Spotlight 09 01

71
Spotlight Latin American September 2001

Transcript of Spotlight 09 01

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SpotlightLatin AmericanSeptember 2001

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2 Dresdner Bank Lateinamerika, Spotlight 9/2001, Latin America

DOMESTIC ECONOMY GDP change Inflation Budget balance

in % (real) in % (year-end) in % of GDP

2000 2001f 2002f 2000 2001f 2002f 2000 2001f 2002f

Argentina -0.5 -1.4 1.1 -0.7 -0.2 0.6 -3.5 -2.7 -0.4

Bolivia 2.4 2.0 4.0 3.4 4.0 4.2 -4.5 -4.4 -4.0

Brazil 4.5 1.8 3.0 6.0 6.0 4.3 -4.6 -6.0 -4.0

Chile 5.4 3.4 4.7 4.5 3.2 3.0 -1.6 -2.1 -1.3

Colombia 2.8 2.3 2.5 8.8 9.5 9.0 -3.6 -3.0 -2.8

Costa Rica 1.7 1.0 3.0 10.2 10.5 10.0 -3.7 -3.5 -3.2

Dominican Republic 7.8 2.5 4.5 9.0 6.5 6.0 -2.1 -0.5 -1.5

Ecuador 2.3 4.0 4.2 91.0 20.0 8.0 1.5 -1.0 -0.8

El Salvador 2.0 2.8 3.8 4.3 3.5 2.7 -3.0 -4.0 -4.0

Guatemala 3.3 1.5 2.3 5.1 8.0 9.0 -2.2 -2.5 -2.7

Honduras 4.8 3.0 3.6 10.1 9.5 9.0 -4.5 -5.5 -5.0

Jamaica 0.8 1.5 2.2 6.0 6.7 6.2 -5.3 -3.7 -4.5

Mexico 6.9 1.1 4.2 9.0 4.9 5.2 -1.1 -0.8 -0.5

Nicaragua 4.3 2.5 3.5 9.9 8.0 7.9 -15.2 -15.0 -14.0

Panama 2.7 2.0 2.5 0.7 0.5 0.6 -0.8 -1.0 -0.5

Paraguay -0.4 0.0 2.0 8.6 10.5 12.5 -5.7 -3.5 -2.6

Peru 3.1 0.0 3.0 3.7 3.0 3.2 -3.0 -2.2 -2.1

Trinidad & Tobago 4.0 3.9 4.5 5.6 6.0 5.0 1.6 0.0 -0.3

Uruguay -1.3 -0.5 2.0 5.1 9.0 8.0 -4.2 -3.5 -2.5

Venezuela 3.2 2.5 2.5 13.4 13.0 22.0 3.9 -3.0 -4.0

Latin America (17 countries) 4.1 1.2 3.1 7.0 5.4 5.5

EXTERNAL SECTOR Current account balance Import cover Gross foreign debt

FOREIGN DEBT in % of GDP in months* in % of exports*

2000 2001f 2002f 2000 2001f 2002f 2000 2001f 2002f

Argentina -3.3 -2.4 -2.5 8.1 6.4 6.9 382 369 370

Bolivia -5.6 -4.5 -4.0 6.2 5.5 5.3 427 354 300

Brazil -4.2 -5.2 -4.6 4.1 3.9 3.9 347 324 298

Chile -1.4 -2.2 -2.9 7.0 6.3 6.1 155 161 153

Colombia 0.0 -3.4 -3.7 6.0 5.5 4.7 218 242 245

Costa Rica -5.6 -6.4 -6.7 1.8 1.5 1.2 58 67 66

Dominican Republic -5.2 -2.8 -1.7 0.6 0.8 1.2 55 57 56

Ecuador 8.8 -5.1 -5.8 1.8 1.3 1.4 238 278 287

El Salvador -3.2 -4.9 -7.1 3.8 3.7 3.0 111 124 127

Guatemala -4.9 -4.0 -4.3 3.7 3.4 2.6 131 132 129

Honduras -3.4 -5.5 -4.1 4.5 4.0 3.8 207 207 184

Jamaica -3.8 -6.7 -7.8 2.6 2.8 2.4 119 134 135

Mexico -3.1 -3.2 -3.2 2.0 2.1 2.0 88 86 81

Nicaragua -25.5 -24.9 -24.6 2.7 2.4 2.0 734 777 729

Panama -9.4 -5.9 -4.5 0.8 1.1 1.2 77 80 78

Paraguay -1.8 -3.2 -3.6 2.6 2.3 2.4 105 111 117

Peru -2.8 -2.4 -1.6 8.3 8.2 7.8 275 283 273

Trinidad & Tobago 7.7 1.6 -0.4 3.8 4.3 4.9 54 58 62

Uruguay -3.1 -3.3 -2.7 5.9 6.4 6.5 205 219 207

Venezuela 11.1 3.8 2.1 6.4 4.3 3.6 90 109 117

Latin America (17 countries) -2.5 -3.1 -3.1 3.9 3.5 3.4 176 177 170

* goods and services f=forecast

LALALALALATIN AMERICA ATIN AMERICA ATIN AMERICA ATIN AMERICA ATIN AMERICA AT A GLANCET A GLANCET A GLANCET A GLANCET A GLANCE

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Latin America at a glance

LATIN AMERICA: No change to fundamentals _____________________ 4

FOCUS: End of currency board system in Argentina? _______________ 6

Country analyses

ARGENTINA: What impact will the IMF deal have? _________________8

BOLIVIA: A new generation ____________________________________14

BRAZIL: Crisis management ___________________________________16

CHILE: Economic trend reversal?________________________________22

COLOMBIA: Economy lacking in dynamism ______________________28

EL SALVADOR: Assistance with reconstruction ____________________34

JAMAICA: In the debt trap _____________________________________36

MEXICO: Congress must deliver ________________________________38

NICARAGUA: Liquidity bottlenecks _____________________________44

PANAMA: Debt buyback _______________________________________46

PARAGUAY: Touch and go _____________________________________48

PERU: Moment of truth ________________________________________50

VENEZUELA: "Soft" exchange controls ___________________________56

Financial market indicators Latin Amercia

Stock market indices __________________________________________62

Bond yield spreads ___________________________________________63

Global economy - figures and forecasts _______________________ 71

TABLE OF CONTENTS

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Latin America (17 countries) 1998 1999 2000 2001f 2002f

DOMESTIC ECONOMY

GDP change (real) % 2.4 0.2 4.1 1.2 3.1

GDP US$ bn 1956 1714 1889 1863 1961

Inflation (year-end) % 10.0 8.8 7.0 5.4 5.5

EXTERNAL SECTOR

Merchandise exports US$ bn 271.1 286.9 346.0 344.4 369.4

Merchandise imports US$ bn 294.3 286.4 334.3 344.3 370.7

Trade balance US$ bn -23.2 0.5 11.7 0.2 -1.3

Current account balance US$ bn -85.3 -55.5 -46.4 -58.6 -61.3

Current account balance % GDP -4.4 -3.2 -2.5 -3.1 -3.1

Gross foreign direct investment US$ bn 57.0 63.2 62.6 56.5 51.8

Foreign exchange reserves, year-end US$ bn 161.1 153.9 157.0 148.2 151.2

Import cover ** months 4.4 4.4 3.9 3.5 3.4

FOREIGN DEBT

Gross foreign debt US$ bn 770 769 745 755 773

Foreign debt % exports** 228 217 176 177 170

Short-term foreign debt US$ bn 142 125 125 128 134

Foreign debt amortization US$ bn 80 97 82 87 90

Foreign debt service US$ bn 130 147 135 141 157

Foreign debt service % exports** 38 42 32 33 35

FINANCIAL MARKETS (year-end)

IFCI stock index (US$ based, 2001: 08/22) 482 275 520 510

Yield spread (2001: 08/22)* bps 487 968 692 898

* JP Morgan Latin America-Eurobond-Portfolio ** goods and services f=forecast

LALALALALATIN AMERICA:TIN AMERICA:TIN AMERICA:TIN AMERICA:TIN AMERICA: NO CHANGE TO FUNDAMENTALSArea 20.5 million sq. kmPopulation 518 million (+1.7% p.a.)

Share of global exports 5.6% (2000)Share of global GDP 6.7% (1999)GDP per capita US$ 3 900 (2000)

Exports (2000) Purchasing countries USA 54%, Latin American countries 17%, EU 13%, Japan 3%

Imports (2000) Supplier countries USA 47%, Latin American countries 16%, EU 15%, Japan 5%

SUMMARY AND OUTLOOK

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1998 1999 2000 2001f 2002f

% y-o-y LA Argentina Brazil Mexico

200

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1400

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Jan-01 Mar-01 May-01 Jul-01

bps Argentina Brazil Mexico

90

100

110

120

130

140

150

Aug-00 Nov-00 Feb-01 May-01 Aug-01

(Index August 2000=100) Reais/ Peso Euro/ Peso $

Cyrus de la Rubia +49 40 3595 3889

US$ EXCHANGE RATE

Argentina is keeping both the continent and its investors in suspense

despite the announced increase in the current standby facility by about

US$ 8 billion. We only anticipate short-term relief from this accord

unless the IMF manages to pull off the difficult task of restructuring the

country's debt without waiving part of the principal and yet bringing

about a drastic reduction of Argentina's debt service for two to three

years. There may be considerable delay with the organization of

another "megaswap", and the depletion of deposits and reserves will

not be halted automatically. Accordingly, the underlying fundamentals

(including the continued poor economic growth in the U.S. and low

prices of nonoil commodities) for the other countries in the region

basically remain unchanged.

The significant increase in key interest rates and energy savings by

20% in Brazil are having a stronger impact than initially expected after

all: in the second quarter, GDP only rose by 0.8% year-on-year, inducing

us to revise our growth forecast for the current year downward from

2.8% to 1.8%.

In Mexico the slowdown appears to be increasingly impacting on

domestic demand. However, the accompanying decline in inflation

rates is making it easier for the central bank to ease its monetary policy

reins further, which means that the country might soon be able to benefit

from the moderate upturn anticipated for the U.S. economy in the fourth

quarter.

Following the announcement of the new Peruvian cabinet, there are

increasing signs that the government will pursue a more prudent fiscal

policy than that announced during the election campaign and that it is

well on track with its further privatization plans. The situation is quite

the contrary in Venezuela, where the introduction of "soft" exchange

controls has made investors skittish. Apart from these dirigistic

measures, the reduced oil production quotas in particular have caused

us to lower our growth forecast from 3.3% to 2.5% for the year 2001.

While there are no signs of economic revitalization in Colombia owing

to setbacks in the peace process (GDP forecast: 2.3%), in Chile a

silver lining is visible on the horizon: in June growth was unexpectedly

high, and if this trend proves to be reinforced, we will consider revising

our forecast (2001: 3.4%).

For the region as a whole, we have lowered our forecast yet again for

the year 2001 (from 1.6% to 1.2%).

YIELD SPREAD OVER US-TREASURIES

GDP CHANGE (REAL)

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EU22%

NAFTA22%

Mercosur29%

Other 27%

60

70

80

90

100

110

120

130

140

150

Jul-89 Jul-91 Jul-93 Jul-95 Jul-97 Jul-99 Jul-01

overvalued by approx.13% (July 2001)

longterm average

real effective exchange rate, Argentine peso

REAL EFFECTIVE EXCHANGE RATE

FOCUS: FOCUS: FOCUS: FOCUS: FOCUS: END OF CURRENCY BOARD SYSTEM IN ARGENTINA?

Speculation about devaluation

The number of voices calling for a change to the Argentinean

exchange-rate regime is growing again in light of the never-ending

speculation concerning the country's future. However, the

abandonment of the Currency Board system does not represent a

solution to the country's deeper-seated problems. The proponents of

a flexibilization of the exchange-rate regime (in other words allowing

the exchange rate to float, followed by a depreciation of the currency)

believe this will generate a strong impetus for the benefit of Argentina's

export sector and a revitalization of economic activity driven by rising

exports. Higher growth would then make the country's debt appear to

be more easily manageable.

Overvalued peso?

This plan would probably not work out, at least not in this form. First of

all, there is some doubt as to whether the peso's exchange rate really

is as sharply overvalued as many happen to believe. Since 1999 Argen-

tina has undergone a significant deflation, which means that in relation

to the U.S. a devaluation has even taken place. For foreign trade, the

exchange-rate regime was already rendered more flexible several

months ago by linking the currency to a euro- and dollar-denominated

basket; this has resulted in the Argentinean peso no longer following

the appreciation of the dollar relative to the euro to the full extent.

According to our calculations, the peso in terms of wholesale prices is

only overvalued by about thirteen per cent. This year, the Argentinean

economy is likely to generate a trade surplus in the order of some US$

STRUCTURE OF ARGENTINE EXPORTS

Exchange rate systems in Latin AmericaExchange rate systems in Latin AmericaExchange rate systems in Latin AmericaExchange rate systems in Latin America 1991199119911991 2001200120012001

Argentina Currency Board Currency Board / Currency Basket

Brazil Crawling Peg Floating

Chile Crawling Peg Floating

Columbia Crawling Peg Floating

Mexico Crawling Peg Floating

Peru Floating Floating

Venezuela Floating Crawling Band

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7Dresdner Bank Lateinamerika, Spotlight 9/2001, Latin America

1000

1500

2000

2500

3000

Dec-97 Jun-98 Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01

US$ mn

100

110

120

130

140

150

160

1998 1999 2000 2001f 2002f

US$ bn

90

100

110

120

130

140

150

Aug-00 Nov-00 Feb-01 May-01 Aug-01

(Index August 2000=100) Reais/ Peso Euro/ Peso $

EXCHANGE RATES

GROSS FOREIGN DEBT (ARGENTINA)

ARGENTINE EXPORTS5 billion, which is double the level recorded in the previous year.

Even if this is largely attributable to the recession and poor domestic

demand, it nevertheless means that foreign trade is not necessarily

Argentina's main problem. And finally, Argentina's traditionally low

export quota indicates that it would not make sense to use devaluation

as a prescription. Only 8% of Argentina's GDP is exported. While a

massive depreciation, which would be inevitable following a free

float of the exchange rate, might boost exports, but the effect for the

aggregate economy would be of less significance owing to the low

export quota.

Devaluation causes fresh problems

A devaluation of the peso would not solve any problems but create

new ones instead. The state, corporations and private households

are heavily indebted on a dollar basis. A devaluation would cause

the country's debt on a peso basis to skyrocket. Not only would this

automatically mean an insolvency of the Argentine state, but also of

numerous corporations. This would result in a long-term

destabilization of the relatively solid financial sector at present (one

of the strongest points of the Argentinean economy), the insolvency

of the state and a deep and long-lasting recession. In addition, there

is the danger of this triggering a domino effect for other emerging

markets dependent on capital inflows.

However, this does not mean that the Argentine peso necessarily

needs to be linked to the US dollar on a long-term basis. On the

contrary: the fact that the export sector is so underdeveloped and

hardly competitive is attributable in large part to the inflexible

exchange-rate regime.

Dollarization has its vagaries

Accordingly, the alternative proposal for a complete dollarization of

the Argentinean economy also has its vagaries. Dollarization means

the complete relinquishment of a country's own national currency.

Once abolished, a subsequent return to an own currency and inde-

pendent monetary policy is very difficult. Countries like Argentina

which, due to their economic structure, are heavily dependent on

global economic developments, need their own independent

monetary policies and exchange-rate regimes to ward off external

shocks. In the long run, Argentina will need to find a way out of the

"dollar trap". But not in the country's current situation.

Dr. Heinz Mewes +49 40 3595 3482

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ARGENTINA:ARGENTINA:ARGENTINA:ARGENTINA:ARGENTINA: WHAT IMPACT WILL THE IMF DEAL HAVE?

SUMMARY AND OUTLOOK

The reinforcement of the existing IMF accord announced by IMF president Horst Koehler on August 21, comprising

US$ 8 billion, is likely to provide Argentina only with a brief respite. Presumably an attempt will be made using part

of the IMF funding to restructure the country's debt one more time on a voluntary basis and/or reduce the level of

amortization payments significantly in the next several years. However, it should be difficult to convince investors of

a plan of this kind. At the same time, it must be taken into account that the population is increasingly unwilling to

accept the austerity measures this agreement will entail. Accordingly, for us the bottom line is that while Argentina

will gain some time thanks to the new IMF accord, this has not really brought the country any closer to solving its

actual problems. Accordingly, we adhere to our assessment that the danger of a default has not been averted at this

stage.

Area 2 736 700 sq. kmPopulation 37.1 million (+1.3% p.a.)

