The Miami Herald from Miami, Florida • 194

'I tf A 1 ilL ffs Ctrl SECTION MONDAY JUNE 19 1995 31k iffiami Herald Argentina about to miss another IMF target The question is does it really matter? it also take into account about $4 billion in payments due this year on ACQUISITIONS By RICHARD JARVIE Bloomberg News Service BUENOS AIRES Argentina will probably fail to meet budget targets it agreed to with the International Monetary Fund two months ago in return for an emergency loan of $28 billion And nothing much may happen not the way panicky investors reacted last week when they sent Argentine stocks skidding to their lowest level in a month Though speculation that Economy Minister Domingo Cavallo the architect of the economic program might resign also weighed heavily on share prices the prospect of a breach in the IMF deal raised concern that both the program and ability to service its foreign debt might be in jeopardy Yet economists and analysts doubt that failure to abide by the IMF commitments will have such dire effects For one thing Argentina fulfilled a single one of the 14 economic reform programs made with the IMF the foreign debt that pledge the country now looks likely to violate thanks Argentine officials say to a slump in government revenues brought on by the austerity program and slowing growth Tax and other revenues are running well below expectations in the two months since the IMF agreement was signed In April government revenue totaled $333 billion or 23 percent less than the planned $341 billion In May receipts of $376 billion fell 65 percent short of the target Cavallo blames the shortfall on a credit squeeze and resultant high interest rates which encouraged companies to delay tax payments rather than borrow money for working capital Revenues says Cavallo should pick up over the next two months as the PLEASE SEE ARGENTINA 2B since 1958" In some cases the loan programs were suspended In most new targets were set and the loans continued This time round Argentina at most will probably be forced to make additional pledges to raise taxes and cut spending in return for continuing aid Mexico lingering in the background the last thing the IMF would want to do is unleash a crisis in said Roberto Lavagna an economist and former minister for industry and international trade devaluation of its peso last December sparked a flight by foreign investors that drained capital throughout the region driving down share prices and squeezing credit Argentina led many lists of the country most likely to suffer fate In Argentina stocks plunged as much as 50 percent and international reserves dropped by a third before an accord with the IMF accord Iv ped restore confidence in the country's financial system Few analysts think the Fund would risk another crisis of confidence especially since hardly uncommon for countries to miss their IMF targets get waivers all the time from the IMF a part of the fine-tuning process in their economic said Bear Stearns analyst David Mal-pass who was a State Department dep-uty assistant secretary for Latin American economic affairs The most recent IMF loan to Argentina came just six months after the country walked out of an earlier agreement saying it could raise money elsewhere As a Condition of the new IMF credits Cavallo promised to produce a 1995 primary budget surplus of $6 billion The surplus was to be achieved without including a projected $24 billion in rev- Mexican peso futures set a scorching pace on CME But Payrolls Glide 20 Total compensation expense as a percentage of revenue All figures are for NYSE member firms doing a public business 10 By KEVIN HALL Journal of Commerce CHICAGO Futures contracts for Mexican pesos traded on the Chicago Mercantile Exchange have been so well received that they have achieved the second-fastest growth rate in the history officials said Jack Sandner CME chairman said that open interest in the futures contracts on Mexican pesos has grown to more than 5000 positions since the April 25 launch date peso has achieved volume and open interest in the short time since launch sufficient to make it the second-fastest-growing currency product in the Sandner said peso futures are meeting a strong demand in the currency markets and that augurs well for the additional products we will be launching as part of our emerging markets CME officials announced last week that they intend to trade futures and options on the Brazilian real Italian lira and Spanish peseta Last week the open interest in peso futures stood at 5092 contracts Open interest is generally defined as the number of contracts on the books at the end of the day The 5092 open interest contracts on pesos futures is significant because crossing the 5000 mark is a milestone It means the contracts are growing large enough to gamer the attention of traders open interest pool of more than 5000 contracts indicates strong participation in the market by risk managers and institutions with longer-term hedging said Bill Brodsky CME president have now achieved the critical mass to ensure further growth and draw more participants into