entitled to the benefits
of this Agreement.

(c) This Agreement shall in no way be construed to preclude a
Supporting Creditor from acquiring additional Existing Bank
Debt, Existing Notes or other claims against the Company,
provided that such Supporting Creditor (other than a Transferee)
shall vote, and take such other actions in respect of, such
additional Existing Bank Debt, Existing Notes or other claims as
is provided for herein.

6. Additional Conditions Precedent. The following shall be
additional conditions to the effectiveness of this Agreement:

(a) The professional advisors to the Bank Lenders and the Ad Hoc
Bondholders Committee shall have been brought current with
respect to fees and expenses incurred during the Restructuring
negotiations.

(b) Each of the Company and Note Guarantors shall have (i)
entered into one or more agreements (or reaffirmed a previous
agreement) whereby it jointly and severally agrees to pay the
fees and expenses of the professional advisors to the Bank
Lenders and the Ad Hoc Bondholders Committee, whether incurred
before or after the filing of the Concurso Proceeding. Such
agreements shall be on terms substantially identical to the
terms of the previously existing fee agreements between the
Company and such professionals; and (ii) fund the retainers of
the professional advisors to the Bank Lenders and the Ad Hoc
Bondholders Committee, in the amounts agreed to among the
Company and each such professional in a separate writing.

(c) The Company shall have certified in writing to U.S. counsel
to both the Bank Lenders and the Noteholders that the Supporting
Creditors executing this Agreement hold unsecured debt of the
Company in a principal amount necessary to confirm the Plan in
the Concurso Proceeding.

7. Termination.

(a) Except as may otherwise be provided for herein, this
Agreement shall terminate as to a Supporting Creditor, if any of
the events set forth in the following paragraph occurs and is
not cured (which in the case of any date set forth in the
following paragraph, shall mean that the Company fulfills the
condition(s) notwithstanding such date) prior to the time such
Supporting Creditor electing to terminate this Agreement sends a
written notice (a "Notice of Termination") to the Company, with
a copy to the other Notice Parties in accordance with Section 18
hereof, terminating this Agreement and identifying the event
giving rise to such termination.

For purposes of this Section 7, the following shall constitute
events of termination:

1) The Company shall have failed to file (i) the Term Sheet with
the Institute or (ii) a Form 6-K with the Securities and
Exchange Commission attaching a copy of the Term Sheet and this
Agreement on or before two (2) business days from the
declaration of concurso in the Concurso Proceeding by the
Durango District Court; or

2) Following approval pursuant to Section 4 hereof, any
Restructuring Document shall be amended, modified or
supplemented (i) in any respect such that such Restructuring
Document is materially inconsistent with the Term Sheet without
having first obtained the consent of such Supporting Creditor,
or (ii) in any other respect without the consent of Bingham and
Mayer, Brown, Rowe & Maw LLP; or

3) The Company shall institute an insolvency proceeding other
than the Concurso Proceeding or the 304 Case; or

4) The Company shall allow the Concurso Proceeding to be
dismissed or converted to a liquidation under the Mexican
Business Reorganization Act; or a concurso shall be declared in
an involuntary proceeding under the Mexican Business
Reorganization Act commenced against the Company or any Note
Guarantor other than the Concurso Proceeding; or

5) Any Note Guarantor shall voluntarily institute an insolvency
proceeding or become a debtor under an existing insolvency
proceeding, or an involuntary insolvency proceeding other than
under the Mexican Business Reorganization Act shall be
instituted against any Note Guarantor other than by a Supporting
Creditor and not be dismissed within sixty (60) days from its
commencement; or

6) The Company or the members of the Note Guarantor Group shall
have failed to pay any fees and disbursements of Bingham,
Canales y Socios, Asesoria Juridica, Capstone Corporate
Recovery, LLC, Mayer, Brown, Rowe & Maw LLP, Martinez Algaba
Estrella de Haro y Galvan Duque, or Mexican restructuring
counsel to the Bank Lenders, as advisors to the Bank Lenders or
Noteholders, within seven (7) days of having been given written
notice by such party (including, without limitation, notice by
electronic mail) that an invoice is past due. If any portion of
such fees and expenses is disputed by the Company in good faith,
the Company need not pay the disputed portion if (i) the Company
timely pays that portion of fees and expenses not subject to
dispute, and (ii) the relevant parties promptly proceed in good
faith to resolve such dispute within fifteen (15) days; or