State president Fernando de la RuaEconomy minister Domingo CavalloCentral bank president Roque Maccarone

Next elections State president: 2003House of Deputies (half) andSenate: 14. October 2001

GDP per capita US$ 7 690 (2000)

Investment 18% of GDP (2000)Savings 17% of GDP (2000)

Exchange rate system Fixed exchange rate to the US$ (1:1)Monetary policy Currency board

Exports (2000) 10% of GDPPurchasing countries Merosur 32%, EU 18%, NAFTA 14%Products Primary goods and crude oil 39%,

industrial goods 31%, processedagricultural produce 30%

Imports (2000) 9% of GDPSupplier countries Mercosur 29%, EU 23%, NAFTA 22%Products Capital goods 41%, intermediate goods 34%,

consumer goods 18%

Rating Moody’s: Caa1 S&P: B-

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1998 1999 2000 2001f 2002f

DOMESTIC ECONOMY

GDP change (real) % 3.9 -3.4 -0.5 -1.4 1.1

GDP US$ bn 299.1 283.4 285.2 280.0 297.2

Inflation (year-end) % 0.7 -1.8 -0.7 -0.2 0.6

Inflation (average) % 0.9 -1.2 -0.9 -0.6 0.0

PUBLIC SECTOR

Budget balance, central government % GDP -1.4 -2.6 -2.3 -1.9 0.0

Budget balance, public sector % GDP -2.2 -4.0 -3.5 -2.7 -0.4

Public debt % GDP 38 43 45 48 48

Amortization US$ bn 6.3 11.4 12.2 11.8 16.6

Gross financing needs US$ bn 11.4 19.7 19.8 17.1 16.6

EXTERNAL SECTOR

Merchandise exports US$ bn 26.4 23.3 26.4 27.6 29.5

Merchandise imports US$ bn 29.6 24.1 23.9 22.9 24.4

Trade balance US$ bn -3.2 -0.8 2.5 4.7 5.1

Current account balance US$ bn -14.6 -12.3 -9.4 -6.7 -7.0

Current account balance % GDP -4.9 -4.3 -3.3 -2.4 -2.5

Net foreign direct investment US$ bn 4.4 11.1 10.6 6.9 7.0

Foreign exchange reserves, year-end*** US$ bn 30.4 32.2 32.5 25.0 28.0

Import cover ** months 7.0 8.3 8.1 6.4 6.9

US$ exchange rate, year-end Pesos 1.0 1.0 1.0 1.0 1.0

US$ exchange rate, average Pesos 1.0 1.0 1.0 1.0 1.0

FOREIGN DEBT

Gross foreign debt US$ bn 141.9 146.0 147.2 146.5 153.1

Foreign debt % exports** 381 431 382 369 370

Short-term foreign debt US$ bn 20.9 19.7 22.8 24.0 25.5

Foreign debt amortization US$ bn 9.8 12.9 16.0 17.6 19.6

Foreign debt service US$ bn 21.1 23.7 28.5 29.7 32.4

Foreign debt service % exports** 57 70 74 75 78

FINANCIAL MARKETS (year-end)

Prime rate % 10.6 11.5 13.8 15.0 10.0

Merval stock index (peso based, 2001: 08/22) 430 549 417 329

IFCI stock index (US$ based, 2001: 08/22) 798 1064 797 614

Bond market yield (2001: 08/22)* % 11.0 11.2 12.5 18.5

Yield spread (2001: 08/22)* bp 581 447 672 1239

* 93/4 % US$-Bond (2027) **goods and services *** incl. liquidity requirements held abroad f=forecast

ANNUAL FIGURES AND FORECASTS

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Partido Justicialista

99 Alianza 129

UCR: 84Frepaso: 37Provincialparties: 8

Acción por la República 12

Provincialparties 17

Partido Justicialista 39

Alianza 21

Provincial parties 9

UCR: 20Frepaso: 1

0.0

0.5

1.0

1.5

2.0

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3.0

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4.0

Jan-01 May-01 Sep-01 Jan-02 May-02 Sep-02

US$ mn

GOVERNMENT FINANCING NEEDS

SEATS IN THE SENATE

SEATS IN THE CHAMBER OF DEPUTIES Domestic policy: overshadowed by the economic crisis

Elections to congress are scheduled to be held toward the middle

of the De la Rua government's term of office, on October 14 of this

year. For the first time all 72 seats in the senate will be up for re-

election, while of the 257 deputies only half (exactly 127) continue

to stand for election. In view of the ongoing economic crisis, we

anticipate that the parties of the ruling coalition (UCR and Frepaso)

will lose seats. The Peronists (Partido Justicialista), the strongest

opposition party, will hardly be able to benefit from the govern-

ment's weakness. Its strategy of dissociating itself from Cavallo's

strict austerity measures will probably not succeed since their en-

actment was only possible with their (albeit halfhearted) support.

The high popularity of minister of economy Cavallo when he took

office has declined in the course of the stringent austerity measures

imposed. The party (Acción por la República) he founded in 1997

should nevertheless do better than at the congressional election of

1999 without being able to come close to the two major parties,

however. We take it for granted that the dissatisfaction among the

population will chiefly lead to votes gained by splinter and provin-

cial parties.

We expect the ruling coalition to lose its majority in the house of

deputies along with some seats in the senate, where it is already in

the minority. The outcome of the election will probably complicate

the government's tasks further. However, the special powers con-

ceded to the government when Cavallo took office will continue to

apply until April next year.

Economic activity: no turnaround in sight

Following three years' recession, the economic slide has acceler-

ated yet again. The latest figures on GDP trends show a decline of

2.1% for the first quarter year-on-year. Investment activity once again

declined sharply (-9.2%) and private consumption likewise

continued to decline (-1.8%). For the second quarter we anticipate

similarly negative figures. In view of the uncertain economic outlook

and high interest rates, a revitalization in terms of consumption

and investment is out of the question at present. A further increase

in the number of layoffs is likely to have led to an increase in the un-

employment rate, which stood at 15.5% in May this year. One fur-

ther indicator of poor trends in consumer demand is that inflation is

declining again (July: -1.1% year-on-year).

The public spending cuts (salaries and pensions in the public

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Jan-01 Mar-01 May-01 Jul-01

US$ bn

BANK DEPOSITS

CENTRAL BANK REPOS

GDP CHANGE (REAL)service were reduced by 13%) within the scope of the zero deficit

plan will also hamper growth in the course of the year. A substantial

part of the reduced GDP decline to -0.6% we anticipate for the

second half year-on-year is attributable to statistical base effects.

For the year as a whole, we expect a GDP decline of 1.4%.

Fiscal policy: IMF accord - a new mega-swap?

The renewed intensification of the crisis induced the Argentinean

government to enter into talks with the IMF once again. After two

weeks of sluggish negotiations, on August 21 IMF president Horst

Köhler announced that he would recommend increasing the past

credit volume by US$ 8 billion, to US$ 22 billion. Of this sum, US$ 5

billion is to be made available to increase the central bank's foreign

currency reserves once the IMF's Board of Directors has agreed

early in September. The remaining US$ 3 billion will presumably be

used to give investors some incentive to agree to a further restruc-

turing of the country's debt (after the mega-swap of June 2001). In

other words, in view of the high volume of debt maturing in the next

several years (2002: US$ 19.6 billion) the maturity structure of the

debt could be extended to gain time once again. To perform a

transaction of this kind, Argentina will need to do a great deal of

propaganda work to convince investors and the markets. In par-

ticular, Argentina will have to deliver credible evidence that the

country actually is willing and able to assert the required reforms.

Part of this will be the unconditional enforcement of the zero deficit

plan passed at the end of July, which provides for the entire public

sector (including the provinces) to spend no more than is collected

by way of revenues. This issue will depend on acceptance by the

broad population, which for several weeks now has voiced its dis-

satisfaction with the country's austerity policy by calling for general

strikes and setting up roadblocks.

In our opinion, the US$ 5 billion earmarked to bolster the country's

foreign currency reserves is a drop in the ocean; there has been

an outflow in foreign currency reserves of more than US$ 5 billion

since end-June 2001 alone. This liquidity injection will only be

sensible if a debt restructuring actually takes place. But skepticism

is justified even here: only a restructuring that will drastically reduce

the level of debt service in the next two or three years could give

Argentina the necessary leeway to push through the reforms and

return to a growth path. In light of past experience with the IMF

packages of March 2000 (US$ 7.2 billion) and January 2001 (US$

(US$ and Peso deposits)

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%, y-o-y, 3 month moving average

exports

imports

Günter Köhne +49 40 3595 3483

Cyrus de la Rubia +49 40 3595 3889

EXPORT AND IMPORT GROWTH

US$-PRIME RATE AND BOND SPREAD

COVER OF THE MONETARY BASE 14 billion) it is likely to be extremely difficult to obtain adequate

consensus among investors for a transaction of this kind.

Monetary sector: meltdown of deposits and reserves

The Argentinean investors' fear of a devaluation and bank deposits

being frozen is reflected in a massive decline in deposits and re-

serves. Bank deposits declined by 10% within five weeks, to US$

75.0 billion by mid-August. The central bank responded by easing

the liquidity reserve commitments. Since mid-July it has also been

adding liquidity to the market with the increasing use of repo trans-

actions. However, its means within the currency board system are

restricted, indicating that a further meltdown of deposits is not likely

to be sustainable for long. The central bank's foreign currency

reserves declined by a quarter in the five weeks since the begin-

ning of July, to US$ 17.4 billion. The new IMF agreement is only

likely to yield a brief respite. If the liquidity outflow is not capable of

being stanched, this will mean an immediate danger to Argentina's

solvency since a banking crisis is likely to intensify the recession

and cause tax revenues to collapse. Moreover, the banks are heav-

ily engaged in financing the country's public-sector debt.

External sector: slowdown in imports

The decline in imports in the second quarter of the year ( -9% year-

on-year) mirrors the country's weak domestic demand. What is

especially worrying is the reduction in imports of investment goods

by 32% in June. Exports are increasingly suffering due to the de-

valuation of currencies in neighboring countries essentially pre-

cipitated by the Argentinean crisis. For the year as a whole, exports

are unlikely to rise by more than 4%. The trade surplus is expected

to increase in the current year to US$ 4.7 billion (2000: US$ 2.5

billion) and contribute to a reduction of the current account deficit

to 2.4% (2000: 3.3%) of GDP. The price of these "successes" is the

increased recession.

Page 13: Spotlight 09 01

13Dresdner Bank Lateinamerika, Spotlight 9/2001, Argentina

MONTHLY INDICATORS Apr 01 May 01 Jun-01 Jul-01

DOMESTIC ECONOMY

Industrial production % yoy 0.1 -2.4 -1.3 -2.6-2.6-2.6-2.6 17-Sep

Construction % yoy 1.2 0.7 0.1 24-Aug

Supermarket sales % yoy -4.3 -3.2 -1.7 24-Aug

Budget balance US$ mn -878 -1002 298 27-Aug

Consumer prices % yoy -0.2 0.2 -0.3 -1.1-1.1-1.1-1.1 05-Sep

Consumer prices % mom 0.7 0.1 -0.7 -0.3-0.3-0.3-0.3 05-Sep

Money supply M3 % yoy -1.5 -2.4 -2.3 -6.9-6.9-6.9-6.9 15-Sep

Overnight peso rate (latest: 08/22)* % 7.6 4.8 8.5 23.5 13.813.813.813.8

Overnight US$ rate (latest: 08/22)* % 6.5 5.0 4.4 11.0 13.313.313.313.3

Private sector borrowing (latest: 08/22)* US$ bn 61.0 60.3 60.3 58.258.258.258.2 15-Sep

Public sector borrowing (latest: 08/22)* US$ bn 14.8 14.7 14.2 14.814.814.814.8 15-Sep

Peso deposits ***(latest: 08/21)* US$ bn 24.2 24.0 23.9 21.7 20.320.320.320.3

US$ deposits (latest: 08/21)* US$ bn 47.5 48.6 48.8 46.4 44.744.744.744.7

EXTERNAL SECTOR

Merchandise exports US$ mn 2381 2602 2531253125312531 07-Sep

Merchandise exports % yoy 2.0 0.0 6.06.06.06.0 07-Sep

Merchandise imports, cif US$ mn 1908 2075 1764176417641764 07-Sep

Merchandise imports % yoy 0.0 -6.3 -19-19-19-19 07-Sep

Trade balance US$ mn 473 527 767.0767.0767.0767.0 07-Sep

Foreign exchange reserves (latest: 08/21)* US$ bn 27.4 27.2 28.5 21.821.821.821.8 17.217.217.217.2

next/latest

QUARTERLY INDICATORS Q2 00 Q3 00 Q4 00 Q1 01

DOMESTIC ECONOMY

GDP % yoy 0.2 -0.5 -2.1 -2.1 20-Sep

Private consumption % yoy 1.0 -0.3 -2.6 -1.8 20-Sep

Public consumption % yoy -0.8 -0.4 -1.2 -0.5 20-Sep

Private and public investment % yoy -7.4 -11.4 -11.9 -8.6 20-Sep

Domestic demand % yoy 0.2 -0.9 -2.0 -2.2 20-Sep

Export (goods and services) % yoy 2.0 0.8 1.8 1.0 20-Sep

Import (goods and services) % yoy 2.5 -2.0 -2.3 0.1 20-Sep

Budget balance, central governm. (latest: Q201) US$ mn -234 -1553 -2798 -3120 -1582-1582-1582-1582

Public debt US$ bn 123.5 123.7 128.0 127.4 27-Sep

EXTERNAL SECTOR

Current account balance US$ bn -1.4 -2.3 -2.0 -2.9 26-Sep

Net foreign direct investment US$ bn 1.4 6.0 1.0 1.1 26-Sep

Net portfolio investment US$ bn 1.9 -2.6 -2.3 -2.3 26-Sep

Capital account** US$ bn 0.7 1.5 3.5 -0.3 26-Sep

Change in foreign reserves (latest: Q2 01) US$ bn 1.5 0.0 0.1 -3.7 -1.7-1.7-1.7-1.7

Gross foreign debt US$ bn 144.4 147.7 147.2 145.6 26-Sep

Short-term foreign debt US$ bn 19.5 22.5 22.8 23.2 26-Sep

* month-end ** incl. residual items ***by the private sector

next /latest

MONTHLY AND QUARTERLY FIGURES

Page 14: Spotlight 09 01

14 Dresdner Bank Lateinamerika, Spotlight 9/2001, Bolivia

1998 1999 2000 2001f 2002f

DOMESTIC ECONOMYGDP change (real) % 4.7 0.6 2.4 2.0 4.0GDP US$ bn 8.5 8.4 8.3 8.7 8.9Inflation (year-end) % 4.4 3.1 3.4 4.0 4.2Budget balance, public sector % GDP -4.1 -4.0 -4.5 -4.4 -4.0

EXTERNAL SECTORMerchandise exports US$ mn 1104 1051 1230 1350 1490Merchandise imports US$ mn 1983 1755 1830 1857 1950Trade balance US$ mn -879 -704 -600 -507 -460Current account balance US$ mn -666 -488 -464 -390 -359Current account balance % GDP -7.8 -5.8 -5.6 -4.5 -4.0Net foreign direct investment US$ mn 955 1014 760 950 720Foreign exchange reserves, year-end US$ mn 885 917 824 720 730Import cover * months 5.8 7.1 6.2 5.5 5.3US$ exchange rate, year-end*** Bolivianos 5.65 5.99 6.40 6.73 7.10

FOREIGN DEBTGross foreign debt US$ mn 5125 5100 5150 4800 4500Foreign debt % exports* 450 474 427 354 300Short-term foreign debt US$ mn 575 625 700 680 640Foreign debt amortization US$ mn 324 300 275 190 220Foreign debt service US$ mn 608 550 540 380 400Foreign debt service % exports* 53 51 45 28 27

*goods and services f=forecast

Area 1 098 581 sq. kmPopulation 8.3 million (+ 2.8% pro Jahr)

State president Jorge Quiroga RamirezFinance minister Jacques TrigoCentral bank president Juan Antonio Morales AnayaNext elections State president: 2002

Parliament: 2002

GDP per capita US$ 1 012

Rating Moody’s: B1 S&P: B+

ANNUAL FIGURES AND FORECASTS

BOLIVIA:BOLIVIA:BOLIVIA:BOLIVIA:BOLIVIA: A NEW GENERATION

Page 15: Spotlight 09 01

SUMMARY AND OUTLOOK

15Dresdner Bank Lateinamerika, Spotlight 9/2001, Bolivia

Kai Stefani + 49 40 3595 3486

BALANCE OF PAYMENTS

GDP AND INFLATION

0

2

4

6

8

10

12

14

1994 1995 1996 1997 1998 1999 2000e 2001f

% GDP change (real) inflation

0

200

400

600

800

1000

1200

1400

1600

1996 1997 1998 1999 2000 2001f 2002f

US$ mn exports FDI FX reserves

Domestic policy: old guard bowing out

Newly appointed president Jorge Quiroga took advantage of his

opportunity when he took office to almost completely reshuffle the

cabinet. Only four of the 16 ministers remained in office. The business

community was especially pleased with the appointment of Jacques

Trigo, the chairman of the banking supervisory office, as finance minister.

In addition, the fact that the influence of the old guard of the ruling party

(ADN) has been reduced on the whole is a positive signal. The

government only has a few months before the next presidential election

campaign. According to the constitution, Quiroga will not be able to

stand as a candidate. It remains to be seen whether Quiroga, a trained

engineer in the U.S., will manage to deliver any significant impetus in

this short space of time. In the medium to long term, economic policy is

being dictated above all by the program to combat poverty. By 2003

economic growth is to be raised from 2% at present to 5% per annum

amid ongoing low inflation rates. In the short term, infrastructural

measures are to generate growth and prove beneficial to rural regions.

Monetary sector: reinforcement of the banking system

The weak level of growth for three years now poses a substantial burden

to the Bolivian banking system. The share of non-performing loans

(8.5%) is in danger of rising due to the high level of interest rates and the

economic situation. An additional financial injection via the state-owned

bank "NAFIBO" is to help private banks in restructuring their loan portfolios

and contribute toward a reduction of interest rates on US$ loans (end-

July: 15.5%). At the same time, banking supervision is to be reinforced.

External sector: decline in foreign currency reserves

Due to the intervention of the central bank on the forex market - the

devaluation of the boliviano is being contained to check inflation - the

central bank's foreign currency reserves have been fluctuating

considerably from month to month. Despite the sharp increase in natural

gas exports as well as the especially high net inflows of direct investment

this year on account of capital spending on a mining project (San

Cristobal), we fear that there may be an net outflow of foreign currency

reserves of US$ 100 million by the end of this year. Import cover by that

time should be around 5½ months. On the other hand, the debt remission

performed within the scope of the HIPC Program will enable the indicator

of foreign debt as a percentage of exports to fall by well over 70

percentage points, and maturities of medium to long-term debt will also

see a significant decline.