the peso futures Traders also were upbeat about the contract think everybody around here is quite pleased with the said one trader for a Hong Kong firm The Mexico contracts bode well for planned expansions into other Latin American currencies he said America is going to be a huge market in the next 1 0 the trader said During the first 34 days of trading volume in Mexican peso futures has averaged 510 contracts a day The CME says this places the peso second among CME currencies in growth in trading volume since startup Futures contracts are often sought by banks pension fund managers and other large institutions as a way of hedging against risks in currency parity When a contract is purchased right now contracts are for 500000 pesos or about $83333 in current exchange rates a deal is struck to purchase or sell pesos at a certain exchange rate to the dollar in the future Institutions taking out contracts do so to guard against deterioration in exchange rates are not people who are taking quick action or the opposite side These are people who want to keep these transactions on the books for a period of time because they want to manage these said Ellen Resnick a CME spokeswoman In another move designed to allow hedging now that the peso floats freely against the dollar Mexico recently began allowing banks to offer forward contracts to clients Forwards are private contracts in which two parties agree to swap two currencies on a specified date at a predetermined price Forwards give exporters and importers more certainty in current uncertain times where the peso can fall quickly against the dollar on sheer rumor i 1985 1986 1987 1988 1989 1990 1' Mi Source: Secunties Industry Association 1991 1992 1993 'it i I -if NY Times News Service WALLfET) STREET WOES Growing pay gap growing envy between the stars and the drones From Herald Wire Reports SCOTT PAPER Co the tissue-maker soon to open its world headquarters in Boca Raton Fla has agreed to sell its interest in a pulp mill and timberland in Chile for $51 mil- lion the company announced Tuesday The deal is part of plan to sell subsidiaries pay off debt and focus on new consumer products 20 percent interest in the pulp operation near the city of Naci-miento as well as 130000 acres of eucalyptus groves is being bought by Empresas CMPC largest aper manufacturer Total proceeds of 74 million include a $23 million loan advanced by Scott AVIATION SKYWEST AIRLINES has agreed to buy 10 EMB-120 Brasilia aircraft from Embraer Aircraft Corp which has its US offices in Fort Lauderdale The deal was announced this week at the Paris Air Show SkyWest a Utah-based Delta Connection carrier that flies to 1 1 Western states currently operates 29 Embraer Brasilias and expects to operate 50 of the planes by 1997 AGRICULTURE THE US Commodity Credit Corp has it bought 3450 tons of US No 2 yellow corn for donation to Guatemala Cargill got 1 2225 for the corn which will be shipped between July 10 and Aug 5 PRIVATIZATIONS MEXICO EXPECTS to reap some $12 billion over the next year and a half from the sale of state-owned enteiprises in the privatization program a senior official says Ports airports and petrochemical complexes are topping the sale list and the government has already received 61 bids from 23 groups interested in the privatization of four Mexican ports says Roberto Villareal a top privatization official at the Finance Ministry He says firms from Britain Australia and Chile are among those put in bids for the ports TAXES FEDERAL revenues jumped 122 percent in April compared with the previous month due mostly to a higher tax take as a result of late income tax payments The Central Reserve Bank reports April revenues totaled $704 million up $764 million from March CONTRACTS SUPERMARKETS Inc has agreed to manage Hawaii supermarkets of Buenos Aires for a net management fee of 175 percent of sales All expenses including those for personnel stationed in Buenos Aires will be reimbursed The management contract involves the initial reopening of the 14 Hawaii supermarkets operating in Buenos Aires with the first expected to do so within 30 days and the possibility of opening other stores in the future INVESTMENT SALOMON BROTHERS believes investors should begin looking for value in heavily sold sectors of the Mexican economy as well as those which may benefit from a heterogeneous and modest recovery in 1996 short it may be time to search for value in short-term high interest bearing sovereign instruments and attractive corporate says John Purcell managing director and head of the global emerging markets research BANKING STATE-RUN Banco Industrial de Venezuela expects to privatize its Banco de Fomento Regional de los Andes (Banfoandes) in July says BIV President Diego Amal The bank also expects to sell Banco Guayana afterward will be sold before Banco he says base price has not been sold but everything is being designed so that the sale can be made about July Banfoandes based in San Cristobal in Tachira state has 40 branches and about $71 million in deposits Banco Guayana based in Ciudad Bolivar in Bolivar state has 15 