October 8, 1998

Brazil Aims To Hang On By A $US30 Billion Thread

Eric Ellis, Rio De Janeiro

It was a bikini - not something you'd ordinarily find on Wall Street, Threadneedle Street or at the Australian Stock Exchange for that matter.

More correctly, it was a G-string, what Cariocas, as the 11 million people of Rio de Janeiro are known - call fio dental, or dental floss, for reasons that become obvious during an afternoon stroll along Rio's notorious Copacabana Beach.

And it was on sale alongside lists of Brazil's top 100 companies and drier economic tracts in the gift shop of Rio's stock exchange, the Bolsa de Valores.

What was even more remarkable to a foreign eye was that the official, clearly a true Carioca, escorting The Australian Financial Review on a tour of the bolsa saw nothing odd about the gift shop selling fios dentales or their male equivalent, a pair of Speedos.

"They've got the bolsa logo on them," protested Senhor Carlos Alberto de Azevedo.

Brazil will need much more than just novel marketing to see off the economic crisis that threatens to devastate it and its Latino neighbours, and possibly pull booming North America into recession for good measure.

Brazil's stockmarkets in Sao Paulo and Rio are the current ground zero of what Brazilians call la crise, as closely monitored as a barometer of confidence in Washington and New York as they are at home.

On the Rio bolsa's nearby trading floor, traders and investors yesterday struggled to make sense of a market that has nearly halved in value in just two months and crippled foreign confidence in Brazil.

Just two months ago, they seemed on the verge of untold riches.

The world's biggest privatisation, the $US20 billion-plus break-up and float of the national telecom, Telebras, had just taken place and was deemed a huge success. Learned analysts said the float would herald unlimited prosperity, allowing Latin America to take over where Asia failed.

Today, the thousands of small investors, and the score of mostly European telecom companies, that bought into the Telebras units, have investments notionally worth half their outlay.

The Brazil debacle has left investors and companies in Spain, Portugal and Italy in despair.

At the Rio bolsa, which shares Brazil's trading with the larger Sao Paulo exchange to the south, about 50 computerised traders were largely biding their time, awaiting latest developments from Brasilia, but more so from Washington, where the International Monetary Fund is assembling a $US30 billion bail-out for an increasingly desperate Brazil.

True, the market was up 6 per cent at the time, later to close 3.5 per cent up, but activity was lacklustre amidst the political horse-trading that Brazil's newly elected President, Fernando Henrique Cardoso, must do before he can announce any IMF-friendly austerity package.