Owing to his severe illness (cancer), the past

president Hugo Banzer handed over the staff of

office to his much younger deputy, Jorge

Quiroga. This was followed by an extensive

reshuffle of the cabinet equivalent to a political

change of generation. The state's support of the

banking system and the increase in public

investment are to make it possible next year to

increase the level of growth, which at present is

being driven by gas exports.

Page 16: Spotlight 09 01

16 Dresdner Bank Lateinamerika, Spotlight 9/2001, Brazil

BRAZIL:BRAZIL:BRAZIL:BRAZIL:BRAZIL: CRISIS MANAGEMENT

SUMMARY AND OUTLOOK

Unexpectedly negative global economic trends, the Argentinean crisis and scarce energy resources are responsi-ble to

a great extent for the substantial decline in inflows of foreign investment this year and the fact that the real is under constant

devaluation pressure. This made it necessary to raise the level of interest rates, which has contributed to the economic

slowdown. In the second quarter of the year 2001 GDP growth declined surprisingly sharply to as little as 0.8% year-on-

year. While we do not rule out a subsequent upward revision of this figure, we have nevertheless lowered our GDP forecast

for the current year from 2.8% to 1.8%. At the same time, we have raised our exchange-rate forecast for the end of this year

from 2.38 to 2.50 reais per US dollar. The devaluation of the real and flagging economic activity is likely to help ease the

current account. The IMF is supporting the economic adjustment under a new stand-by agreement.

Area 8 511 965 sq. kmPopulation 170 million (+1.4% p.a.)

State president Fernando Henrique CardosoFinance minister Pedro MalanCentral bank president Armínio Fraga

Next elections State president: October 2002Parliament: October 2002

GDP per capita US$ 3 450 (2000)

Investment 19% of GDP (1999)Savings 16% of GDP (1999)

Exchange rate system Flexible exchange rateMonetary policy Inflation targeting

Exports (2000) 9% of GDPPurchasing countries EU 27%, USA 24%, ALADI 23%, Asia 12%Products Manufactured goods 68%,

Primary products 32%

Imports (2000) 9% of GDPSupplier countries EU 25%, USA 23%, ALADI 21%, Asia 15%Products Capital goods 41%, primary products 34%,

crude oil 14%, consumer goods 11%

Rating Moody’s: B1 S&P: BB-

Page 17: Spotlight 09 01

17Dresdner Bank Lateinamerika, Spotlight 9/2001, Brazil

1998 1999 2000 2001f 2002f

DOMESTIC ECONOMY

GDP change (real) % 0.2 0.8 4.5 1.8 3.0

GDP US$ bn 787.5 529.4 588.0 511.3 525.0

Inflation (year-end) % 1.7 8.9 6.0 6.0 4.3

Inflation (average) % 3.2 4.9 7.0 6.5 5.3

PUBLIC SECTOR

Budget balance, central government % GDP -5.4 -6.9 -3.2 -5.0 -3.5

Budget balance, public sector % GDP -8.1 -10.0 -4.6 -6.0 -4.0

Public debt % GDP 43.3 49.4 49.5 -54.0 52.0

Amortization US$ bn n.a. n.a. n.a. n.a. n.a.

Financing needs, central government US$ bn 42.5 36.4 18.8 25.6 18.4

EXTERNAL SECTOR

Merchandise exports US$ bn 51.1 48.0 55.1 59.8 66.0

Merchandise imports US$ bn 57.7 49.3 55.8 60.5 65.0

Trade balance US$ bn -6.6 -1.3 -0.7 -0.7 1.0

Current account balance US$ bn -33.6 -25.4 -24.6 -26.5 -24.0

Current account balance % GDP -4.3 -4.8 -4.2 -5.2 -4.6

Net foreign direct investment US$ bn 26.1 26.9 30.5 19.0 19.0

Foreign exchange reserves, year-end US$ bn 42.6 34.8 32.5 34.0 35.0

Import cover ** months 5.1 4.8 4.1 3.9 3.9

US$ exchange rate, year-end Reais 1.2 1.8 2.0 2.5 2.5

US$ exchange rate, average Reais 1.2 1.8 1.8 2.3 2.4

FOREIGN DEBT

Gross foreign debt US$ bn 267.3 254.0 236.2 242.2 244.0

Foreign debt % exports** 418 430 347 324 298

Short-term foreign debt US$ bn 40.0 32.0 30.0 31.0 32.0

Foreign debt amortization US$ bn 30.7 44.3 28.1 30.2 32.0

Foreign debt service US$ bn 46.5 61.4 45.2 48.4 51.0

Foreign debt service % exports** 73 104 66 65 62

FINANCIAL MARKETS (year-end)

Interbank interest rate, overnight % 29.2 18.8 15.8 17.0 14.0

Bovespa stock index (real based. 2001: 08/22) 6784 17091 15258 12952

IFCI stock index (US$ based, 2001: 08/22) 275 459 411 291

Bond market yield (2001: 08/22)* % 15.3 12.5 13.1 15.4

Yield spread (2001: 08/22)* bp 968 562 731 950

* 101/8 % US$-Bond (2027) **goods and services f= forecast

ANNUAL FIGURES AND FORECASTS

Page 18: Spotlight 09 01

18 Dresdner Bank Lateinamerika, Spotlight 9/2001, Brazil

PSDB*18%

PMDB*19%

PFL*21%

PPB*11%

Others19%

PT12%

*government coalition

PSDB*20%

PMDB*32%

PFL*25%

PPB*5%

Others9%

PT9%

*government coalition

-15-13-11-9-7-5-3-1135

Dec-98 May-99 Oct-99 Mar-00 Aug-00 Jan-01 Jun-01

% of GDP, moving 12 months period nominal primary

PUBLIC SECTOR BUDGET BALANCE

SEATS IN THE SENATE

SEATS IN THE CHAMBER OF DEPUTIES Domestic policy: corruption and election campaign

Brazilian political situation is once again being dominated by a case

of corruption. A commission of inquiry was set up in congress against

president of the senate Barbalho (on leave at present) to investigate

his involvement in several unlawful acts. Proof of having made a

false statement before Congress would be sufficient for impeachment

proceedings. In view of the political isolation by and large of the

president of the senate, we anticipate that the procedure in congress

will run its course in several weeks' time and Barbalho will resign

before the work routine in congress is unduly disrupted for too long.

In the campaign for the presidential election (October 2002) former

president Itamar Franco has had to contend with defeat within his

own party. His plans to become party chairman of the coalition party

PMDB and lead it into the opposition have failed because he did not

manage to prevail against the powers interested in an ongoing

cooperation with the government. As a result, the likelihood of Fran-

co being nominated presidential candidate of the PMDB has declined,

which would mean his departure to a smaller party or adversely

affect his chances. The party will make its decision on September 9

whether or not it will remain in the ruling coalition.

The outcome of the election remains completely open – contrary to

the opinion of some analysts, who consider the victory of the oppo-

sition a certainty. Whereas the popularity of Cardoso (whose party

has not nominated a candidate yet) has surprisingly increased

according to the latest opinion polls, the opposition candidates Ciro

Gomes and Itamar Franco had to contend with losses. Some 60% of

all voters are still undecided, and the government has not even

launched its election campaign. From today's perspective a tight

election victory is likely. If the opposition remains divided and the

coalition parties work together a similar grouping as in 1998 may

arise, when the candidate of the ruling coalition and Luís Ignácio da

Silva ("Lula") of the PT workers' party faced each other in a run-off

ballot. Unlike the situation at the time, however, the PT has mean-

while moved away from its radical views hostile to the business

community, which means that even in the event of an opposition

victory (which we consider to be unlikely) a certain continuity in

economic policy would nevertheless be likely.

Public finance: tighter fiscal policy

In the first half of the year the public sector reported a surplus be-

fore interest of R$ 30.4 billion (5.4% of GDP), exceeding the target

Page 19: Spotlight 09 01

19Dresdner Bank Lateinamerika, Spotlight 9/2001, Brazil

0

10

20

30

40

50

60

70

80

May-99 Oct-99 Mar-00 Aug-00 Jan-01 Jun-01

share in % US$ fixed rate Selic

-2

-1

0

1

2

3

4

5

6

I/98 IV/98 III/99 II/00 I/01 IV/01p

%, yoy

-2

0

2

4

6

8

10

Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01

% mom yoy

INFLATION

GDP CHANGE (REAL)

PUBLIC INTERNAL DEBTlaid down by the IMF for the first six months by R$ 9 billion. However,

if the substantially higher interest rates on public debt are included

in the equation, this produces a deficit for the same period of R$ 29

billion or 4.9% (1st half of 2000: 3.1%) of GDP. The interest burden

rose from R$ 40 billion to R$ 59 billion, or 10.2% of GDP. This increase

is explained by the weak exchange rate (roughly a quarter of

domestic debt is linked to the exchange rate of the US dollar) and

the increase in interest rates. The ratio of public debt to GDP is likely

to rise to 54% by end-2001 (end-2000: 50%). In view of this trend,

the government has raised its target for the primary surplus for 2001/

02 from 3% to 3.35% or 3.5% of GDP. This measure was adopted

within the framework of a new stand-by agree-ment with the IMF

scheduled to run until December 2002 and linked to an additional

credit line of US$ 15 billion. The minimum level of foreign currency

reserves was lowered from US$ 25 billion to US$ 20 billion, widening

the central bank's scope for intervention to a corresponding degree.

Economic activity: decline in growth

GDP grew at a lower rate than expected in the second quarter of

2001, rising by as little as 0.8% (first half of the year: 2.5%) year-on-

year. Particularly sharp reductions were registered in the agricul-

tural sector (+0.2%) and industry (+0.4%) but the services sector

(+2.2%) also remained behind expectations, especially due to the

sharp decline in the telecommunications sector (-11%). Growth rates

remained satisfactory in the banking industry (5%) and in mining

and the oil sector (6%). The economic weakness is attribut-able to

various factors: in addition to the negative global economic

environment and the ongoing Argentinean crisis, it was especially

the hike in key interest rates (375 basis points since March) that has

impacted adversely on investment. The energy crisis enduring since

June has been an additional burden. These unfavorable conditions

are likely to continue in the third quarter; for this reason we have

lowered our GDP growth forecast for the year 2001 from 2.8% to

1.8%. However, since some of the figures used to calculate second-

quarter GDP still are estimates and other indicators reflect a

considerably more upbeat image in terms of economic develop-

ment, we cannot rule out a subsequent upward revision of GDP

growth figures.

Monetary sector: increase in inflation

The inflation rate peaked at 1.3% in July, reaching its highest rate

Page 20: Spotlight 09 01

20 Dresdner Bank Lateinamerika, Spotlight 9/2001, Brazil

1.5

1.7

1.9

2.1

2.3

2.5

2.7

Aug-99 Feb-00 Aug-00 Feb-01 Aug-01

Reais/US$

10

15

20

25

30

35

40

45

50

Jun-96 Jun-97 Jun-98 Jun-99 Jun-00 Jun-01

interbank overnight %, annualized rate

0

5

10

15

20

25

30

35

Apr-00 Jul-00 Oct-00 Jan-01 Apr-01 Jul-01

US$ bn current account deficit foreign direct investment

CURRENT ACCOUNT AND FDI

INTEREST RATES

EXCHANGE RATE

Humberto Santamaria, São Paulo +55 11 5188 6884

Christine Thomas do Prado, São Paulo +55 11 5188 6968

this year (twelve-monthly rate to end-July: 7.1%). This acceleration

is largely attributable to higher, state-imposed price adjustments

concentrating on the months of June and July; starting in August

the inflation rate should return to a lower level. However, the cumu-

lative inflation rate in the course of this year (4.3%) is so high that

we have raised our forecast for the year 2001 from 5.5% previously

to 6%, the upper limit of the central bank's inflation target. At the

center of inflationary expectations lie two counteracting factors:

the weakness of the Brazilian real and the decline in consumer de-

mand. In view of the economic slowdown in the second quarter,

which is likely to continue into the third, we expect the pass-through

to be very slight in the next several months even if the weakness of

the real continues for the time being and a recovery only eventu-

ates at the end of the year. We have raised our exchange-rate

forecast for 2001 from R$ 2.38/US$ to R$ 2.50/US$, and we expect

the base interest rate to reach a level of 17% by the end of this year.

External sector: lower investment inflows

In the first half of the year 2001 the current account deficit rose to

reach US$ 13.3 billion (first half of 2000: US$ 11.2 billion). At the

same time, the level of direct investment declined from US$ 13.4

billion to US$ 9.9 billion. For the year as a whole we anticipate a net

direct investment inflow of US$ 19 billion and a current account

deficit of US$ 26.5 billion. The deterioration in the balance of pay-

ments situation is essentially attributable to the cooling down of the

global economy, which is dampening foreign investment and im-

peding export growth. After two years in which it was possible to

reduce the level of Brazil's foreign debt, fresh net borrowing will be

necessary once again in the year 2001. We expect the country's

total foreign debt to rise from US$ 236 billion to US$ 242 billion. A

certain relief is likely to result from the slower level of economic

activity and the weakness of the country's national currency, which

stimulates exports and enhances the competitiveness of domestic

products relative to imports from abroad. Owing to the country's

dependence on foreign capital, Brazil's necessary adjustment to

internal and external crisis factors is ultimately leading to an in-

crease in foreign debt and slower economic growth.

Page 21: Spotlight 09 01

21Dresdner Bank Lateinamerika, Spotlight 9/2001, Brazil

MONTHLY INDICATORS Apr-01 May 01 Jun-01 Jul-01

DOMESTIC ECONOMY

Capacity utilization (CNI) % yoy 81.0 81.8 80.380.380.380.3 06-Sep

Industrial production (IBGE) % yoy 6.1 4.2 -1.4-1.4-1.4-1.4 06-Sep

Retail sales (FCESP) % yoy -3.1 -6.4 -7.7-7.7-7.7-7.7 29-Aug

Unemployment rate (IBGE) % 6.5 6.9 6.46.46.46.4 29-Aug

Real wages per working hour (FIESP) % yoy 7.8 7.1 4.74.74.74.7 04-Sep

Consumer prices % yoy 6.6 7.0 7.4 7.17.17.17.1 12-Sep

Consumer prices % mom 0.6 0.4 0.5 1.31.31.31.3 12-Sep

Money supply M1 % yoy 22.7 25.1 21.321.321.321.3 26. Aug

Interbank interest rate (latest: 08/21)* % 16.2 16.8 18.3 18.9 19.119.119.119.1

Financial sector lending US$ bn 153.5 145.6 135.1135.1135.1135.1 26. Aug

EXTERNAL SECTOR

Merchandise exports US$ mn 4730 5367 5042 4965496549654965 03-Sep

Merchandise exports % yoy 13.1 6.0 3.7 -0.8-0.8-0.8-0.8 03-Sep

Merchandise imports US$ mn 4610 5156 4765 4857485748574857 03-Sep

Merchandise imports % yoy 9.6 9.7 3.5 -0.6-0.6-0.6-0.6 03-Sep

Trade balance US$ mn 120 211 277 108108108108 03-Sep

Foreign exchange reserves (latest: 08/21)* US$ bn 34.7 35.5 37.3 35.5 34.934.934.934.9

US$ exchange rate (latest: 08/22)* Reais 2.22 2.38 2.30 2.43 2.532.532.532.53

next/latest

QUARTERLY INDICATORS Q3 00 Q4 00 Q1 01 Q2 01

DOMESTIC ECONOMY

GDP % yoy 5.1 4.1 4.3 0.80.80.80.8 14-Nov

Agriculture % yoy 3.9 -7.3 1.8 0.20.20.20.2 14-Nov

Industry % yoy 4.7 4.9 5.1 0.40.40.40.4 14-Nov

Services % yoy 4.5 3.9 2.8 2.22.22.22.2 14-Nov

Public debt Reais bn 547.9 563.2 588.7 619.4619.4619.4619.4 26-Oct

EXTERNAL SECTOR

Current account balance US$ bn -4.5 -9.0 -6.7 -6.9-6.9-6.9-6.9 26-Oct

Net foreign direct investment US$ bn 8.2 9.6 4.6 5.25.25.25.2 26-Oct

Portfolio investment US$ bn 2.1 0.5 2.5 -0.9-0.9-0.9-0.9 26-Oct

Capital account ** US$ bn 7.5 9.0 7.8 9.69.69.69.6 26-Oct

Change in foreign exchange reserves US$ bn 3.2 1.6 1.0 2.92.92.92.9 26-Oct

Gross foreign debt US$ bn 232.4 236.2 236.8 26-Sep

Short-term foreign debt US$ bn 29.3 30.0 29.0 26-Sep

* month-end ** incl. residual items

next/latest

MONTHLY AND QUARTERLY FIGURES

Page 22: Spotlight 09 01

22 Dresdner Bank Lateinamerika, Spotlight 9/2001, Chile

CHILE:CHILE:CHILE:CHILE:CHILE: ECONOMIC TREND REVERSAL?

SUMMARY AND OUTLOOK

A few months before the congressional elections, opinion polls seem to indicate that the Lagos government may find it

difficult to defend its majorities in both houses of parliament; in particular, its majority in the senate might be at stake. This

is likely to be the background to the reform plans relating to the labor market, which are heavily geared to regulation and

which the government hopes will win additional votes. Looking at the economy, in spite of the high growth in June we do

not see any immediate indicator of an economic trend reversal as this growth is partly attributable to special effects, and

the factors impeding growth (commodity prices, Argentinean crisis) continue to prevail. Accordingly, we are leaving our

GDP forecast at 3.4% for the time being. The peso weakness is impacting positively on foreign trade figures. We have

therefore revised our current account deficit forecast for the year 2001 from 2.6% to 2.2% of GDP.