branches French tickler: Australia swears off sex (well Gaullist sex) over nuclear testing By STEPHANIE STROM New York Times Service NEW YORK A young bond analyst moved to CS First Boston last year lured by the promise of a $100000 salary and a guaranteed cash bonus to match But at the end of the year when he stepped up to collect the bonus the firm gave him two choices: forgo it or take a percentage of it as severance and hit the road went from calling it a guarantee to calling it an said the analyst who insisted that his name not be used there were people who have been here a lot longer than I have and have made a lot more money for the firm than I have who got the same At about the same time Andrew Taussig who is head of the retail investment banking group at CS First Boston was offered a multiyear pay package by a competitor UBS Securities that guaranteed him more than $10 million part of it to cover the bonus and unvested stock options he would forgo by leaving First Boston To keep Taussig from walking CS First Boston quickly countered with assurances sweet enough to retain him although it did not include any guaranteed sum First Boston management talked to Mr Taussig about a number of factors including pay and pay parameters because it wanted to keep a talented said someone at CS First Boston familiar with the discussions The difference in the way that CS First Boston treated Taussig and the young analyst exemplifies Wall latest efforts to reduce compensation which eats up close to 50 percent of the reve- nues of most firms and accounts! for roughly two-thirds of their costs On the one hand rewards are being raised for the top producers the investment bankers who land the most business and the traders who generate the biggest profits On the other compensation is being reduced for PLEASE SEE WALL STREET 2B By TRACEY AUBIN Bloomberg Business News CANBERRA Australia sex industry is boycotting French products in protest at the resumption of nuclear testing in the Pacific The Eros Foundation an umbrella organization covering brothels X-rated video shops and sex shops has sent letters to its 200 trader members Australia-wide asking them to stop ordering products from France lift the ban until France stops nuclear said Fiona Patten foundation president Australian adult shops import almost $180000 in goods mostly magazines and videos from France each year according to Patten also sending letters to the 500000 on our mailing lists to boycott all French she said French-maid outfits and French lingerie are being taken out of window displays and requests for rather than condoms will be ignored under the policy She said Eros was seeking to rename the French kiss and would be advising members to avoid using French words like and as names for products Patten said she would attempt to extend the campaign overseas Look out Lotus here come the guys with axes The Biggest Deals Proposed or completed software industry mergers Date announced Acquirer By EVAN RAMSTAD Associated Press NEW YORK budget managers responsible for one of the largest corporate cost-cutting jobs ever swoop in to examine and change the newest subsidiary Lotus Development Corp Lotus stung by a first quarter loss already had started reshaping itself and cutting $50 million from an expected $800 million in 1995 expenses when IBM offered to buy the software company June 5 Now that the companies have agreed to a $35 billion buyout restructuring will proceed under its current managers including chief executive officer Jim Manzi representatives of both companies said restructuring work has actually been postponed for a little more than a week for obvious Richard Eckel a spokesman for Lotus said But it will get under way again today he added hands-off approach is a sign of both the need for smooth feelings after it initially made a hostile takeover bid and the large number of other things that need to be handled by the two companies work in terms of the two companies talking together is really just IBM spokesman Rob Wilson said He said IBM executives are first focusing on product and technical issues other immediate worry is to mail out proxies for Lotus shareholders to consider the $64 per share cash offer They will have until July 3 to respond The only other requirement for the completion is an antitrust review by the Federal Trade Commission which is expected to conclude without trouble late this month Anytime two companies come together managers have an opportunity to scrutinize and eliminate places where work is duplicated Lotus started to do that in April after suffering a $175 million first-quarter loss is in a better position to judge what areas are said Michael Popow analyst at Oppenheimer Co better form for him to do it than IBM given that the acquiring company needs to be looked upon as Lotus last month eliminated 32 upper management jobs about 15 percent of its total Some were cut through attrition but most resulted from severance The company also reorganized into four PLEASE SEE LOTUS 2B Adobe Systems Aldus Juy1994 Source Bloomberg Busness News 446 NY Times News Service 4 A.