7) The Company or one or more Note Guarantors shall have
expressed in writing or by public press release or SEC filing or
Bolsa Mexicana de Valores filing its intention not to pursue the
Restructuring; or

8) The claims alleged against the Company (or any Note
Guarantor) consisting of: (i) that certain action filed April 2,
2004 by The Official Committee of Unsecured Creditors of
Durango-Georgia Paper Company, Durango-Georgia Converting Corp.,
and Durango-Georgia Converting LLC in the Name of and Behalf of
the Bankruptcy Estates of Durango-Georgia Paper Company,
Durango-Georgia Converting Corp, and Durango-Georgia Converting,
LLC, Adversary Proceeding No. 04-2070, pending before the United
States Bankruptcy Court for the Southern District of Georgia,
Brunswick Division; (ii) that certain action filed December 19,
2002, by HG Estate LLC, Case No. 02 CV 10059 (CSH), pending
before the United States District Court for the Southern
District of New York; and (iii) any other claims arising from or
related to Durango-Georgia Paper Company, Durango-Georgia
Converting Corp., and Durango-Georgia Converting LLC
(collectively, the "Contingent Claims"), are settled, resolved,
dismissed or treated in any manner, including, without
limitation, under a plan of reorganization, which in any case
contemplates the payment or delivery of money, property,
securities, or the incurrence of any other obligation of either
the Company or any Note Guarantor which is inconsistent with the
terms previously agreed upon by the Parties; or

9) The Company or any Note Guarantor shall fail to support an
application by the Ad Hoc Bondholders Committee and/or the Bank
Lenders, acting through their respective counsel, to be
appointed pursuant to Article 63 of the Mexican Business
Reorganization Act as conservators with the powers set forth in
Article 64 of the Mexican Business Reorganization Act, including
the right to be heard in the Concurso Proceeding; or

10) The Company or one or more of the Note Guarantors,
Intercompany Creditors or Individual Signatories shall take any
action which is materially inconsistent with the implementation
of the Restructuring;or

11) If the business, properties, assets or financial condition
of the Company and the Note Guarantors (taken as a whole) shall
have been materially and adversely affected since the date of
this Agreement by reason of any act of God, war, civil
disturbance, terrorism, earthquake, flood, fire, other casualty
event, expropriation or nationalization, as reasonably
determined in writing by (i) Bank Lenders holding at least 66
2/3% of the aggregate amount of the Existing Bank Debt or
Noteholders holding at least 66 2/3% of the aggregate amount of
the Existing Notes, or (ii) Bank Lenders and Noteholders holding
at least 51% of the aggregate amount of Existing Notes and
Existing Bank Debt; or

12) The Company shall fail to confirm the Plan by February 28,
2005.

(b) Except as otherwise provided in Section 25 hereof, this
Agreement shall terminate automatically without any action on
the part of any Party to this Agreement upon consummation of the
transactions contemplated under the Term Sheet.

8. Representations and Warranties.

(a) Each Supporting Creditor (other than the Individual
Signatories) severally hereby represents and warrants to the
Company that:

1) It has the requisite corporate power and authority to enter
into this Agreement and to carry out the transactions
contemplated by, and perform its respective obligations under,
this Agreement;

2) The execution and delivery of this Agreement and the
performance of its obligations hereunder have been duly
authorized by all necessary corporate or other organizational
action on its part;

3) The execution, delivery, and performance by it of this
Agreement does not and shall not (i) violate any provision of
law, rule, or regulation applicable to it or any of its
affiliates, or its certificate of incorporation or bylaws or
other organizational documents or those of any of its
affiliates, or (ii) conflict with, result in a breach of, or
constitute (with due notice or lapse of time or both) a default
under any material contractual obligation to which it or any of
its affiliates is a party;

4) The execution, delivery, and performance by it of this
Agreement does not and shall not require any registration or
filing with, the consent or approval of, notice to, or any other
action with any federal, state, or other governmental authority
or regulatory body;

5) This Agreement is the legally valid and binding obligation of
it, enforceable against it in accordance with its terms, except
as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium, or other similar laws relating to or
limiting creditors' rights generally, or by equitable principles
relating to enforceability;