Area 756 629 sq. kmPopulation 15.2 million (+1.2% p.a.)

State president Ricardo Lagos EscobarFinance minister Nicolás Eyzaguirre GuzmánCentral bank president Carlos Massad Abud

Next elections State president: December 2005Upper House: December 2001Lower House: December 2001

GDP per capita US$ 4 599 (2000)

Investment 22% of GDP (2000)Savings 25% of GDP (2000)

Exchange rate system Flexible exchange rateMonetary policy Inflation targeting

Exports (2000) 26% of GDPPurchasing countries EU 25%, USA 17%, Japan 14%Products Mining 46%, Industry 45%,

Fishing, Agriculture, Forestry 9%

Imports (2000) 26% of GDPSupplier countries USA 19%, Argentina 16%, EU 16%Products Capital goods 21%, consumer goods 19%,

fuel and lubricants 16%

Rating Moody’s: Baa1 S&P: A-

Page 23: Spotlight 09 01

23Dresdner Bank Lateinamerika, Spotlight 9/2001, Chile

1998 1999 2000 2001f 2002f

DOMESTIC ECONOMY

GDP change (real) % 3.9 -1.1 5.4 3.4 4.7

GDP US$ bn 72.7 67.0 69.9 63.1 65.5

Inflation (year-end) % 4.7 2.3 4.5 3.2 3.0

Inflation (average) % 5.1 3.3 3.8 3.7 3.2

PUBLIC SECTOR

Budget balance, central government % GDP 0.4 -1.5 0.1 -0.5 -0.1

Budget balance, public sector % GDP -0.7 1.6 -1.6 -2.1 -1.3

Public debt % GDP 12.1 12.4 11.3 11.3 11.3

EXTERNAL SECTOR

Merchandise exports US$ bn 14.8 15.6 18.2 17.6 19.4

Merchandise imports US$ bn 17.3 14.0 16.7 17.2 19.2

Trade balance US$ bn -2.5 1.7 1.4 0.4 0.2

Current account balance US$ bn -4.1 -0.1 -1.0 -1.4 -1.9

Current account balance % GDP -5.7 -0.1 -1.4 -2.2 -2.9

Net foreign direct investment US$ bn 1.8 4.4 -1.1 2.0 2.5

Foreign exchange reserves, year-end US$ bn 15.7 14.5 14.7 13.2 14.3

Import cover ** months 7.7 8.3 7.0 6.3 6.1

US$ exchange rate, year-end Pesos 474 528 574 660 670

US$ exchange rate, average Pesos 460 509 539 623 655

FOREIGN DEBT

Gross foreign debt US$ bn 31.7 34.2 36.8 37.5 39.0

Foreign debt % exports** 158 167 155 161 153

Short-term foreign debt US$ bn 7.9 7.4 7.9 7.5 8.0

Foreign debt amortization US$ bn 2.3 2.6 2.8 5.4 3.5

Foreign debt service US$ bn 3.7 3.9 4.6 6.9 7.0

Foreign debt service % exports** 18 19 19 29 27

FINANCIAL MARKETS (year-end)

Base rate, 90 days (PRBC) % real 14.5 10.7 8.5 6.2 6.6

IPSA stock index (peso based, 2001: 08/22) 71 100 96 115

IFCI stock index (US$ based, 2001: 08/22) 451 613 520 509

Bond market yield (2001: 08/22)* % 8.1 7.5 6.7

Yield spread (2001: 08/22)* bp 152 221 181

* 67/8 % US$-Bond (2009) **goods and services f=forecast

ANNUAL FIGURES AND FORECASTS

Page 24: Spotlight 09 01

24 Dresdner Bank Lateinamerika, Spotlight 9/2001, Chile

PDC*

PS*

P. Radical Social-

Demócrata*

PPD*

RN

Independent deputies

UCCP Partido Unión-Demócrata

Independiente5

1

22

16

22

5 11

38

*Concertación

RN

appointed Senators

6

UDI

appointed Senators*

3

Senators for life*

PPD*PS*

PDC*

Independents

5

75

1

2

14

*Concertación4

4000

5000

6000

7000

8000

9000

10000

11000

1991 1993 1995 1997 1999 2001(Jun)

US$ mn

PUBLIC FOREIGN DEBT

SENATE

CHAMBER OF DEPUTIES Domestic policy: poor poll results for government

Only a few months before the parliamentary elections scheduled

for December 16, according to a CERC poll taken in July the govern-

ment's approval ratings dropped to 47% (following 53% in April),

while its rejection rose from 39% to 44%. The proportion of respon-

dents who believe an election victory of the opposition "Alianza por

Chile" is correspondingly high (roughly 40%), while only 33% be-

lieve the ruling Concertación will win. The majorities in the senate

and in the house of deputies are likely to remain close owing to the

election system and are likely to change to the detriment of the

ruling coalition particularly in the senate. At present the labor mar-

ket reform is being debated in congress. We believe this topic is

receiving so much attention merely because of the run-up to the

elections. In light of the many regulations planned (particularly

with regard to protection from dismissal and strike conditions), we

feel the project is likely to be more of a hindrance than a help in

terms of the competitiveness of the Chilean economy.

Fiscal policy: budget remains on target

Expenditure of the central government came to the equivalent of

US$ 8.2 billion in the second quarter (slightly below the figure

budgeted); accordingly, the budget almost balanced against some

US$ 7.9 billion in revenues. In the first half of the year the govern-

ment managed to achieve a surplus amounting to 0.5% of GDP. It

was possible for the negative impact of the weak copper price to

be absorbed by the copper equalization fund and the weak peso,

among other factors. On the expenditure side, the public sector

has so far exercised restraint with regard to its investment projects

planned; accordingly, investment spending only rose by about 1.5%

in the first half of the year. The government has announced plans to

boost its spending in the second half, with a real growth rate of 7%

being targeted. We are keeping to our forecast of a budget deficit

amounting to 0.5% of GDP.

Meanwhile the law to reduce income tax and raise taxes on corpo-

rate profits from 15% to 17% has passed through congress. This

law, which is geared above all to distributive effects, is only likely to

have a negative impact on investment trends of companies, which

had agreed to an increase in corporate income tax by 1.5 of a

percentage point in the period leading up to the legislative process.

Page 25: Spotlight 09 01

25Dresdner Bank Lateinamerika, Spotlight 9/2001, Chile

-7

-5

-3

-1

1

3

5

7

9

Jun-99 Dec-99 Jun-00 Dec-00 Jun-01

Imacec index, % y-o-y

-1

0

1

2

3

4

5

6

Jan-00 Apr-00 Jul-00 Oct-00 Jan-01 Apr-01 Jul-01

Inflation, % y-o-y m-o-m

450

500

550

600

650

700

Aug-99 Feb-00 Aug-00 Feb-01 Aug-01

Pesos/US$

EXCHANGE RATE

INFLATION

ECONOMIC ACTIVITYEconomic activity: long-awaited trend reversal in sight?

Following low growth rates in April and May (2.6% and 2.4%, re-

spectively) in June the Imacec, with an increase of 5.1% year-on-

year, indicated an acceleration of economic activity. On the one

hand, this might reflect an economic trend reversal attributable to

monetary policy and the exchange rate. The weak peso in particu-

lar has several benefits in economic terms: the competitiveness of

exports is rising, which is discernible from the significant increases

in export volume. The local industries are in a better position than

in the past to compete with imports, which have become more

expensive. The 6.3% industrial growth rate (June) may be a possible

indicator. And finally, the weak peso is also likely to be perceived

as a good opportunity for foreign investors to enter the market or

reinforce existing investments. The two-fold increase in gross direct

investments in the first half of the year to US$ 3.2 billion might be a

contributory factor.

On the other hand, there are several negative factors relating to

economic activity. In this context, firstly the sharp decline in prices

of key commodities must be taken into account. The copper price

in particular was down to 65 cents/lb at times, or just over 20%

lower than at the beginning of the year. Even if this is not attended

by a decline in export volumes, lower prices of merchandise ex-

ports nevertheless are impeding growth. Secondly, the Argentine-

an crisis is a factor that is leading to lower profits for parent compa-

nies, especially via Chilean direct investment in Argentina (which

accounts for more than 50% of Chile's direct investment portfolio

abroad) and hurting the economy. Finally, the ongoing high unem-

ployment rate is stifling consumption. In addition, taking several

special effects into consideration that led to the high level of growth

in June, we believe it would be premature to raise our growth fore-

cast from 3.4% for the year 2001. Instead, we will need to wait and

see whether the economic indicators will point to a consolidation

of the good growth figures.

Monetary sector: massive support announced for the peso

Early in August the central bank announced its plans to use a

nominal interest rate as a key rate rather than a real one. The past

policy resulted in very stable real interest rates, whereas short-

term nominal interest rates were subjected to significant fluctuations

because they were determined on the basis of inflationary

expectations. However, since most short-term loans are granted

Page 26: Spotlight 09 01

26 Dresdner Bank Lateinamerika, Spotlight 9/2001, Chile

60

70

80

90

100

110

120

I/98 III/98 I/99 III/99 I/00 III/00 I/01200

220

240

260

280

300 Price Index Volume-Index

-1600

-1200

-800

-400

0

400

800

I/98 III/98 I/99 III/99 I/00 III/00 I/01

US$ mn, balances

-1000

-500

0

500

1000

1500

2000

Jul-98 Feb-99 Sep-99 Apr-00 Nov-00 Jun-01

US$ mn exports imports balance

TRADE BALANCE

CURRENT ACCOUNT

EXPORTS

Cyrus de la Rubia +49 40 3595 3889

on a nominal basis, under the past policy it was difficult for the

central bank to exert an influ-ence on interest rates prevailing on

the market. – In mid-August the peso hit an all-time low (691 pesos/

US$) against the backdrop of the Argentinean crisis and the decline

of the copper price to 65 cents/lb. Thus far no inflationary pressure

is discernible. In July there was even a price decline by 0.2%

month-on-month. However, if the peso fails to recover, the latest

devaluation push could lead to imported inflation and put the

inflationary target of 2-4% at risk. The central bank therefore decided

to take more stringent measures to combat the devaluation,

announcing issues of dollar-linked papers (PRD) to extend the

volume already in circulation by up to US$ 2 billion beyond the

past level planned, resulting in a total stock equivalent to US$ 4.5

billion by the end of the year. In addition, US$ 2 billion of the central

bank's reserves is to be used for support buying operations. Apart

from combating inflation, this measure is also intended to cover the

high demand for hedging instruments on the part of private

companies (private foreign debt at end-June: US$ 31.7 billion). In

contrast, the country's public foreign debt (US$ 5.3 billion) is no

cause for concern.

External sector: decline in commodity prices

The weak peso is impacting significantly on the trade balance. In

the second quarter, exports rose 12.4% year-on-year. Among other

factors, this is attributable to industrial goods exports, which ex-

panded by 10.7% in spite of a 7.5% price decline. In other sectors

too (mining and the agricultural sector) it was possible for the de-

cline in export prices to be offset by appropriate expansions in

volumes exported. In contrast, imports declined significantly. In

this context, consumer goods in particular were imported to a lesser

extent (-12.6%). On the other hand, in July the increased price

decline on commodity markets (e.g. for copper and fishmeal) led to

a 14.1% drop in exports year-on-year. In forthcoming months too,

the effect of the sharp decline in commodity prices will predominate

by far. We have therefore lowered our forecast for exports slightly

to US$ 17.6 billion. Imports will likewise grow to a lesser extent

than previously assumed (3% year-on-year). We have corrected

our forecast for the current account deficit from 2.6% to 2.2% of

GDP.

Page 27: Spotlight 09 01

27Dresdner Bank Lateinamerika, Spotlight 9/2001, Chile

MONTHLY INDICATORS Apr 01 May 01 Jun-01 Jul-01

DOMESTIC ECONOMY

IMACEC % yoy 2.6 2.4 5.15.15.15.1 17-Sep

Industrial production % yoy 3.1 0.6 6.3 30-Aug

Mining production % yoy -3.5 3.2 5.2 30-Aug

Retail sales % yoy 0.4 0.5 3.8 23-Aug

Unemployment rate % 9.1 9.6 9.7 30-Aug

Employment mn 5.28 5.25 5.26 30-Aug

Labour cost index % yoy 0.3 0.3 0.3

Consumer prices % yoy 3.5 3.7 3.6 3.23.23.23.2 05-Sep

Consumer prices % mom 0.5 0.4 0.1 -0.2-0.2-0.2-0.2 05-Sep

Wholesale prices % yoy 10.7 10.9 8.5 7.47.47.47.4 05-Sep

Wholesale prices % mom 1.9 1.5 -0.1 0.90.90.90.9 05-Sep

Money supply M1 % yoy 16.8 18.0 20.9 23.423.423.423.4 07-Sep

Base rate (PDBC, 90 days, latest: 08/21)* % 8.62 8.69 6.74 6.46.46.46.4 6.426.426.426.42

Deposit rate (month-average) % 5.94 5.98 5.83 6.06.06.06.0 23-Aug

Financial sector lending* Pesos bn 27500 27584 27391 23-Aug

Total financial savings M7* Pesos bn 36676 36512 37217 23-Aug

EXTERNAL SECTOR

Merchandise exports US$ mn 1693 1544 1428 1332133213321332 23-Aug

Merchandise exports % yoy 28.6 -11.9 12.6 -14.2-14.2-14.2-14.2 23-Aug

Merchandise imports US$ mn 1280 1361 1380 1390139013901390 23-Aug

Merchandise imports % yoy -6.1 -13.1 3.7 -4.7-4.7-4.7-4.7 23-Aug

Trade balance US$ mn 413 183 48.4 -57.8-57.8-57.8-57.8 23-Aug

Net foreign direct investment US$ mn 122.9 50.9 225.5 23-Aug

Foreign exchange reserves* US$ bn 14.4 14.5 14.3 14.514.514.514.5 23-Aug

US$ exchange rate (latest: 08/22) CLP 592.7 611.0 631.8 670.3670.3670.3670.3 665.4665.4665.4665.4

next/latest

QUARTERLY INDICATORS Q2 00 Q3 00 Q4 00 Q1 01

DOMESTIC ECONOMY

GDP % yoy 6.0 5.6 4.5 3.3 23-Aug

Total consumption + change in stocks % yoy 14.5 5.0 2.1 2.1 23-Aug

Private and public investment % yoy 1.6 7.8 12.0 9.7 23-Aug

Domestic demand % yoy 11.0 5.7 4.7 3.9 23-Aug

Exports (goods and services) % yoy 3.9 9.7 5.7 5.6 23-Aug

Imports (goods and services) % yoy 15.3 9.0 6.1 6.9 23-Aug

Budget balance, public sector Pesos bn 34 -160 -232 200 23-Aug

EXTERNAL SECTOR

Current account balance balance US$ bn -0.62 -0.53 -0.31 0.11 23-Aug

Net foreign direct investment US$ bn 0.21 -0.53 -0.45 0.86 23-Aug

Portfolio investment US$ bn -0.10 0.29 -0.13 -0.96 23-Aug

Capital account** US$ bn 0.49 0.76 -0.77 -0.05 23-Aug

Change in foreign exchange reserves US$ bn -0.13 0.22 -0.38 0.06 23-Aug

Gross foreign debt US$ bn 35.0 35.5 36.8 37.4 23-Aug

Short-term foreign debt US$ bn 4.77 4.99 7.90 7.5 23-Aug

* month-end ** incl. residual items

next/latest

MONTHLY AND QUARTERLY FIGURES

Page 28: Spotlight 09 01

28 Dresdner Bank Lateinamerika, Spotlight 9/2001, Colombia

COLOMBIA:COLOMBIA:COLOMBIA:COLOMBIA:COLOMBIA: ECONOMY LACKING IN DYNAMISM

SUMMARY AND OUTLOOK

The peace process between the government and the two leftist guerrilla groups, the FARC and the ELN, once again saw

severe setbacks. The guerrilla conflict will continue to hurt the country's economic development. To some extent in view

of the latest economic data (industrial production in June was even slightly lower year-on-year), our GDP growth forecast

for the year 2001 as a whole remains at 2.3%. The current account this year is likely to record a deficit of more than 3% of

GDP especially due to declining oil export revenues. This deficit is being financed e.g. by issuing government bonds on

international capital markets. The peso, which regained some of its value following an announcement by the government

that assets located abroad would be repatriated, is likely to decline again in the next several months. The reason for this

is that the reforms to reduce the public-sector budget deficit, especially the new rules and regulations relating to old-age

pension provisions, continue to be delayed.

Area 1 141 748 sq. kmPopulation 42.3 million (+1.9% p.a.)

State president Andrés Pastrana ArangoFinance minister Juan Manuel Santos CalderónCentral bank president Miguel Urrutia Montoya

Next elections State president: May 2002Parliament: March 2002

GDP per capita US$ 1 925 (2000)

Investment 12% of GDP (2000)Savings 14% of GDP (2000)

Exchange rate system Flexible exchange rate (floating)Monetary policy Inflation targeting

Exports (2000) 17% of GDPPurchasing countries USA 50%, EU 14%, Venzuela 10%Products Manufactured goods 38%,

Crude oil and derivatives 34%, Coffee 8%

Imports (2000) 14% of GDPSupplier countries USA 34%, EU 17%, Venezuela 8%Products primary and intermediate products 51%,

capital goods 30%, consumer goods 19%

Rating Moody’s: Ba2 S&P:BB

Page 29: Spotlight 09 01

29Dresdner Bank Lateinamerika, Spotlight 9/2001, Colombia

1998 1999 2000 2001f 2002f

DOMESTIC ECONOMY

GDP change (real) % 0.6 -4.1 2.8 2.3 2.5

GDP US$ bn 98.8 84.9 81.3 81.8 84.7

Inflation (year-end) % 16.7 9.2 8.8 9.5 9.0

Inflation (average) % 18.7 10.9 9.2 8.4 9.0

PUBLIC SECTOR

Budget balance, central government % GDP -4.9 -7.4 -6.5 -4.8 -4.3

Budget balance, public sector % GDP -4.6 -6.4 -3.6 -3.0 -2.8

Public debt % GDP 30 37 42 45 45

Amortization US$ bn 4.4 6.1 5.7 n.a. n.a.

