global markets monitor prepared presentaton argentina brazil sp trip michael guerriero said add e mail list john lavorato jim hughes already added director sovereign risk foreign exchange group within enron research vince kaminski weeks ago gary hickerson asked send information kevin hannon argentina brazil india korea turkey uk sent excerpts past global markets monitors gmm published maureen raymond castaneda gwyn koepke enron research department thought would helpful add list recepients weekly publication please find attached two recent issues gmm purpose product inform traders well various business units across corporation important international economic events impact currency financial markets special emphasis placed potential central bank policy changes impact changes interest rates currencies also emphasize emerging markets countries argentina brazil india korea turkey select countries relevant news credit rating change midst economic financial crisis past issues located website address http enaresearch corp enron com research framework default asp also attached convience previous gmm articles jan 2000 aug 10 2001 brazil argentina also attched internally distributed e mail outlining risks default devaluation argentina finally assumptions behind brazil curve question regarding argentina brazil countries enron assets group help reached x 3 0396 houston regards maureen raymond castaneda inline attachment follows mujica mitra date monday july 16 2001 2 13 21 gmt subject fyi original message koepke gwyn sent thursday july 12 2001 8 52 pm hickerson gary shahi pushkar stuart iii william port david gorte david zipter rudi buy rick kaminski vince j cc raymond maureen subject ena research argentina default devaluation risk rises brazil feels effects contagion date 12 july 2001 maureen raymond castaneda gwyn koepke believe risk argentine debt default increased peso devaluation risk also risen substantially last several days due recent economic fiscal developments argentina believe argentina lacks fiscal monetary maneuverability lift 3 year recession exacerbated global slowdown strong peso argentina fiscal position weakened substantially due economic weakness limits government revenue receipts needed balance fiscal deficit pay country debt service loss investor confidence caused spreads widen despite argentina need rollover 8 bn short term letes argentine government debt end year yields paid week treasury auction levels sustainable medium term three month treasury yields 14 01 versus 9 1 paid auction june 26 7 89 june 12 addition suffering widening yields argentina forced shorten tenor debt mix 6 month 1 year bonds issued previously 3 month securities week auction due increased risk aversion longer term government paper local investors pension funds banks sharp increase letes yields inability issue longer maturities highly indicative difficulty argentine government rolling 8 bn short term paper remainder year sustainable rates weakens fiscal position due higher interest payments recession exacerbated strong peso caused persistently strong us dollar hurt argentina export competitiveness especially vis vis brazilian real depreciated 25 relative usd since beginning year result factors believe risks argentine debt default peso devaluation mounting argentina increasingly vulnerable run banking system argentines switching peso dollar deposits argentina limited forex reserves constrain central bank ability support peso private sector deposits withdrawn converted u dollars private sector deposits 74 bn 33 peso denominated 25 bn 67 foreign currency denominated deposits dwarf argentina official forex reserves 25 bn total private sector deposits fell 5 bn 77 5 bn 72 4 bn february end april year stabilizing 74 bn july 6 th political uncertainty high throws serious doubt economic minister cavallo ability win opposition support new fiscal austerity program announced late yesterday cavallo needs win approval fiscal agenda national level also provincial level easy considering 3 year contraction failure gain support cutback spending worsen argentina fiscal woes cause deterioration investor confidence external internal pressures leave exchange rate vulnerable speculative attack threaten 1 1 dollar peg especially light country limited foreign exchange reserves today argentina 1 month ndf traded pl 15 implying risk 15 devaluation yesterday 1 month ndf traded pl 05 implying increased probability devaluation since yesterday also today 1 year ndf traded 1 25 implying 25 devaluation result internal external pressures believe risk peso devaluation increased substantially danger steep devaluation private sector firms hold dollar denominated debt long pesos short dollars suffer sharply higher debt payments could cripple already tenuous economic situation causing deterioration government revenue lower tax receipts developments argentina impact brazil 3 main channels currency volatility contagion argentina lead substantially weaker brazilian real triggered general sell argentine stocks bonds currency real depreciated 24 since beginning year close today r 2 55 stem real recent decline central bank president fraga hiked interest rates 150 bp simultaneously intervened forex market june 22 stemmed real depreciation one week see gmm 29 june recent currency volatility could result central bank intervention drawing brazil forex reserves fraga indicated central bank intervene support real value weak real also translate higher inflation expectations brazil emerging market credit spreads argentina represents 25 total emerging market debt traded current investor concern argentina consequently widened emerging market debt spreads wider spreads put upward pressure overnight rates brazil reducing liquidity increasing costs debt service brazil trade mechanism downward pressure economic output brazil already aggravated drought induced energy crisis brought weaker export market growth argentina also weaker argentine peso would reduce brazil export competitiveness within mercosur trade bloc week gmm contain details contagion effects brazil well argentina disappointing treasury bill auction trend private sector deposits cavallo new fiscal measures cut spending argentina heightened political risk associated need fiscal austerity amid concerns provincial political support p debt downgrade b one notch moody rating b 2 link gmm website http enaresearch corp enron com research framework default asp pull sovereign fx risk global markets monitor recent issues gmm coverage argentina brazil gmm 29 june brazil copom intervenes forex market stem real decline bolsters reserves defend currency future gmm 22 june argentina introduces new exchange rate system traded sector impact peso discussed gmm 15 june brazil energy crisis impact growth outlook gmm 8 june argentina completes successful debt swap gmm 8 june brazil energy rationing mandate impact output key brazilian commodities