6) It is an "accredited investor" within the meaning of Rule 501
of the Securities and Exchange Commission under the Securities
Act, with sufficient knowledge and experience to evaluate
properly the terms and conditions of the Term Sheet and this
Agreement, and has been afforded the opportunity to discuss the
Term Sheet and other information concerning the Company with the
Company's representa- tives, and to consult with its legal and
financial advisors with respect to its investment decision to
execute this Agreement, and (ii) it has made its own analysis
and decision to enter into this Agreement and otherwise
investigated this matter to its full satisfaction and will not
seek rescission or revocation of this Agreement; and

(b) The Company and each of the Note Guarantors represent and
warrant to each of the Supporting Creditors that:

1) It has the requisite corporate power and authority to enter
into this Agreement and to carry out the transactions
contemplated by, and perform its respective obligations under,
this Agreement;

2) The execution and delivery of this Agreement and the
performance of its obligations hereunder have been duly
authorized by all necessary corporate or other organizational
action on its part;

3) The execution, delivery, and performance by it of this
Agreement does not and shall not (i) violate any provision of
law, rule, or regulation applicable to it or any of its
affiliates, or its certificate of incorporation or bylaws or
other organizational documents or those of any of its
affiliates, or (ii) conflict with, result in a breach of, or
constitute (with due notice or lapse of time or both) a default
under any material contractual obligation to which it or any of
its affiliates is a party;

4) The execution, delivery, and performance by it of this
Agreement does not and shall not require any registration or
filing with, the consent or approval of, notice to, or any other
action with any federal, state, or other governmental authority
or regulatory body;

5) This Agreement is the legally valid and binding obligation of
it, enforceable against it in accordance with its terms, except
as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium, or other similar laws relating to or
limiting creditors' rights generally, or by equitable principles
relating to enforceability;

6) It has been advised by professionals of international
standing and experience in transactions of this nature, and has
been afforded the opportunity to discuss and evaluate the term
and conditions of the Term Sheet and this Agreement, and to
consult with its legal and financial advisors with respect to
its decision to execute this Agreement and it has made its own
analysis and decision to enter into this Agreement and otherwise
investigated this matter to its full satisfaction and will not
seek rescission or revocation of this Agreement;

7) To the best of their knowledge and belief, the debt held by
the Intercompany Creditors and the Individual Signatories
represent the only debt of the Company held by persons or
entities affiliated with the Company; and

8) The Individual Signatories collectively hold, directly or
indirectly, a majority of the issued and outstanding shares of
the Company's capital stock.

9) Specific Performance. It is understood and agreed by each of
the Parties that money damages would not be a sufficient remedy
for any breach of this Agreement by any Party, and each non-
breaching Party shall be entitled to seek specific performance
and injunctive or other equitable relief as a remedy for such
breach.

10) Material Non-Public Information. If the Company or any Note
Guarantor, Intercompany Creditor or Individual Signatory
proposes to provide any Supporting Creditor with material
information concerning the Company which is not available to the
public, the Company or such Note Guarantor, Intercompany
Creditor or Individual Signatory shall first inform such
Supporting Creditor of such fact and give it the option to
decline to receive such information.

11) Indemnification of Supporting Creditors. The Company and
each of the Note Guarantors shall, jointly and severally,
indemnify each of the Indemnified Parties and hold them harmless
from and against any and all claims, liabilities, actions,
suits, damages, fines, and judgments (including the current
payment of legal fees and expenses) directly or indirectly
resulting from, arising out of, or in any way connected with (a)
such Supporting Creditor's entering into this Agreement or (b)
any action taken by such Supporting Creditor in good faith which
is in furtherance of the Restructuring or required by this
Agreement, including any action permitted by the final sentence
of Section 4 hereof. An Indemnified Party shall promptly notify
the Company and each of the Note Guarantors in writing of any
claim made against it which falls within the scope of this
indemnity, and the Company and each of the Note Guarantors shall
assume the defense of such claim, including, without limitation,
the employment of counsel satisfactory to the Company and the
Note Guarantors, at its expense.