Gross financing needs US$ bn 8.8 11.0 8.3 n.a. n.a.

EXTERNAL SECTOR

Merchandise exports US$ bn 11.5 12.0 13.6 12.7 13.1

Merchandise imports US$ bn 13.9 10.2 11.1 12.5 13.0

Trade balance US$ bn -2.4 1.8 2.5 0.2 0.1

Current account balance US$ bn -5.2 0.1 0.0 -2.8 -3.1

Current account balance % GDP -5.3 0.1 0.0 -3.4 -3.7

Net foreign direct investment US$ bn 2.1 1.2 2.3 1.2 1.0

Foreign exchange reserves, year-end US$ bn 8.7 8.0 8.9 9.0 8.0

Import cover *** months 5.2 6.2 6.0 5.5 4.7

US$ exchange rate, year-end Pesos 1536 1874 2229 2455 2610

US$ exchange rate, average Pesos 1426 1756 2088 2335 2530

FOREIGN DEBT

Gross foreign debt US$ bn 35.9 36.1 36.0 38.0 40.0

Foreign debt % exports*** 251 246 218 242 245

Short-term foreign debt US$ bn 8.6 5.7 5.7 5.9 6.2

Foreign debt amortization US$ bn 4.4 4.9 5.0 5.7 5.5

Foreign debt service US$ bn 7.0 7.5 7.7 8.5 8.5

Foreign debt service % exports*** 49 51 47 54 52

FINANCIAL MARKETS (year-end)

Deposit rate (DTF, 90 days) % 34.3 15.8 13.4 12.5 12.5

IBB stock index (peso based, 2001: 08/22)* 1109 998 713 984*

IFCI stock index (US$ based, 2001: 08/22) 439 353 198 236

Bond market yield (2001: 08/22)** % 11.0 11.6 13,1 9.5

Yield spread (2001: 08/22)** bp 601 474 757 477

* as of July 2001: IGBC ** 75/8 % US$-Bond (2007) ***goods and services f=forecast

ANNUAL FIGURES AND FORECASTS

Page 30: Spotlight 09 01

30 Dresdner Bank Lateinamerika, Spotlight 9/2001, Colombia

-8

-5

-2

1

4

II/98 IV/98 II/99 IV/99 II/00 IV/00 II/01e IV/01f

% yoy qoq

-25

-20

-15

-10

-5

0

5

10

15

20

Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01

% y/y industrial production retail sales

5

10

15

20

25

30

35

40

Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01

% deposit rate inflation, yoy

INTEREST RATE AND INFLATION

ECONOMIC INDICATORS

GDP CHANGE (REAL) Domestic policy: positions entrenched in guerrilla conflict

The slight easing of tension between the government and the FARC

(with more than 16,000 fighters the strongest leftist group of rebels)

was very brief: even after abducted members of the security forces

had been exchanged for detained guerrilla fighters in June, the first

noticeable advance in the peace process, the FARC continued its

abductions and other acts of violence. Subsequently, the government

discontinued the cease-fire negotiations. In the ensuing weeks

hundreds were killed in skirmishes in various areas of Colombia

between FARC rebels and security forces and in clashes between the

FARC and rightist paramilitary groups, which have meanwhile

expanded to approx. 8,000 fighters.

Meanwhile the positions between the government and the ELN,

consisting of about 5,000 rebels, have become completely en-

trenched. The guerrillas had broken off talks with the government after

the establishment of a demilitarized zone in which peace negotiations

were to be held had failed on account of protests by the inhabitants.

Early in August the government likewise terminated the dialog as the

ELN had also rejected peace negotiations outside the country – Vene-

zuela had offered to host the peace talks. Meanwhile the rebels have

reinforced their violent attacks, also dealing sensitive blows to the

country's infrastructure, and the armed forces have intensified their

military activities against the rebels.

In view of this situation, state president Pastrana, whose four-year term

of office will be coming to an end as early as in August 2002 and who

is prohibited by the constitution from standing again, will not reach his

objective of concluding peace agreements with the guerrilla groups.

Accordingly, he will leave his successor to deal with the internal conflict,

which has raged for almost 40 years now and cost nearly 40,000 lives

in the last decade alone. Three presidential candidates have chances

of winning the election in May 2002: Horacio Serpa, the leader of the

liberal party, independent Noemí Sanín, former conservative minister

of parliament, and the former liberal and independent Alvaro Uribe.

Uribe in particular wants to negotiate significantly more strictly with

the leftist rebel groups and is in favor of a further military reinforcement.

Serpa also criticized Pastrana's management of the negotiations as

too soft; he intends to include the paramilitary groups in the peace

effort.

Fiscal policy: bond issues at lower spreads

In the course of this year, Colombia has already placed several bond

Page 31: Spotlight 09 01

31Dresdner Bank Lateinamerika, Spotlight 9/2001, Colombia

-200

0

200

400

600

800

1000

1200

1400

May-99 Sep-99 Jan-00 May-00 Sep-00 Jan-01 May-01

US$ mn exports imports balance

5

10

15

20

25

30

35

40

Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01

US$/barrel Cusiana Caño Limón

-6

-4

-2

0

2

4

1997 1998 1999 2000 2001f 2002f

balance, US$ bn current account trade

EXTERNAL SECTOR

OIL PRICES COLOMBIA

FOREIGN TRADEissues on the international capital markets to cover the public sector's

financing requirements. The country managed to benefit in particular

in recent months from the considerably lower risk premiums. They fell

because some advances had been made in the interim with the peace

process and because the budget structural reform to limit transfer

payments by the central to regional government offices has finally

been passed. Moreover, Colombian bonds also appeared less risky

in light of the turmoil in Argentina – and the country took advantage of

that propitious moment: this year's public financing requirements on

the international capital market (US$ 2.7 billion) have already been

covered and, in addition, a total of US$ 1 billion in issues planned for

fiscal 2002 (US$ 2.2 billion) have already been placed. The

government wants to continue the advance funding by placing further

bond issues, which is a wise move because of the uncertainty

associated with the gradually approaching presidential election. This

uncertainty might lead to higher spreads even though none of the

candidates is expected to make any major changes to the country's

economic policy.

Economic activity: stubborn weakness in growth

There are increasing signs that economic growth this year will turn out

lower than in 2000 (2.8%). In the first quarter of 2001 the GDP increase

had only amounted to 1.7% year-on-year, and in the second quarter it

is unlikely to have exceeded 2%. While retail sales rose more sharply

in the second quarter than in the first, growth of industrial production

declined at the same time. Among other things, the economy is being

impeded by the higher tax burden that arose once the tax reform

entered into force at the beginning of 2001 and by declining oil

production, which is also attributable to the oilfields becoming less

productive. In contrast, a significant impetus is being generated by

exports, especially those of the non-traditional variety (including

industrial goods). Exports to Ecuador and Venezuela have risen

substantially in the course of this year, benefiting from the high

competitiveness of Colombian goods in neighboring countries thanks

to exchange-rate related factors. We are sticking to our forecast for

GDP growth for the year 2001 as a whole, which we had reduced to

2.3% within the scope of our recent Latin American Spotlight update

(previously 2.6%). Easing monetary policy – in July and August the

central bank lowered its key interest rates, including the repo rate, by

a total of 150 basis points – like the interest rate cut of March 2001,

should not generate any significant economic impetus. The economic

Page 32: Spotlight 09 01

32 Dresdner Bank Lateinamerika, Spotlight 9/2001, Colombia

30

32

34

36

38

40

42

1997 1998 1999 2000 2001f 2002f200

210

220

230

240

250

260 US$ bn % of exports

0

2

4

6

8

10

1997 1998 1999 2000 2001f 2002f4

4.5

5

5.5

6

6.5

7 US$ bn import cover in months

1600

1800

2000

2200

2400

2600

Aug-99 Feb-00 Aug-00 Feb-01 Aug-01

Pesos/US$

EXCHANGE RATE

FOREIGN EXCHANGE RESERVES

FOREIGN DEBT

Luz Knees +49 40 3595 3488

climate remains depressed, with the banks' lending volume still slightly

below the previous year's level. On the one hand, the banks frequently

prefer less risky assets such as government bonds; on the other, the

demand for credit by corpora-tions remains weak.

External sector: current account in deficit this year

Colombia's external accounts will turn out less upbeat this year. As

regards the trade balance, which finished the year 2000 with a surplus

of US$ 2.5 billion due to price-related higher oil export revenues and

substantially higher exports of industrial goods, we only anticipate a

modest surplus this year. Oil exports will see a significant fall, especially

due to the decline in the export volume, which is also attributable to

the increasingly frequent acts of sabotage by the guerrillas; in the first

half of 2001, at US$ 1.6 billion they were 31% lower year-on-year.

Although exports of non-traditional goods and coal rose appreciably,

in the first half total merchandise exports fell by 3% year-on-year.

Merchandise imports continue to grow. Owing to the deterioration of

the trade balance, we continue to believe that the current account

(which closed with small surpluses in 1999 and 2000 of US$ 98 million

and US$ 41 million, respectively), will record a deficit of US$ 2.8 billion

(or 3.4% of GDP). In the first quarter the current account deficit amounted

to US$ 736 million.

Exchange rate: strong peso – but how much longer?

The peso, which shed 6% of its value from the beginning of the year to

mid-May, has since appreciated by some 4% (Aug. 22: 2,283 Pesos =

US$ 1.00). The primary cause in this respect was the government's

announcement of its intention to repatriate assets located abroad to

pay for domestic debt. However, we believe the value of the peso will

decline again soon and adhere to our exchange-rate forecast (end-

2001: 2,455 pesos = US$ 1.00). There are several factors in favor of

this trend, which would be beneficial to the competitiveness of exports:

in October the government will need to decide yet again whether it

wants to allow the FARC to retain the demilitarized zone. In addition,

the reduction of the public budget deficit is not likely to proceed on

schedule since the new rules relating to vertical financial equalization

have been watered down and the reform of the old-age pension system

remains stalled due to a lack of political consensus.

Page 33: Spotlight 09 01

33Dresdner Bank Lateinamerika, Spotlight 9/2001, Colombia

MONTHLY INDICATORS Apr 01 May 01 Jun-01 Jul-01

DOMESTIC ECONOMY

Industrial production % yoy 4.9 2.6 -2.6-2.6-2.6-2.6 11-Sep

Retail sales % yoy 1.1 2.7 6.46.46.46.4 21-Sep

Unemployment rate (urban) % 17.8 18.1 18.618.618.618.6 31-Aug

Active labour force (urban) % yoy 3.0 2.1 2.82.82.82.8 31-Aug

Consumer prices % yoy 8.0 7.9 7.9 8.18.18.18.1 06-Sep

Consumer prices % mom 1.2 0.4 0.0 0.10.10.10.1 06-Sep

Producer prices % yoy 10.7 11.1 10.2 9.09.09.09.0 06-Sep

Producer prices % mom 1.4 0.8 -0.1 0.10.10.10.1 06-Sep

Money supply M1 (latest: 08/15)* % yoy 15.5 9.0 10.9 7.1 5.85.85.85.8

Money supply M3 (latest: 08/03)* % yoy 5.7 6.0 7.1 5.8 5.85.85.85.8

Lending rate (latest: 08/10) % 22.0 22.8 22.1 21.4 21.621.621.621.6

Deposit rate (DTF, 90 days, latest: 08/17)* % 12.7 12.7 12.8 12.7 12.512.512.512.5

Treasury bills (TES, 1 year, latest: 08/22)* % 13.2 13.0 12.9 12.9 12.412.412.412.4

Interbank interest rate (latest: 08/16) % 10.6 11.7 11.3 10.8 10.910.910.910.9

Credit volume (latest: 08/03)* % yoy -5.1 -3.6 -2.4 -2.1 -2.1-2.1-2.1-2.1

EXTERNAL SECTOR

Merchandise exports US$ mn 1057 1086 991.0991.0991.0991.0 31-Aug

Merchandise exports % yoy 19.3 -5.2 -13.9-13.9-13.9-13.9 31-Aug

Merchandise imports US$ mn 1086 1060 27-Aug

Merchandise imports % yoy 33.6 8.3 27-Aug

Trade balance US$ mn -29 26 27-Aug

Foreign exchange reserves (latest: 08/15)* US$ mn 9567 9561 9187 9365 9495949594959495

US$ exchange rate (latest: 08/22)* pesos 2347 2325 2305 2298.0 2283228322832283

next/latest

QUARTERLY INDICATORS Q2 00 Q3 00 Q4 00 Q1 01

DOMESTIC ECONOMY

GDP % yoy 3.4 3.2 2.3 1.7 28-Sep

GDP % qoq 0.0 1.2 0.1 0.4 28-Sep

Domestic consumption % yoy 1.7 0.9 -0.2 1.2 28-Sep

Domestic investment % yoy 24.6 19.4 7.7 7.2 28-Sep

Domestic demand % yoy 4.4 3.2 0.8 2.1 28-Sep

Exports (goods and services) % yoy 3.0 6.5 8.1 6.6 28-Sep

Imports (goods and services) % yoy 9.1 7.0 0.2 9.2 28-Sep

Manufacturing industry % yoy 11.5 13.0 6.4 2.2 28-Sep

Financial sector and real estate % yoy 0.0 1.1 -0.7 1.0 28-Sep

Budget balance, central government Pesos bn -2106 -1118 -6594 -1632 28-Sep

EXTERNAL SECTOR

Merchandise exports US$ bn 3.31 3.53 3.53 3.09 28-Sep

Merchandise imports US$ bn 2.77 2.77 2.85 3.06 28-Sep

Trade balance US$ bn 0.54 0.76 0.68 0.03 28-Sep

Current account balance US$ bn -0.03 0.06 0.03 -0.74 28-Sep

Net foreign direct investment US$ bn 0.42 0.85 0.72 0.37 28-Sep

Portfolio investment US$ bn 0.14 0.09 0.35 0.71 28-Sep

Capital account** US$ bn 0.13 0.26 0.21 1.05 28-Sep

Change in foreign exchange reserves US$ bn 0.09 0.25 0.41 0.28

* month-end ** incl. residual items

next/latest

MONTHLY AND QUARTERLY FIGURES

Page 34: Spotlight 09 01

34 Dresdner Bank Lateinamerika, Spotlight 9/2001, El Salvador

1998 1999 2000 2001f 2002f

DOMESTIC ECONOMY

GDP change (real) % 3.5 2.6 2.0 2.8 3.8

GDP US$ bn 15.4 12.4 13.2 14.0 14.9

Inflation (year-end) % 4.2 -1.0 4.3 3.5 2.7

Budget balance, public sector % GDP -2.1 -3.0 -3.0 -4.0 -4.0

EXTERNAL SECTOR

Merchandise exports US$ mn 2460 2546 2972 3015 3355

Merchandise imports US$ mn 3763 3903 4690 5289 5840

Trade balance US$ mn -1303 -1357 -1718 -2274 -2485

Current account balance US$ mn -83 -286 -418 -682 -1065

Current account balance % GDP -0.5 -2.3 -3.2 -4.9 -7.1

Net foreign direct investment US$ mn 872 178 179 200 300

Foreign exchange reserves, year-end US$ mn 1613 2004 1922 2100 1900

Import cover * months 4.3 4.7 3.8 3.7 3.0

US$ exchange rate, year-end Colones 8.76 8.76 8.76 8.76 8.76

FOREIGN DEBT

Gross foreign debt US$ bn 3.6 4.0 4.2 5.0 5.4

Foreign debt % exports* 127 122 111 124 127

Short-term foreign debt US$ bn 0.8 1.1 1.1 1.4 1.5

*goods and services f= forecast

Area 21 041 sq.kmPopulation 6.3 million (+ 2.2% p.a.)

State president Francisco Guillermo Flores PérezFinance minister: Juan José DaboubCentral bank president Rafael Barraza

Next elections State president: March 2004Parliament: March 2003

GDP per capita US$ 2 110

Rating Moody’s: Baa3 S&P: BB+

ANNUAL FIGURES AND FORECASTS

EL SALEL SALEL SALEL SALEL SALVVVVVADOR:ADOR:ADOR:ADOR:ADOR: ASSISTANCE WITH RECONSTRUCTION

Page 35: Spotlight 09 01

SUMMARY AND OUTLOOK

35Dresdner Bank Lateinamerika, Spotlight 9/2001, El Salvador

Ingrid Grünewald 040 3595 3487

CURRENCY RESERVES

INDUSTRIAL PRODUCTION

-2

0

2

4

6

8

10

12

Jun-98 Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01

Real change, % y-o-y

0

500

1000

1500

2000

1996 1997 1998 1999 2000 2001f 2002f0

1

2

3

4

5 FX-reserves US$ mn Import cover, months

Domestic sector: upturn around the corner?

