In this issue:

Parmalat's Brazil Subsidiaries File for Bankruptcy

Argentine Leader: IMF's Krueger Thinks Like the Vultures

Russian-Brazilian High-Tech Cooperation Strengthened


From Volume 3, Issue Number 5 of Electronic Intelligence Weekly, Published Feb. 3, 2004

World Economic News

Parmalat's Brazil Subsidiaries File for Bankruptcy

Two of the three Parmalat corporate entities operating in Brazil—the holding controlled by the Italian parent company, Parmalat Participacoes do Brasil, Ltda., and its actual productive arm, Parmalat Brasil, S.A. Industria de Alimentos—filed for court protection from their creditors on Jan. 28. If their request is granted, the companies would have two years to restructure their debts with suppliers and the banks. The president of Parmalat Brasil said that the company was forced to act, to head off the mounting number of suits filed by creditors and suppliers, seeking payments, or, in the case of five companies, requesting the company be placed in involuntary bankruptcy.

There are two ramifications of the move.

From the standpoint of the Brazilian physical economy, at least 20,000 milk producers in 14 states who supply Parmalat are affected. According to a survey carried out by the National Agricultural Confederation (CNA), Parmalat Brasil owes R$14 million (approximately US$5 million) to milk producers, on contracts going back to the end of November, a debt which will double by Feb. 16, if payments aren't made. As one representative of the milk producers put it: "This is a social problem, not only an economic one." Entire communities will be wiped out, should these producers not be protected. The move apparently caught the government by surprise, and an emergency meeting was called in Brasilia of representatives of the Agriculture, Treasury, and Justice Ministries, the Central Bank, the Banco do Brasil, and a special commission responsible for the milk industry. The government's concern, according to Agriculture Minister Roberto Rodrigues, is to keep the producers afloat, and to ensure no reduction in the national milk supply occurs, which could lead to scarcity.

The other aspect, of course, are the ramifications for the global debt bubble. Parmalat's operations in Brazil account for 10% of the company's global revenue, and employ a sixth of the overall company's 30,000 global workforce. Parmalat Brasil's bank debt is estimated at only between US$110-160 million. The holding company, Parmalat Participacoes, is where things could become financially dicey. Participacoes's total debt is estimated variously at US$1.4 or 1.8 billion, owed to approximately 12 banks. It is backed, by and large, only by the guarantee of the parent company—which is bankrupt, so the bank creditors of the Brazilian holding company are trying to join the creditors' committee of the industrial company, to get their hands on its revenue. O Globo comments Jan. 29 that specialists consider Participaoes dealings to be "a bit nebulous." According to the daily, the Brazilian holding company is responsible not only for Italian company's investments in Brazil and all of Ibero-America, but also for those in countries from other regions, such as China. If the creditor banks of Parmalat Participacoes succeed in unifying the handling of the two companies, things really get complicated, one source told O Globo, as the company "has more creditors than the little saints distributed in San Marcos Plaza, in Venice."

Argentine Leader: IMF's Krueger Thinks Like the Vultures

Anne Krueger, the Deputy Managing Director of the IMF, told Argentina it should be more "constructive" in dealing with foreign creditors, and speed up negotiations to restructure $99 billion in defaulted debt, Infobae reported Jan. 26.

Argentina is negotiating, said Chief of Cabinet Alberto Fernandez, and it's a process that will take some time. "Any urgency is Anne Krueger's, not ours," he added. "I don't know whether she's defending the vulture funds, but what I do have clear is that she's a person whose position is very much in accordance with those of Argentina's creditors who are strongly speculative, and want a fast negotiation." It is the vulture funds that are lobbying the IMF to pressure Argentina to make concessions on the restructuring, Fernandez said.

Russian-Brazilian High-Tech Cooperation Strengthened

Cooperation between Russia and Brazil on energy, space exploration, and biotechnology, was discussed during a Jan. 23 meeting of the Russian-Brazilian Commission for Trade and Economic Cooperation in Moscow, Itar-Tass reported Jan. 23. Technological cooperation in aviation and the military sphere is another area under consideration, also, Russian Deputy Prime Minister Boris Alyoshin announced in advance of the meeting, adding that Russia may sell licenses for the production of medicines in Brazil as well.

Contracts for machine-building for hydroelectric plants are under discussion, and Russia and Brazil might also build an oil refinery together. Russia and India are both interested in working on hydropower plants in Brazil, while cooperation on pipelines is another likely option.

An agreement for cooperation in space exploration between Russia and Brazil is expected to be signed by the fall of 2004. The agreement envisages a $500-700 million program through 2008, and would include development of a Brazilian launch site and launch of Brazilian satellites.

All rights reserved © 2004 EIRNS