Each Indemnified Party shall have the right to employ separate
counsel in any such claim, action or proceeding and to consult
with the Company in the defense thereof, and the obligation to
pay fees and expenses of such counsel shall be joint and several
obligations of the Company and each Note Guarantor unless the
Company or a Note Guarantor shall have assumed the defense of
such claim, action or proceeding. The Company or any of the Note
Guarantors shall not effect any settlement of any such claim
unless such settlement contains a full and unconditional release
of the Indemnified Party. As used in this Section "Indemnified
Party" shall mean any one or more of the Supporting Creditors or
their officers, directors, employees, agents,representatives,
advisors, attorneys, successors or assigns.

12) Successors and Assigns. Except as otherwise provided in this
Agreement, this Agreement is intended to bind and inure to the
benefit of each of the Parties and each of their respective
successors, assigns, heirs, executors, administrators, and
representatives.

13) No Third-Party Beneficiaries. Unless expressly stated
herein, this Agreement shall be solely for the benefit of the
Parties and no other person or entity shall be a third-party
beneficiary of this Agreement.

14) Prior Agreements. This Agreement supersedes all prior
negotiations and agreements among the Parties with respect to
the matters set forth herein.

15) Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York,
regardless of the laws that might otherwise govern under
applicable principles of conflicts of law of the State of New
York.

16) Venue. By execution and delivery of this Agreement, each of
the Parties irrevocably and unconditionally agrees that any
legal action, suit, proceeding or other contested matter with
respect to any matter under or arising out of or in connection
with this Agreement, or for recognition or enforcement of any
judgment rendered or order entered in any such action, suit, or
proceeding, shall be brought in the Bankruptcy Court. Each Party
irrevocably waives any objection it may have to the venue of any
action, suit or proceeding brought in such court or to the
convenience of the forum.

17) Personal Jurisdiction. By execution and delivery of this
Agreement, each of the Parties irrevocably and unconditionally
submits to the personal jurisdiction of the Bankruptcy Court for
purposes of any action, suit or proceeding or other contested
matter arising out of or relating to this Agreement, or for
recognition or enforcement of any judgment rendered or order
entered in any such action, suit, or proceeding or other
contested matter.

18) Notices. All notices (including, without limitation, any
Notice of Termination) and other communications hereunder shall
be in writing and shall be deemed to have been duly given if
personally delivered by courier service, messenger, or facsimile
to the following addresses, or such other addresses as may be
furnished hereafter by notice in writing:

(a) if to Corporacion Durango, any of the Note Guarantors or the
Intercompany Creditors:

Corporacion Durango, S.A. de C.V. Potasio No. 150
Cd. Industrial - Durango C.P. 34220
Durango
Mexico
Attention: Mayela Rincon
Facsimile: 011-52-618-814-0048

-and-

Javier Perez Rocha
Cuahtemoc 84-A
Col. Toriello Guerra
14050 Mexico, D.F.
Facsimile: 52 (55) 5666-2562

(b) if to a Noteholder, to counsel for the Noteholders:

Bingham McCutchen LLP
One State Street
Hartford, Connecticut 06103-3178
Attention: Michael J. Reilly; William B. Kelly; and
William F. Govier
Facsimile: (860) 240-2800

(c) if to a Bank Lender, to counsel for the Bank Lenders:

Mayer, Brown, Rowe & Maw LLP 1675 Broadway
New York, NY 10019-5820 Attention: David K. Duffee Facsimile:
(212) 849-5630

19) Headings. The section headings of this Agreement are for
convenience of reference only and shall not, for any purpose, be
deemed a part of this Agreement.

20) Amendments. The Parties acknowledge and agree that the
Termination Events set forth in Section 7 hereof and the Term
Sheet attached hereto as Exhibit A are a material inducement for
the Supporting Creditors to enter into this Agreement, and that
no grace periods are intended. Accordingly, except as otherwise
provided herein, no waiver, extension or modification of any
Termination Event or Term Sheet may be effectuated as to any
Supporting Creditor except in a writing signed by the Company
and such Supporting Creditor. As to any other provision
contained in this Agreement, this Agreement may not be modified,
amended, or supplemented, and no provision hereof waived, except
in a writing signed, as to the Bank Lenders, by the Company and
Bank Lenders holding at least 66 2/3% of the aggregate amount of
Existing Bank Debt, and as to the Noteholders, by the Company
and Noteholders holding at least 66 2/3% of the aggregate amount
of Existing Notes.

21) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all
of which shall constitute one and the same Agreement. Delivery
of an executed signature page of this Agreement by facsimile
shall be effective as delivery of a manually executed signature
page of this Agreement.

22) No Waiver of Participation and Reservation of Rights. Except
as expressly provided in this Agreement and in any amendment
among the Parties, nothing herein is intended to, or does, in
any manner waive, limit, impair, or restrict the ability of any
Supporting Creditor or the Company to protect and preserve its
rights, remedies and interests, including, without limitation,
its claims against Corporacion Durango or any of the Note
Guarantors or its full participation in any bankruptcy case
filed by Corporacion Durango, or any of its affiliates and
subsidiaries, including without limitation, the Concurso
Proceeding. The Parties fully reserve any and all of their
rights in the event the transactions contemplated by this
Agreement or in the Plan are not consummated or this Agreement
is terminated, including all rights to

(i) object to any request in the 304 Case, including without
limitation, the Injunctive Relief, and (ii) request to
accelerate the final hearing on the Company's request for the
304 Case.

23) Interpretation. This Agreement is the product of
negotiations among the Supporting Creditors, the Company and the
Note Guarantors, and in the enforcement or interpretation
hereof, is to be interpreted in a neutral manner, and any
presumption with regard to interpretation for or against any
Party by reason of that Party having drafted or caused to be
drafted this Agreement or any portion hereof, shall not be
effective in regard to the interpretation hereof.

24) Acknowledgement. This Agreement is not and shall not be
deemed to be a solicitation of votes for the acceptance of the
Plan.

25) Survival. The representations, warranties, covenants and
other agreements contained in this Agreement shall cease to be
of any force and effect upon the termination of this Agreement
pursuant to Section 7 hereof; provided, however, that the
obligations of the Company and the Note Guarantors set forth in
Section 11 hereof shall survive any such termination for a
period of one year from the date of such termination.

26) Limitation of Liability. Notwithstanding anything in this
Agreement to the contrary, (i) if any of the Individual
Signatories fails to perform any of its obligations under this
Agreement, the sole and exclusive remedy of the other Parties as
against the Individual Signatory shall be the right, if any, to
terminate this Agreement pursuant to Section 7 hereof; (ii) none
of the Individual Signatories, on the one hand, and the other
Supporting Creditors, on the other hand, shall be liable to each
other for any damages arising from, in connection with, or as a
result of a failure to perform or termination of this Agreement
by any Party hereto, and (iii) the Individual Signatories, on
the one hand, and the other Supporting Creditors, on the other
hand, covenant and agree among themselves not to sue each other
for any claims arising from, in connection with, or as a result
of a failure to perform or termination of this Agreement.

CONTACT: Corporacion Durango, S.A. de C.V
         Ms. Mayela R. Velasco
         Phone: +52 (618) 829 1008
         e-mail: mrinconv@corpdgo.com.mx

         White & Case LLP
         Mr. Emilio J. Alvarez-Farre
         Phone: (305) 995-5219
         e-mail: ealvarez@whitecase.com


JAFRA COSMETICS: Moody's Confirms Ratings
-----------------------------------------
Moody's Investors Service confirmed the ratings of Jafra
Cosmetics International, Inc. and its affiliates following
Moody's completion of its review of the company's merger with
Vorwerk & Co. KG.

The following ratings were confirmed:

- Distribuidora Comercial Jafra, S.A. de C.V. and Jafra
Cosmetics International, Inc.:

$200 million senior subordinated notes due 2011, at B3.

- Jafra Worldwide Holdings (Lux), S.aR.L:

Senior implied rating, at B1 and Senior unsecured issuer rating,
at B2

The outlook remains positive.

Moody's said the confirmation reflects Jafra's robust business
model in Mexico and its more streamlined focus on fewer markets,
offset by the limited history of operations under its new
corporate parent, limited debt pay down since its 2003
recapitalization, and its heavy reliance for sales and
profitability on its core Mexican operations.

The ratings also reflect management's experience in implementing
strategies to grow its consultant base and improve productivity
and a strong track record of product quality and innovation, as
well as the relatively recession resistant nature of its
business.