At the beginning of the year, severe earthquakes in El Salvador caused

some US$ 2 billion in damage. In March of this year - at the meeting of

the consultative group for Central America - foreign governments and

multilateral financial institutions approved funding to assist the country

with the reconstruction of its economy. The consultative group will grant

the country US$ 1 billion in the next several years in the form of loans

(one third of which in the fast-track process) as well as grants-in-aid

(US$ 0.4 billion that do not need to be repaid). Since El Salvador can

now use the funds approved to push forward the reconstruction of its

devastated infrastructure and as investment activity is being stimulated

by declining interest rates (currently in the region of 9.9% p.a.) within

the framework of the dollarization process initiated, economic growth is

likely to accelerate in the course of the year; even in the first quarter of

this year the growth rate was in the region of 1.7% year-on-year due to

a 7% production increase in the manufacturing industry. Our growth

forecast for the year 2001 as a whole remains at around 3% even

though the agricultural sector (including coffee) suffered severe

setbacks due to earthquake damage and unfavorable climatic

conditions. During the reconstruction process the state will need to

raise spending significantly, which means that the budget deficit (after

grants) is likely to grow from 3% to roughly 4% of GDP. This year the

government will be able to cover the higher financing needs with the

aid of multilateral loans and by issuing a ten-year eurobond (to the

value of US$ 353 million, at a coupon of 8.6%) which was received by

the international capital market in spite of the Argentinean crisis. Lea-

ding rating agencies kept their risk assessment for El Salvador

(investment grade) in force. In the longer term, however, the state has to

return to a consolidation course for public finances in order to be

prepared for external shocks.

External sector: reserve cushion

Due to further increasing private money transfers from the U.S. and a

rising inflow of funds in the form of foreign loans (including the

government bond issue and multilateral lending), by July of this year

the country's foreign currency reserves rose to US$ 2 billion even though

the demand for imports is rising significantly during the reconstruction

phase and coffee exports are falling drastically. The current account

deficit in 2001 is likely to widen to 5% of GDP; however, we assume that

the further capital inflow will cause reserves to stabilize at just over US$

2 billion.

Even after the severe earthquake damage at the

beginning of the year, the growth process in El

Salvador is not in danger since foreign

governments and multilateral financial

institutions quickly prepared a support package

for reconstruction purposes. The government

can also use these proceeds to cover rising

fiscal and external deficits. In the year 2001 the

increasing volume of public spending will also

be financed by a eurobond issue.

Page 36: Spotlight 09 01

36 Dresdner Bank Lateinamerika, Spotlight 9/2001, Jamaica

1998 1999 2000 2001f 2002f

DOMESTIC ECONOMY

GDP change (real) % -0.7 -0.4 0.8 1.5 2.2

GDP US$ bn 7.4 7.3 7.5 7.5 7.6

Inflation (year-end) % 7.8 6.9 6.0 6.7 6.2

Budget balance, public sector* % GDP -11.1 -7.4 -5.3 -3.7 -4.5

EXTERNAL SECTOR

Merchandise exports* US$ mn 1613 1490 1637 1650 1800

Merchandise imports* US$ mn 2744 2628 2975 3200 3300

Trade balance* US$ mn -1131 -1138 -1338 -1550 -1500

Current account balance US$ mn -302 -256 -285 -500 -600

Current account balance % GDP -4.1 -3.5 -3.8 -6.7 -7.8

Net foreign direct investment US$ mn 287 429 340 180 300

Foreign exchange reserves, year-end US$ mn 710 555 1054 1200 1100

Import cover ** months 1.9 1.5 2.6 2.8 2.4

US$ exchange rate, year-end J$ 37.10 41.30 45.40 47.00 50.00

FOREIGN DEBT

Gross foreign debt US$ mn 4017 3913 4414 5100 5400

Foreign debt % exports** 113 112 119 134 135

Short-term foreign debt US$ mn 630 760 750 800 850

*incl. foreign assistance **goods and services f=forecast

Area 11 425 sq.kmPopulation 2.6 million (+ 0.9% p.a.)

State president P.J. PattersonFinance minister Omar DaviesCentral bank president Derick Latibeadiere

Next elections December 2002

GDP per capita US$ 2 716

Rating Moody’s: Ba3 S&P:B+

ANNUAL FIGURES AND FORECASTS

JAMAICA:JAMAICA:JAMAICA:JAMAICA:JAMAICA: IN THE DEBT TRAP

Page 37: Spotlight 09 01

SUMMARY AND OUTLOOK

37Dresdner Bank Lateinamerika, Spotlight 9/2001, Jamaica

Thorsten Rülle +1 305 810 3855

CURRENT ACCOUNT

GDP CHANGE (REAL)

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

1997 1998 1999 2000 2001f 2002f

%

-700

-600

-500

-400

-300

-200

-100

0

1997 1998 1999 2000 2001f 2002f-10

-8

-6

-4

-2

0US$ mn % of GDP

Domestic economy: growth path too low

The risk that Jamaica will have no way of escaping its debt trap

has continued to grow. While the government's austerity policy -

the budget surplus before interest payments amounted to 12.5%

of GDP in the year 2000 - reduced the public-sector deficit

further to 5.3% of GDP, the level of public-sector debt continued

to rise to 137% of GDP. For the year 2001 the government agreed

on a reduction to 3% of GDP within the scope of an IMF monitoring

program. In view of the growing dissatisfaction of the population,

which led to bloody uprisings in July, and the presidential election

scheduled for the year 2002, we doubt that the government will

be in a position to reach its set target. A softening of fiscal policy

would put an end to the slight decline in interest rates which has

done a great deal to stimulate the Jamaican economy to a certain

extent. The projected growth rates of 2% for this year and next

are too low in any event to take pressure off the country's debt

situation. In view of the political uncertainty in connection with

the elections, the significantly higher risk aversion on the

emerging markets and the amortization payments on internatio-

nal bonds starting next year, it is doubtful whether the Jamaican

government will be able to meet its payment obligations in the

medium term.

External sector: external shocks hurting current account

Owing to the diverse external shocks that Jamaica has had to

contend with since the year 2000 (oil price hikes, decline in

aluminum prices, economic slowdown in the U.S.), the current

account deficit will widen substantially this year to nearly 7% of

GDP, and it will remain at this high level next year too. In the

medium term, a deficit of this order is impossible to finance for

Jamaica. In the past, the government has resisted a flexibilization

of its exchange-rate regime - against the recommendations of

the IMF. The Jamaican dollar had appreciated by about 50% in

real terms from 1995 to 1998 and has since shed little in value. A

control led devaluat ion would improve the country's

competitiveness and contribute toward a reduction of the

structural current account deficit. If the public debt situation

should escalate, this will lead to a substantial exchange-rate

correction of the national currency.

The slight economic pickup this year has done

nothing to change our fundamental conviction

that in light of a public debt quota of around 140%

of GDP Jamaica will be caught in a debt trap in

the medium term. Funding via international

bonds is likely to become more difficult next year

due to the presidential election and the negati-

ve external conditions prevailing, which will lead

to an unsustainable current account deficit of

around 7 % of GDP

Page 38: Spotlight 09 01

38 Dresdner Bank Lateinamerika, Spotlight 9/2001, Mexico

MEXICO:MEXICO:MEXICO:MEXICO:MEXICO: CONGRESS MUST DELIVER

SUMMARY AND OUTLOOK

In the past, the Mexican economy has managed to shake off a large number of negative external influences without

difficulty: the economic slowdown in the U.S., the decline in oil prices, the financial crisis in Argentina - while all this has

ended a phase of uninterrupted growth for a solid 21 quarters, these events nevertheless have not managed to shake

confidence in the country's macro-economic stability and its long-term growth prospects. Accordingly, thanks to an

easing of monetary policy and declining inflation, Cetes interest rates reached an all-time low. And the peso remains

remarkably stable owing to the high capital inflows. The true test still lies ahead, however: starting in September the house

of deputies will be dealing with the tax reform. We are optimistic that thanks to intensive preparatory work on the political

front, an acceptable compromise will emerge at the end of the day. If expectations are disappointed, however, the peso

and the country's interest rates will be in for volatile times.

Area 1 967 183 sq. kmPopulation 98 million (+1.6% p.a.)

State president Vicente Fox QuesadaFinance minister Francisco Gil DiazCentral bank president Guillermo Ortiz Martínez

Next elections State president: July 2006Parliament: July 2003

GDP per capita US$ 5 860 (2000)

Investment 23% of GDP (2000)Savings 21% of GDP (2000)

Exchange rate system Flexible exchange rateMonetary policy Inflation targeting

Exports (2000) 29% of GDPPurchasing countries USA 89%, EU 3%, Canada 2%Products Maquiladora 45%, rest of industry 40%

crude oil and derivatives 10%

Imports (2000) 30% of GDPSupplier countries USA 73%, EU 9%, Japan 3%, Canada 2%Products Intermediate goods for the maquiladora 35 %,

intermediate goods for the rest of the economy 41%,capital goods 14%, consumer goods 10%

Rating Moody’s: Baa3 S&P: BB+

Page 39: Spotlight 09 01

39Dresdner Bank Lateinamerika, Spotlight 9/2001, Mexico

1998 1999 2000 2001f 2002f

DOMESTIC ECONOMY

GDP change (real) % 4.8 3.9 6.9 1.1 4.2

GDP US$ bn 420.5 480.4 574.4 618.8 665.9

Inflation (year-end) % 18.6 12.3 9.0 4.9 5.2

Inflation (average) % 15.9 16.6 9.5 6.2 5.3

PUBLIC SECTOR

Budget balance, central government % GDP -1.7 -1.9 -1.5 -1.2 -1.0

Budget balance, public sector % GDP -1.2 -1.2 -1.1 -0.8 -0.5

Public debt % GDP 45 43 39 40 42

Amortization (not incl. Cetes)*** US$ bn n.a. n.a. 44.3 23.7 20.1

Gross financing needs*** US$ bn n.a. n.a. 52.9 31.2 26.6

EXTERNAL SECTOR

Merchandise exports US$ bn 117.5 136.4 166.5 168.7 182.1

Merchandise imports US$ bn 125.4 142.0 174.5 178.0 193.5

Trade balance US$ bn -7.9 -5.6 -8.0 -9.3 -11.4

Current account balance US$ bn -16.1 -14.3 -18.1 -19.6 -21.6

Current account balance % GDP -3.8 -3.0 -3.1 -3.2 -3.2

Gross foreign direct investment US$ bn 11.3 11.6 13.2 20.0 15.0

Foreign exchange reserves, year-end US$ bn 31.8 31.8 35.5 38.5 39.0

Import cover ** months 2.4 2.2 2.0 2.1 2.0

US$ exchange rate, year-end Pesos 9.91 9.50 9.62 9.40 10.00

US$ exchange rate, average Pesos 9.15 9.56 9.46 9.41 9.66

FOREIGN DEBT

Gross foreign debt US$ bn 162.7 168.6 163.0 163.5 167.0

Foreign debt % exports** 121 111 88 86 81

Short-term foreign debt US$ bn 39.9 38.1 37.0 37.0 38.0

Foreign debt amortization US$ bn 20.5 20.4 18.1 16.5 17.8

Foreign debt service US$ bn 33.0 33.5 31.9 29.7 32.3

Foreign debt service % exports** 25 22 17 15 15

FINANCIAL MARKETS (year-end)

Interest rates (Cetes, 28 days) % 31.2 16.3 17.6 7.5 8.1

IPC stock index (peso based, 2001: 08/22) 3960 7130 5652 6333

IFCI stock index (US$ based, 2001: 08/22) 479 859 675 780

Bond market yield (2001: 08/22)* % 10.9 10.3 9.4 9.2

Yield spread (2001: 08/22)* bp 560 307 381 368

* 111/2 % US$-Bond (2026) ** goods and services *** central government f=forecast

ANNUAL FIGURES AND FORECASTS

Page 40: Spotlight 09 01

40 Dresdner Bank Lateinamerika, Spotlight 9/2001, Mexico

PVEM

PRI PRD

other

PAN

(211)

(15)

(50)

(17)(207)

other

PRD

PVEM

PAN

PRI (59)(2)

(5)

(17)

(45)

Federal Government, non-tax revenues: 24.2%

Federal Government,tax revenues : 48.9 %

Revenues from PEMEX: 9,1%

Revenues from other public sector entities:

year 2000

PUBLIC SECTOR REVENUES

SEATS IN THE SENATE

SEATS IN THE CHAMBER OF DEPUTIESFiscal policy: recession as a catalyst for reforms

Politically speaking, the stage appears to be set for the passage of the

tax reform bill as early as in the first few weeks of the legislative period

for congress scheduled to begin on September 1. The tough

negotiations in recent months to bring about a compromise accept-

able both to PAN and PRI deputies is likely to lead to the government

submitting a modified bill. The anticipated concessions to the PRI are

acceptable in light of political stability factors. The extension of the

value added tax base to include food and medications is likely to be

pushed through by and large; only a basic basket of about 15 products

is to remain free of value added tax in the future. The tax rate is to

remain at 15%. However, three percentage points of this are likely to

go directly to the federal states in the future to alleviate their financial

woes. This would not only be a sensible but also a tactically skillful

strategy on the part of the Fox government, the reason being that the

PRI governors who rule 18 of the total of 31 federal states should well

have an influence on the voting behavior of their party in the house of

deputies. To make up in part for the shortfall in revenues occasioned

by the tax exemption of the basic basket, a tax on price gains realized

on the stock markets and on interest income from government money

market instruments (Cetes) is under discussion. Further concessions

by the government are likely concerning the issue of the peak income

tax rate, which was originally set to be lowered to 32%. Not only the

established readiness of the government to make concessions and

the persistent political work of experts in the parties are to help the

reform initiative to be successful. The "hard landing" of the economy

has revealed the structural weaknesses in public finances: at 16% of

GDP, state revenues are too low; in addition, one third of the revenues

in question are generated by the volatile oil business. Political pressure

on the PRI to agree to the reform has thus increased significantly.

Following the election victory in the federal state of Tabasco, the former

ruling party is in the process of recovering from its defeat at the

presidential election of July 2, 2000 - and it would jeopardize this

trend if it was not inclined to perform constructive work in the opposition.

A taxation reform which is increasing the tax rate by about 1.5 per-

centage points, an austere public-sector budget in 2002 and initial

signs of an economic recovery in the fourth quarter – all this would

constitute an ideal scenario for Mexico to be awarded Investment

Grade status by the rating agency Standard & Poor's by the end of this

year.

Page 41: Spotlight 09 01

41Dresdner Bank Lateinamerika, Spotlight 9/2001, Mexico

-2

0

2

4

6

8

10

I/98 III/98 I/99 III/99 I/00 III/00 I/01 III/01f

%, y-o-y

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

I/98 III/98 I/99 III/99 I/00 III/00 I/01

% y-o-y GDP Agricult. Industr. Serv.

10.0

11.0

12.0

13.0

14.0

15.0

16.0

Jun-98 Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01

mn (persons insured with IMSS)

EMPLOYMENT

GDP CHANGE (REAL,SUPPLIER´S SIDE)

GDP CHANGE (REAL)Public finances: further spending cuts necessary

In the second quarter the gap between budgeted and actual state

revenues widened to 6.8 billion pesos (first quarter: 3.4 billion pe-sos).

The reasons for this were the weak economy and oil revenues short of

levels planned – the result of the firm peso. In line with its powers

granted by the budget act, the government announced spending cuts

of the same order. In the forthcoming two quarters expenditure cuts

are likely to be necessary too. If, as we expect, it is possible to confine

the public deficit to 0.8% of GDP (the govern-ment's target: 0.65% of

GDP), in light of the various negative external shocks we will consider

this a success. The government must submit its budget bill for the year

2002 to congress by November 15. In view of the additional revenues

generated by the tax reform and an expected economic recovery, we

anticipate that the government will target a balanced budget.

Economic activity: weakness reaches private consumption

In line with our expectations, GDP stagnated in the second quarter

year-on-year after having seen uninterrupted growth for 21 con-secutive

quarters. Seasonally adjusted GDP fell by 0.25% over the previous

quarter – the third decline in succession. Based on a quarterly view,

therefore, the Mexican economy has been in recession since the

beginning of the year. While industrial production (-3.6% year-on-year)

continued to decline in tandem with the trend prevailing in the U.S.

industry, growth in the services sector (+1.4% year-on-year) saw a

marked fall. This indicates that the economic downturn has also

reached private consumption, which is likely to have also been hit by

job losses (300,000 since November 2000) and loss of consumer

confidence. In the third quarter little will change in terms of economic

activity: on the one hand, in line with the trend in the U.S. the decline in

industrial production will turn out lower year-on-year because among

other factors the reduction of inventories has already progressed quite

far. On the other, growth of the services sector should decline again

amid further layoffs and slower growth of real wages. On the whole, we

once again anticipate a stagnation of GDP year-on-year. Only in the

fourth quarter will an economic upturn materialize on the back of

accelerating export demand. Thanks to the substantially lower real

interest rates, the external impetus is likely to be transferred relatively

quickly to domestic demand. For the year 2001 as a whole, we expect

a GDP growth rate of 1.1%.

Monetary sector: interest rates reaching all-time low

The dangers of inflation, which induced the central bank (Banxico) to

Page 42: Spotlight 09 01

42 Dresdner Bank Lateinamerika, Spotlight 9/2001, Mexico

-5

0

5

10

15

20

Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01

% y-o-y m-o-m

0

5

10

15

20

25

30

35

40

Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01

Interest rates (CETES 28d) % real nominal

-25

-20

-15

-10

-5

0

1998 1999 2000 2001 f 2002 f-5.0

-4.0

-3.0

-2.0

-1.0

0.0

US$ bn % of GDP

CURRENT ACCOUNT

INTEREST RATE

INFLATION

Thorsten Rülle, Miami +1 305 810 3855

Bolko Schwanecke +49 40 3595 3605

hold onto its restrictive monetary policy until end-May, have dissi-

pated in the past several months: fears of inflation being fueled by the

peso depreciating in the wake of falling oil prices and poor import

demand from the U.S. have been allayed thanks to the sustained,

robust capital inflows (e.g. the Citibank-Banamex merger); inflationary

pressure in the services sector has declined substantially following

the swift cool-down in demand. Not only did the increase in consumer

prices (5.9% year-on-year) slip below the inflationary target for end-

2001 of 6.5% for the first time in July; inflationary expectations of the

private sector for end-2001, at 5.5% in July, have also been

consolidated at a level considerably lower than the target. On the

basis of the inflationary figures, which are considerably better than

expected, we have also reduced our forecast from 5.7% to 4.9%. For

the second time already, Banxico has reduced the minimum liquidity

requirements for banks (the "corto") from 400 milllion to a current 300

million pesos; further moderate reductions of the "Corto" are likely to

follow. Early in August the monetary policy trend reversal and the

decline in inflation caused interest rates on money market instruments

of the state (Cetes, 28 days) to fall to an all-time low of 7.24%. Owing to

the debate concerning the tax reform and the ongoing financial crisis

in Argentina, we continue to expect that interest rates will rise

temporarily to about 9%, but in light of the change of direction in

monetary policy and as inflationary expectations continue to decline,

we have reduced our interest rate forecast for end-2001 significantly

from 10% to 7.5%.

External sector: current account deficit under control

Despite the negative external changes, such as the economic

downturn in the U.S. and the decline in oil prices, the current ac-count

deficit in the year 2001 will remain more or less stable at 3.2% of GDP.

The reason for this is the unexpectedly speedy adjustment of domestic

demand with its dampening impact on the demand for imports, which

is chiefly a success of Banxico's restrictive monetary policy in the

year 2000. Moreover, thanks to the considerable share of durable

consumer goods (automobiles) which Mexico exports to the U.S., a

shortfall of exports of the kind suffered by the Asian exporting countries

has not eventuated so far. Accordingly, the trade deficit is only likely to

rise from US$ 8.0 billion in the year 2000 to US$ 9.3 billion in 2001.

Excluding the forecast decline in oil exports by US$ 2.3 million, the

trade balance would even improve.

Page 43: Spotlight 09 01

43Dresdner Bank Lateinamerika, Spotlight 9/2001, Mexico

MONTHLY INDICATORS Apr 01 May 01 Jun-01 Jul-01

DOMESTIC ECONOMY

Economic activity index (IGAE) % yoy 1.0 -0.7 -0.6-0.6-0.6-0.6 25-Sep

IGAE index (seasonally adjusted) % mom -0.2 -0.3 0.00.00.00.0 25-Sep

Industrial production % yoy -3.3 -3.5 -3.9-3.9-3.9-3.9 11-Sep

Manufacturing, in-bond industry % yoy -3.7 -2.4 -4.2-4.2-4.2-4.2 11-Sep

Manufacturing (excluding in-bond industry) % yoy -3.0 -3.1 -3.8-3.8-3.8-3.8 11-Sep

Construction % yoy -6.2 -7.8 -6.7-6.7-6.7-6.7 11-Sep

Gross fixed capital formation % yoy -1.6 -5.9-5.9-5.9-5.9 07-Sep

Retail sales % yoy 4.6 3.5 24-Aug

Wholesale sales % yoy -2.8 -6.6 24-Aug

Unemployment rate % 2.3 2.5 2.3 2.42.42.42.4 19-Sep

Employees (social insurance) % yoy 2.4 2.2 1.1 28-Aug

Real wages per employee, manufacturing % yoy 3.6 6.0 29-Aug

Budget balance, public sector Pesos bn 17.1 1.7 -18.9-18.9-18.9-18.9 03-Sep

Public domestic debt Pesos bn 717.2 708.4 714.4714.4714.4714.4 03-Sep

Public external debt US$ bn 88.0 85.3 84.684.684.684.6 03-Sep

Consumer prices % yoy 7.1 6.9 6.6 5.95.95.95.9 09-Sep

Consumer prices % mom 0.5 0.2 0.2 -0.3-0.3-0.3-0.3 09-Sep

Producer prices (excl. Services) % yoy 6.2 5.5 4.5 4.24.24.24.2 09-Sep

Producer prices (excl. Services) % mom 0.1 -0.2 -0.1 -0.2-0.2-0.2-0.2 09-Sep

Money supply M1a % yoy 13.0 12.0 9.6 24-Aug

Treasury bills, Cetes 28d (latest: 08/21)* % 13.3 10.8 8.9 9.4 7.07.07.07.0

Comercial bank lending (excl. restructuring) % yoy 14.4 11.1 8.8 24-Aug

EXTERNAL SECTOR

Merchandise exports US$ mn 13300 14041 13379 23-Aug

Merchandise exports % yoy 7.3 -4.5 -4.4 23-Aug

Merchandise imports US$ mn 14113 14660 13749 23-Aug

Merchandise imports % yoy 11.0 -3.5 -5.6 23-Aug

Trade balance US$ mn -813 -619 -354 23-Aug

Foreign exchange reserves (latest: 08/17) US$ bn 40.3 40.6 40.8 40.8 40.740.740.740.7

US$ exchange rate (latest: 08/22) Pesos 9.25 9.19 9.04 9.2 9.129.129.129.12

next/latest

QUARTERLY INDICATORS Q3 00 Q4 00 Q1 01 Q2 01

DOMESTIC ECONOMY

GDP % yoy 7.3 5.1 1.9 0.00.00.00.0 15-Nov

Private consumption % yoy 10.5 7.6 6.5 14-Sep

Public consumption % yoy 6.1 0.6 -3.0 14-Sep

Private and public investment % yoy 11.1 7.6 -6.2 14-Sep

Domestic demand % yoy 9.6 6.0 2.5 14-Sep

Exports (goods and services) % yoy 16.9 14.1 4.7 14-Sep

Imports (goods and services) % yoy 23.2 16.1 6.3 14-Sep

EXTERNAL SECTOR

Current account balance US$ bn -3.8 -6.3 -4.4 31-Aug

Gross foreign direct investment US$ bn 2.9 3.3 3.6 31-Aug

Portfolio investment US$ bn -0.6 -4.3 1.7 31-Aug

Capital account US$ bn 3.3 5.6 8.1 31-Aug

Change in foreign exchange reserves* US$ bn 0.1 1.7 4.5 31-Aug

* balance of payments

next/latest

MONTHLY AND QUARTERLY FIGURES

Page 44: Spotlight 09 01

44 Dresdner Bank Lateinamerika, Spotlight 9/2001, Nicaragua

1998 1999 2000 2001f 2002f

DOMESTIC ECONOMY

GDP change (real) % 4.1 7.4 4.3 2.5 3.5

GDP US$ bn 2.1 2.2 2.4 2.3 2.6

Inflation (year-end) % 18.5 7.2 9.9 8.0 7.9

Budget balance, public sector % GDP -7.0 -14.0 -15.2 -15.0 -14.0

EXTERNAL SECTOR

Merchandise exports US$ mn 573 545 625 530 540

Merchandise imports US$ mn 1397 1699 1634 1430 1480

Trade balance US$ mn -824 -1154 -1009 -900 -940

Current account balance US$ mn -498 -652 -612 -584 -631

Current account balance % GDP -24.1 -29.5 -25.5 -24.9 -24.6

Net foreign direct investment US$ mn 184 300 265 300 300

Foreign exchange reserves, year-end US$ mn 350 510 489 400 350

Import cover * months 2.2 2.7 2.7 2.4 2.0

US$ exchange rate, year-end Córdobas 11.25 12.38 13.12 14.00 14.90

FOREIGN DEBT

Gross foreign debt US$ bn 6.4 7.0 7.1 6.9 6.5

Foreign debt % exports* 764 812 734 777 729

Short-term foreign debt US$ bn 0.05 0.12 0.13 0.13 0.13

*goods and services f= forecast

Area 139 000 sq. kmPopulation 4.7 million (+ 2.7% p.a.)

State president Arnoldo Alemán LacayoFinance minister Esteban Duque EstradaCentral bank president Noel Ramirez

Next elections State president: November 2001Parliament: November 2001

GDP per capita US$ 510

Rating Moody’s: B2 S&P:NR

ANNUAL FIGURES AND FORECASTS

NICARAGUA:NICARAGUA:NICARAGUA:NICARAGUA:NICARAGUA: LIQUIDITY BOTTLENECKS

Page 45: Spotlight 09 01

SUMMARY AND OUTLOOK

45Dresdner Bank Lateinamerika, Spotlight 9/2001, Nicaragua

Ingrid Grünewald +49 40 3595 3487

CURRENT ACCOUNT

GDP AND INFLATION

0

2

4

6

8

10

1997 1998 1999 2000 2001f 2002f0

4

8

12

16

20 GDP, real change in % Inflation, %

-800

-600

-400

-200

0

200

400

600

800

1996 1997 1998 1999 2000 2001f 2002f

US$ mn current account balance balance of transfers

Domestic policy: run-up to general elections

Enrique Bolaños Geyer, presidential candidate of the ruling Partido

Liberal Constitucionalista (PLC) and the country's former vice president,

is likely to benefit from votes being split as early as at the first ballot at the

beginning of November this year. The split refers to the loyal voters of

the small Partido Conservador, whose candidate Saborío - who ranks in

third position in the polls - will be satisfied with a stronger PC in

parliament. The outcome of the neck-and-neck race between Bolaños

and Sandinista ex-president Daniel Ortega (who currently has a slight

lead in the polls) remains completely open. The candidate with the

greatest number of votes will already be elected at the first ballot if he

manages to chalk up at least 40% of valid votes or between 35% and

40% of votes and a lead of at least 5 percentage points over the

candidate in second place; otherwise, a runoff ballot will be held.

Domestic economy: internal demand weaker

In Nicaragua the dynamism of growth is flagging - a tendency which

will continue until the end of the year: exports are increasingly

deteriorating due to the fall in coffee prices, and investments are likely

to see a further decline: in the private sector, this is due to the uncertain

outcome of the election and in the public sector the reasons are to be

found in declining foreign assistance and spending cuts. Consumer

demand likewise remains subdued. For the year 2001 as a whole we

only anticipate a growth rate of 2.5% - at present the annualized rate is

just over 3%. The budget deficit should reach approx. 15% of GDP,

which will be higher than the target recently agreed with the IMF (13%

of GDP) as the state will earn a great deal less in revenues from

privatization projects than originally planned. For this year we do not

anticipate any further attempts to sell off the country's power plants

since the last auction in August failed owing to lack of interest among

bidders.

External sector: high debt burden and lower reserves

Even though Guatemala wrote off US$ 500 million in Nicaraguan debt

in the first half of the year - in our opinion an extensive HIPC debt relief

for Nicaragua will only take shape under a market-oriented Bolaños

government as the Sandinistas will not demonstrate willingness to make

the structural adjustment required by the IMF. Nicaragua will hardly be

able to avoid the decline in reserves to US$ 0.4 billion this year since

foreign assistance is drying up and investment from abroad will not be

sufficient to cover the current account deficit remaining at 25% of GDP.

Quo vadis? Continued market economy or return

to a leftist past? The outcome of the forthcoming

presidential election in Nicaragua is highly

uncertain, which is impeding economic growth.

Amid ongoing high current account deficits,

bottle-necks in liquidity are emerging as the

foreign investment hoped for fails to materialize

due to slip-ups with privatizations and as foreign

aid is declining. Accordingly, the budget deficit

remains in the region of 15% of GDP.

Page 46: Spotlight 09 01

46 Dresdner Bank Lateinamerika, Spotlight 9/2001, Panama

1998 1999 2000 2001f 2002f

DOMESTIC ECONOMY

GDP change (real) % 4.2 3.2 2.7 2.0 2.5

GDP US$ bn 9.3 9.6 9.9 10.1 10.5

Inflation (year-end) % 1.4 1.4 0.7 0.5 0.6

Budget balance, public sector % GDP -3.0 -1.4 -0.8 -1.0 -0.5

EXTERNAL SECTOR

Merchandise exports US$ bn 6.4 5.3 5.8 5.9 6.2

Merchandise imports US$ bn 7.7 6.7 7.0 7.0 7.3

Trade balance US$ bn -1.4 -1.4 -1.3 -1.2 -1.1

Current account balance US$ bn -1.2 -1.4 -0.9 -0.6 -0.5

Current account balance % GDP -12.6 -14.4 -9.4 -5.9 -4.5

Net foreign direct investment US$ bn 1.2 0.5 0.4 0.4 0.5

Foreign exchange reserves, year-end US$ bn 1.0 0.8 0.7 1.0 1.1

Import cover * months 1.0 1.0 0.8 1.1 1.2

US$ exchange rate, year-end balboa 1.00 1.00 1.00 1.00 1.00

FOREIGN DEBT

Gross foreign debt US$ bn 6.4 6.8 7.0 7.4 7.6

Foreign debt % exports* 66 80 77 80 78

Short-term foreign debt US$ bn 0.4 0.4 0.5 0.5 0.6

FINANCIAL MARKETS (year-end)

BVP stock index (balboa based, 2001:08/22) 662 561 430 384

Rendite am Anleihemarkt in % (2001: 08/22)* % 9.8 10.9 10.9 9.8

Risikoprämie am Anleihemarkt (2001: 08/22) bp 453 418 519 426

* 8 7/8 US$-bond (2027) *goods and services f= forecast

Area 77 082 sq. kmPopulation 2.9 million (+ 1.7% p.a.)

State president Mireya Elisa Moscoso RodríguezEconomy and Finance minister Norberto Delgado DuránPresident ofBanco Nacional de Panamá Bolivar Pariente C.

Next elections State president: May 2004Parliament: May 2004

GDP per capita US$ 3 460

Rating Moody’s: Ba1 S&P: BB+

ANNUAL FIGURES AND FORECASTS

PANAMA:PANAMA:PANAMA:PANAMA:PANAMA: DEBT BUYBACK

Page 47: Spotlight 09 01

SUMMARY AND OUTLOOK

47Dresdner Bank Lateinamerika, Spotlight 9/2001, Panama

Ingrid Grünewald +49 40 3595 3487

CURRENT ACCOUNT

BUDGET DEFICIT

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

1997 1998 1999 2000 2001f 2002f

% of GDP

-1500

-1000

-500

0

1997 1998 1999 2000 2001f 2002f-15

-10

-5

0 US$ mn % of GDP

Economic activity: growth prospects deteriorated

In the year 2001 the economy will probably only reach a growth rate of

2% (following 3% in the previous year) since the Free Zone's re-exports,

which have been stagnating in the past, meanwhile reflect a slight

downward tendency. Demand from Brazil is falling due to the economic

downturn and the pace of growth will even slow down in such key

purchasing countries as Colombia and Venezuela. State-sponsored

and private infrastructural projects are being delayed, which means

that we hardly anticipate any decisive impetus for investment, and

demand for consumer goods continues to be weak as indicated by

falling commerce figures. For the port services and telecommunications,

however, we anticipate continued double-digit growth rates.

Fiscal policy: slight budget deficit

The government will no longer be in a position to meet its target agreed

within the framework of a stand-by agreement with the IMF of having a

balanced public-sector budget, even though it has already curtailed

public spending. We anticipate a budget deficit amounting to 1% of

GDP as tax receipts are falling in the course of the economic downturn

(January/May: -13% year-on-year) and positive effects are hardly

expected to emanate from the necessary but delayed tax reform by the

end of this year. The government will have no difficulty in financing this

shortfall using the funds generated by the eurobond issue of February

this year (US$ 750 million) even though Panama recently redeemed

US$ 160 million of a global bond issue maturing in 2002. Due to the

residual terms to maturity of this bond issue, public amortization

payments will still be very high in the year 2002 (approx. US$ 600

million), which means that further bond issues will follow. New buy-

backs may also be possible.

Current account: high deficit narrowing

For the current account an improvement is on the cards in spite of

unfavorable trends in the Free Zone and declining agricultural exports:

the high deficit is likely to fall from 9% of GDP in the previous year to 6%

as import demand is slightly down and profit remittances abroad will

decline along with interest payments - the latter due to falling interest

rates in the U.S. and the Panamanian buy-back. Net credit inflows,

which soared in the first several months of the year due to the eurobond

issue, were lowered again owing to the debt buy-back. The net capital

inflow from credits and investments from abroad is likely to remain

substantial until year-end (approx. US$ 400 million, respectively) and

will offset the US$ 600 million current account deficit.

The Colón Free Zone is suffering due to weak

demand from key purchasers in Latin America,

which is slowing down growth of the

Panamanian economy and is likely to cause the

high current account deficit to decline to 6% of

GDP. The government is expected to continue

its current program of debt management - i.e.

eurobond issues and debt buy-backs (which

guarantee that budget and current account

deficits will be covered this year) in 2002 as

well.

Page 48: Spotlight 09 01

48 Dresdner Bank Lateinamerika, Spotlight 9/2001, Paraguay

1998 1999 2000 2001f 2002f

DOMESTIC ECONOMY

GDP change (real) % -0.4 0.5 -0.4 0.0 2.0

GDP US$ bn 8.6 7.7 7.5 6.9 6.7

Inflation (year-end) % 14.6 5.4 8.6 10.5 12.5

Budget balance, public sector % GDP -1.0 -4.7 -5.7 -3.5 -2.6

EXTERNAL SECTOR

Merchandise exports US$ mn 3549 2681 2373 2400 2510

Merchandise imports US$ mn -3942 -3042 -2906 -3000 -3120

Trade balance US$ mn -393 -360 -532 -600 -610

Current account balance US$ mn -160 -90 -137 -220 -240

Current account balance % GDP -1.9 -1.2 -1.8 -3.2 -3.6

Net foreign direct investment US$ mn 336 82 76 90 140

Foreign exchange reserves, year-end US$ mn 865 978 761 700 750

Import cover * months 2.2 3.1 2.6 2.3 2.4

US$ exchange rate, year-end Guaranies 2845 3350 3530 4500 5140

FOREIGN DEBT

Gross foreign debt US$ mn 2300 2550 2800 3000 3300

Foreign debt % exports* 53 83 105 111 117

Short-term foreign debt US$ mn 669 751 650 700 800

* goods and services f=forecast

Area 406 752 sq. kmPopulation 5.6 million (+2.6% p.a.)