The ratings also reflect the competitive and operating
challenges of a multi-level direct selling model, with the
attendant risks of consultant turnover and productivity; the
foreign exchange risk of having significant dollar denominated
debt service expenses; and Jafra's relatively high inventory
levels and its practice of extending credit terms to its
consultants that result in ongoing working capital needs.

Risks to Jafra's ratings include a new corporate parent,
Vorwerk, with a yet unknown impact on Jafra's business and
operating strategy and the heavy concentration of the company's
business with 63% (2003) of sales and 78% (2003 after certain
adjustments) of operating profit coming from Mexico.

CONTACT:  JAFRA COSMETICS INTERNATIONAL S.A. DE C.V.
          Blvd. Adolfo Lopez Mateos #515
          Colonia Tlacopac
          01040 Mexico, D.F.
          Tel: 52-55-5490-1700
          Email: adrian_moncada@jafra.com


NAFIN-BANCOMEXT: Congress Rules Out Merger, Liquidation
-------------------------------------------------------
Mexico's Congress discussed and rejected Wednesday a proposal by
President Vicente Fox to merge or liquidate State credit
organization Nacional Financiera (Nafin) and the National
Foreign Trade Bank (Bancomext), reports Cronica.

Deeming the options unviable, the Permanent Commission requested
the Executive branch to find other options to strengthen their
financial situations.

"Congress rejected the merger or liquidation because it believes
that it is an inadequate solution that damages the capacity of
the Mexican State and the financial system to support the
sustained and equitable development of Mexico," the Commission
said in an accord.

The document explains that the reasons why these banks cannot
fulfill their functions lie in "the lack of an efficient
government promotional strategy, in the application of
inadequate policies, the need for sufficient support and the
incapability of its directors," the accord added.

It stated that the merger of liquidation of the institutions is
a "false" solution that confuses their problems with the absence
of strategy.


PEMEX: Issues Another $44M Short-Term Bonds
-------------------------------------------
Mexico's state oil company Pemex issued MXN500 million (US$44mn)
worth of short-term bonds on the Mexico City stock exchange on
August 26, reports Business News Americas.

In a statement, the company revealed that the 28-day, fixed
interest bonds pay 7.46%, and the auction was 10 times
oversubscribed. Scotiabank Inverlat and Santander Serfin acted
as intermediaries on the transaction.

On August 18, Pemex also issued short-term bonds worth MXN500
million and was 17 times oversubscribed.


VITRO: S&P Affirms Ratings; Outlook Negative
--------------------------------------------
Standard & Poor's Ratings Services affirmed its 'B+' long-term
local and foreign currency corporate credit ratings on glass
manufacturer Vitro S.A. de C.V. (Vitro). Vitro's 'mxBBB' long-
term national scale corporate credit rating was also affirmed.
The outlook is negative.

Standard & Poor's also affirmed the 'B-' rating assigned to
Vitro's notes due 2013 and to Servicios y Operaciones
Financieras Vitro S.A. de C.V.'s notes due 2007 (which are
guaranteed by Vitro).

"The ratings on Vitro S.A. de C.V. are constrained by the
company's high financial leverage, its limited liquidity, and a
challenging operating environment across its product lines,"
said Standard & Poor's credit analyst Jose Coballasi. "The
ratings are supported by the company's leading position in flat
glass, glass containers, and glassware business in Mexico, and
by Vitro's export activities and international operations
(particularly in the U.S.), which accounted for 50% of total
sales."

The negative outlook reflects the fact that continued weakness
in the company's key financial measures or the weakening of its
liquidity could lead to a downgrade. A recovery in the company's
operating and financial performance and the continued success of
its refinancing plans could lead to a stable outlook.

Monterrey, Mexico-based Vitro, through its subsidiary companies,
is Mexico's leading glass producer. Vitro is a major participant
in three principal businesses: flat glass, glass containers, and
glassware. Vitro also produces raw materials and equipment and
capital goods for industrial use.

ANALYSTS:  Jose Coballasi, Mexico City (52) 55-5081-4414
           Santiago Carniado, Mexico City (52) 55-5081-4413



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

* $204M IMF Credit Line Available for Uruguay
---------------------------------------------
The Executive Board of the International Monetary Fund (IMF)
completed Friday the fifth review under the SDR 2.13 billion
(US$3.1 billion) Stand-By Arrangement (SBA) for Uruguay.
Completion of the review makes SDR 139.8 million (about US$204
million) immediately available to Uruguay. In completing the
review, the Board granted waivers of nonobservance of two
structural performance criteria on banking sector reforms and
waivers of applicability of end-June 2004 performance criteria,
for which data was not available, on the public sector primary
balance and the nonfinancial public sector gross debt.

Furthermore, upon request by Uruguay in view of the improvement
in Uruguay's economic outlook and external position, the
remaining access under the SBA was reduced by SDR 139.8 million.
Further disbursements under the SBA will be rephased in two
equal installments of SDR 139.8 million each (about US$204
million) that will become available following the completion of
Executive Board reviews expected in November 2004, and February
2005.

The SBA was approved on March 25, 2002 in an amount of SDR 594.1
million (about US$867 million) for a 24-month period (see Press
Release No. 02/14). The SBA was augmented by SDR 1.16 billion
(about US$1.7 billion) on June 25, 2002 (see News Brief. No. 2
54), and by SDR 376 million (about US$549 million) on August 8,
2002 (see News Brief. No. 02/87). Total commited resources under
the Stand-By Arrangement now amount to SDR 1.99 billion (US$2.9
billion) taking into account the recently approved reduction in
access.

In commenting on the Executive Board decision, Agustín Carstens,
Deputy Managing Director and Acting Chair, said:

"Uruguay's performance under the Stand-By Arrangement continues
to be strong. The ongoing economic recovery has been faster than
expected, reflecting implementation of prudent policies and a
favorable external environment. Unemployment is down, financial
indicators continue to improve, and the economic outlook for the
remainder of 2004 and 2005 is encouraging. Consolidating the
stabilization gains and sustaining the recovery will require
continued implementation of sound policies, especially in the
fiscal and bank restructuring areas, and policy continuity
during the upcoming election period.

"The authorities' commitment to a higher primary surplus target
for 2004 is welcome, and will help enhance prospects for debt
sustainability. To ensure that the target for this year will be
met, primary spending will need to be kept within the program
limits, tax revenue maintained, and public tariffs adjusted in a
timely manner in line with cost developments. To bolster fiscal
prospects over the medium term, revenue administration and the
institutional framework for the budget will need to be
strengthened, and pending reforms of the tax system and
specialized pension funds implemented. The authorities are
seeking consensus in support of the adoption of these essential
reforms.

"Monetary policy has been appropriately tightened in recent
months to ensure that inflation returns within the target band.
The authorities' intention to raise the net international
reserves target for 2004 will lock in part of the
overperformance on the reserves front achieved in the first half
of the year.

"Good progress is being made in restructuring the public
financial institutions. BROU's strategic and operational reforms
are proceeding as planned, and the BHU is reforming its
operations with World Bank support. The process of asset
disposal of three liquidated banks is now moving forward.
Additional relief to bondholders and large depositors of the
liquidated banks needs to be avoided.

"The authorities are committed to maintaining the policy
framework through the upcoming election period, and recognize
that there is no room for slippages. Attaining the program's
objectives will be critical for sustained growth, financial
stability, and public debt sustainability," Mr. Carstens said.

CONTACTS: International Monetary Fund
          700 19th Street, NW
          Washington, D.C. 20431 USA

          Public Affairs:
          Phone: 202-623-7300
          Fax: 202-623-6278

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



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

CANTV: S&P Upgrades Foreign Currency Corporate Credit Rating
------------------------------------------------------------
Standard & Poor's Ratings Services raised its foreign-currency
corporate credit rating on Venezuelan full-service
telecommunications company Compania Anonima Nacional Telefonos
de Venezuela (CANTV) to 'B-' from 'CCC'.

"The rating action follows the upgrade of the foreign currency
sovereign rating on the Bolivarian Republic of Venezuela, which
was upgraded yesterday [Thursday] to 'B' from 'B-'," said
Standard & Poor's credit analyst Manuel Guerena. Subsequently,
Standard & Poor's withdrew its rating on CANTV. There was no
debt owed by CANTV rated by Standard & Poor's.

ANALYSTS:  Manuel Guerena, Mexico City (52) 55-5081-4411
           Santiago Carniado, Mexico City (52) 55-5081-4413



                            ***********


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

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