State president Luis González MacchiFinance minister Francisco OviedoCentral bank president Raúl Vera Bogado

Next elections State president: May 2003Parliament: May 2003

GDP per capita US$ 1 383 (2000)

Rating Moody’s: B2 S&P: B

ANNUAL FIGURES AND FORECASTS

PARAGUAPARAGUAPARAGUAPARAGUAPARAGUAYYYYY::::: TOUCH AND GO

Page 49: Spotlight 09 01

SUMMARY AND OUTLOOK

49Dresdner Bank Lateinamerika, Spotlight 9/2001, Paraguay

Thomas Pohl +49 40 3595 3481

EXCHANGE RATE/CURRENCY RESERVES

GDP AND INFLATION

-2

0

2

4

6

8

10

12

14

16

1998 1999 2000e 2001f 2002f

% GDP, real change inflation

3000

3200

3400

3600

3800

4000

4200

4400

Feb-00 Aug-00 Feb-01 Aug-010

200

400

600

800

1000

1200 Exchange rate G/US$ Forex reserves US$ mn

Domestic policy: on a powder keg

The political situation is becoming increasingly fragile. Dissatisfac-

tion among the population - the current year is the sixth in succes-

sion of no increase in real per-capita income - is being expressed in

partly violent demonstrations and strikes. The government has lost

additional prestige on account of the alleged involvement of president

González Macchi in a fraud scandal, in the wake of which the

president of the central bank and its director have had to resign.

While it was possible for a vote of no confidence by the opposition to

be averted, support in the ruling party (PC) is also dwindling. We do

not anticipate a stabilization in the short term: the social situation

remains tense and the increasing isolation of the president in his

own party and in the political system may have the makings of an

explosive situation.

Domestic economy: stagnation

The absence of structural reforms is an additional factor that is

paralyzing the economy. Whereas the government managed to

conclude a staff-monitored program with the IMF in April this year,

the targets agreed (among other things, to halve the public-sector

budget deficit, privatize the national telephone company and water

utilities by end-2001, restructuring of the technically insolvent de-

velopment bank BNF) and resulting positive economic stimuli are

hardly achievable this year. In our opinion, a further year of reces-

sion will only be averted in view of the expected record harvest. The

government's consolidation efforts and privatizations next year might

produce a modest level of economic growth.

External sector: tightrope act

In light of the declining competitiveness of national exports on the

country's key market, Brazil, following the devaluation of the Brazil-

ian real, as well as very low foreign currency reserves, the central

bank has abandoned its policy of 'dirty floating' for the time being.

Subsequently, from the beginning of the year to end-July the guaraní

shed some 18% of its nominal value against the US dollar. Despite a

temporary recovery in August, we expect the tendency toward

depreciation to continue. With foreign currency reserves providing

only two months' import cover, the central bank has no means of

counteracting this trend, and the danger of the country defaulting on

its debt remains high.

Paraguay faces difficult times in political,

economic and social terms. President González

Macchi's power base is crumbling, and the

government has neither the financial means to

cope with the dissatisfaction among the

population in the short term nor a clear political

concept in order to bring the economy to a

sustained growth path by means of structural

reforms. The central bank's foreign currency re-

serves are depleted.

Page 50: Spotlight 09 01

50 Dresdner Bank Lateinamerika, Spotlight 9/2001, Peru

PERU:PERU:PERU:PERU:PERU: MOMENT OF TRUTH

SUMMARY AND OUTLOOK

Following his election victory, Alejandro Toledo continued his tactics of announcing programs to bolster the economy and

special funds to combat poverty while members of his cabinet tended to nurture investors' hopes for a liberal economic

policy course. The presentation of the government's program to congress marked the beginning of the government's

actual work. The government's decision not to apply for special powers to speedily implement its measures shows that it

has to make concessions within the scope of its policies. Without a substantial upturn in the second half of the year, Toledo

could soon lose the broad support he urgently needs to push his policies through congress. The bleak outlook for the

global economy is extremely inconvenient right now. Nevertheless several early indicators point toward a revitalization of

growth. We adhere to our forecast of zero growth this year.

Area 1 285 215 sq. kmPopulation 25.7 million (+ 2% p.a.)

State president Alejandro Toledo MauriqueFinance minister Pedro Pablo KuczynskiCentral bank president Germán Suárez Chávez

Next elections State president: 2006Parliament: 2006

GDP per capita US$ 2 112 (2000)

Investment 21% of GDP (2000)Savings 19% of GDP (2000)

Exchange rate system Flexible echange rateMonetary policy Inflation targeting

Exports (2000) 13% of GDPPurchasing countries USA 29%, EU 25%, Switzerland 9%Products Gold 20%, fisching products 14%, copper 13%

Imports (2000) 16% of GDPSupplier countries USA 27%, Japan 7%, Colombia 6%Products Capital goods 29%, consumer goods 22%,

energy sources 10%

Rating Moody’s: Ba3 S&P: BB-

Page 51: Spotlight 09 01

51Dresdner Bank Lateinamerika, Spotlight 9/2001, Peru

1998 1999 2000 2001f 2002f

DOMESTIC ECONOMY

GDP change (real) % -0.4 0.9 3.1 0.0 3.0

GDP US$ bn 57.0 52.0 54.2 54.7 56.7

Inflation (year-end) % 6.0 3.7 3.7 3.0 3.2

Inflation (average) % 7.3 3.5 3.8 2.9 3.2

PUBLIC SECTOR

Budget balance, central government % GDP -1.1 -3.1 -2.7 -1.9 -1.8

Budget balance, public sector % GDP -0.8 -3.0 -3.0 -2.2 -2.1

Public debt % GDP 39.9 43.4 41.4 42.3 41.8

Amortization US$ bn 0.86 0.87 1.26 1.10 1.17

Gross financing needs US$ bn 1.32 2.43 2.89 2.31 2.36

EXTERNAL SECTOR

Merchandise exports US$ bn 5.7 6.1 7.0 7.0 7.8

Merchandise imports US$ bn 8.2 6.7 7.3 7.1 7.6

Trade balance US$ bn -2.5 -0.6 -0.3 -0.1 0.2

Current account balance US$ bn -3.6 -1.8 -1.6 -1.3 -0.9

Current account balance % GDP -6.7 -3.7 -2.8 -2.4 -1.6

Net foreign direct investment US$ bn 1.9 2.0 0.6 0.8 1.2

Foreign exchange reserves, year-end US$ bn 10.0 9.1 8.3 8.0 8.0

Import cover months** 9.4 9.7 8.3 8.2 7.8

US$ exchange rate, year-end Soles 3.15 3.51 3.52 3.60 3.70

US$ exchange rate, average Soles 2.93 3.38 3.49 3.56 3.65

FOREIGN DEBT

Gross foreign debt US$ bn 29.5 28.0 27.0 27.3 27.5

Foreign debt % exports** 361 325 275 283 273

Short-term foreign debt US$ bn 6.2 4.6 4.0 4.2 4.5

Foreign debt amortization US$ bn 2.3 2.3 2.2 2.3 2.3

Foreign debt service US$ bn 4.0 4.1 4.0 4.2 4.2

Foreign debt service % exports** 37 44 41 44 41

FINANCIAL MARKETS (year-end)

Interbank interest rate (av) % 12.9 16.9 11.4 12.0 13.0

IGBVL stock index (sol based, 2001: 08/22) 1336 1836 1208 1347

IFCI stock index (US$ based, 2001: 08/22) 134 161 116 134

Bond market yield (2001: 08/22)* % 11.1 11.1 12.1 11.6

Yield spread (2001: 08/22)* bp 624 461 694 664

* FLIRB 33/4 % (2017) **goods and services f=forecast

ANNUAL FIGURES AND FORECASTS

Page 52: Spotlight 09 01

52 Dresdner Bank Lateinamerika, Spotlight 9/2001, Peru

APRA

Unidad Nacional

Others

Perú Posible

FIM

(45)

(19)

(28)

(11)

(17)

0.6 1.0

-0.4

-5.3

-1.0-2.6

-4.9-3.6 -2.8 -2.4 -2.7 -2.3

-0.6-2.3 -2.9 -3.1

-10

-5

0

5

10

15

20

25

I/98 III/98 I/99 III/99 I/00 III/00 I/01 III/01f

% of GDP revenues expenditures balance

-8

-6

-4

-2

0

2

4

6

8

10

Jun-00 Aug-00 Oct-00 Dec-00 Feb-01 Apr 01 Jun 01

%, yoy central government

TAX REVENUES

CENTRAL GOVERNMENTS BUDGET

SEATS IN CONGRESS Domestic policy: waiver of special powers

At present, Alejandro Toledo enjoys broad popular support.

According to an opinion poll taken early in August by "Datum",

an opinion research institute, 74% of the populations endorses

the policies announced by Toledo in his inauguration speech.

Above all, the reason for this may have been that the promises

made at the time of the poll still appeared to be realistic. In

view of the poor budget situation, however, some of the

government's measures will need to be more moderate than

announced. This was already evident in the case of the

reduction in the value added tax rate (from 18% to 16%), which

was originally scheduled for early 2002. Meanwhile the

finance minister conceded that a reduction is out of the

question until the efficiency of the taxation system has been

enhanced.

On August 23 the cabinet members led by Roberto Dañino

pre-sented the government's agenda. It was clear from the

outset that there were going to be no surprises in terms of

content. Key economic impetus is to be generated by reducing

the so-called soli-darity levy from 5% to 2% and raising public-

sector wages. The funding required is to be raised by reducing

military spending, resuming the privatization program and a

partial revocation of the taxation reform initiated by the inte-

rim government. The government dispensed with the need to

apply for such special powers – these were originally intended

to ensure speedy implementation of economic policy

objectives – after having agreed a speedy passage of these

measures in congress with the strongest opposition party

APRA (the party of former president Alán García).

Fiscal policy: a more moderate tone

After Toledo considered a budget deficit amounting to 3% of

GDP as realistic immediately after his election victory,

statements from the governent have recently been more mo-

derate. On several occasions in the past few days, finance

minister Kuczynski indicated an annual deficit of 2.2% as a

target. This is in line with our estimate as early as July. On the

other hand, a consensus with the IMF on this topic – an IMF

delegation is in Lima at present – still remains to be achieved.

It is hardly likely that the IMF will tolerate an upper limit

substantially in excess of 2% of GDP. The consolidation of

Page 53: Spotlight 09 01

53Dresdner Bank Lateinamerika, Spotlight 9/2001, Peru

-4

-3

-2

-1

0

1

2

3

4

5

6

II/98 IV/98 II/99 IV/99 II/00 IV/00 II/01f IV/01f II/02f IV/02f

%, yoy

250

270

290

310

330

350

370

Jul-99 Jan-00 Jul-00 Jan-01 Jul-01115117119121123125127129131133

cement sales (1000 mt) GDP index (1994=100)

1.5

2

2.5

3

3.5

4

4.5

Jan-00 Apr-00 Jul-00 Oct-00 Jan-01 Apr-01 Jul-01

%, yoy CPI core rate

INFLATION

ECONOMIC INDICATORS

GDP CHANGE (REAL)public finances should be one of the government's major

objectives. Especially against the backdrop of the financing

problems in Argentina, signaling solid fiscal policy is a key

factor with a view to regaining investor confidence.

Economic activity: end to the decline

The latest economic indicators convey a mixed impression.

While value added tax revenues in July rose to an appreciable

extent for the first time since August of last year and the

domestic demand index (IMAC) also climbed by 2.0% in the

same month year-on-year (June 2001: 0.8%), sales of the

cement industry (which also correlates significantly with GDP)

declined once again by 12.7%. Ac-cording to our assessment,

GDP in July did not rise year-on-year and has not seen any

significant increase in August either. Starting in September,

however, we forecast the return of higher growth rates. In

addition to the enhanced planning safety at that point –

following the presentation of the government's agenda and

initial concrete economic policy steps being taken by the new

government – there are also statistical reasons at play here

as the Peru-vian economy has been contracting since Sep-

tember 2000. The resulting lower base for comparison

purposes will lead to higher growth rates even if the economy

undergoes a stagnation phase.

Although GDP declined to a somewhat lesser degree (-1.7%)

in the first half of the year than the 2% fall we had assumed,

we continue to believe that the Peruvian economy will not

grow on an annual average for the year 2001. This pessimistic

assessment is also backed up by the bleak growth prospects

in key industrialized countries, which will also impact

adversely on revenues of Peruvian exporters in the course of

the year.

Monetary sector: temporary reduction in inflation

The consumer price index in July only rose by 2.2% year-on-

year. The inflation rate has thus been below 3% for the fourth

month in succession. Several factors indicate that inflation

will pick up again toward the end of the year. Most recently,

the main factors that dampened inflation were stagnating or

declining prices for energy and food & beverages. The core

inflation rate – the increase in the price index excluding

Page 54: Spotlight 09 01

54 Dresdner Bank Lateinamerika, Spotlight 9/2001, Peru

-1000

-500

0

500

1000

1500

2000

2500

I/98 III/98 I/99 III/99 I/00 III/00 I/01 III/01f

US$ mn exports imports balance

7

7.5

8

8.5

9

9.5

10

10.5

Aug-98 Feb-99 Aug-99 Feb-00 Aug-00 Feb-01 Aug-01

US$ bn

500

600

700

800

900

Dec-00 Feb-01 Apr-01 Jun-01 Aug-013.45

3.5

3.55

3.6

3.65 EMBI+ Spread (Peru) Sol/US$

EXCHANGE RATE AND YIELD SPREAD

FOREIGN EXCHANGE RESERVES

TRADE BALANCE

Kai Stefani +49 40 3595 3486

particularly volatile price components – has been higher than

growth of the aggregate index for four months now. Above all,

food prices, which account for as much as 60% of the

consumer price index, should pick up toward the end of the

year. However, energy prices are likely to have a dampening

effect for the remainder of the year.

External sector: trade balance in equilibrium

Despite declining metal prices on international commodity

markets – industrial metals account for almost 50% of Peruvian

exports – the trade balance was almost even in the second

quarter at –US$ 13.8 million. For one thing, this was due to

exports, which increased 3.1% year-on-year. Even greater,

however, was the impact of the drop in imports (-4.8%). For

one thing, the decline in imports is a reflection of the poor

domestic demand; for another, it is attributable to falling import

prices. While the import volumes in the course of the year

should tend to increase as the economy picks up again, import

prices are expected to continue to fall year-on-year. We

therefore adhere to our forecast of an almost even trade

balance for the year as a whole. The increase in export

volumes due to the production of "Antamina", a large-scale

mining project in the western part of Peru that has just taken

up operations – should largely offset the decline in prices.

Financial market: post-election calm

Both the risk premium on Peruvian government bonds and the

exchange rate of the sol have not been impacted at all in the

past three months by the turmoil taking place on most Latin

American markets. The sol most recently was trading

significantly higher than at the beginning of the year, and the

spread of Peruvian foreign bonds, currently at 645 basis points,

is roughly at the level of January. Future trends will essentially

depend on the government's budgetary discipline and the

economic figures for July. By the end of the year, we expect

the sol to depreciate slightly, to 3.56 soles/US$.

Page 55: Spotlight 09 01

55Dresdner Bank Lateinamerika, Spotlight 9/2001, Peru

MONTHLY INDICATORS Apr 01 May 01 Jun 01 Jul-01

DOMESTIC ECONOMY

Economic activity index % yoy -0.3 -0.4 -2.3-2.3-2.3-2.3 07-Sep

Economic activity index (s.a.) % mom 0.9 -0.5 -0.9-0.9-0.9-0.9 07-Sep

Industrial production % yoy 2.4 0.7 -3.2-3.2-3.2-3.2 07-Sep

Tax revenues (central government) % yoy 5.7 1.5 -0.8-0.8-0.8-0.8 31-Aug

Cement Sales (ASOCEM) % yoy -1.8 11.2 -18.6 -12.7-12.7-12.7-12.7 17-Sep

Construction sector % yoy 1.3 -6.4 -12.4-12.4-12.4-12.4 07-Sep

Fishing sector % yoy 45.9 6.0 -29.6-29.6-29.6-29.6 07-Sep

Trade index % yoy -1.9 -1.1 -3.9-3.9-3.9-3.9 07-Sep

Employment index (1994=100) % yoy 0.3 0.8 0.50.50.50.5 07-Sep

Consumer prices % yoy 2.6 2.6 2.5 2.22.22.22.2 07-Sep

Consumer prices % mom -0.4 0.0 -0.1 0.20.20.20.2 07-Sep

Core inflation % yoy 2.9 2.8 2.6 2.22.22.22.2 07-Sep

Core inflation % mom 0.5 0.2 0.0 -0.1-0.1-0.1-0.1 07-Sep

Money supply M4 % yoy 4.2 4.8 2.82.82.82.8 07-Sep

Loan rates in US$ (TAMEX, latest: 08/14)* % 12.5 12.3 12.2 12.412.412.412.4 12.212.212.212.2

Deposit rates in US$ (TIPMEX, latest: 08/14)* % 3.9 3.7 3.6 3.53.53.53.5 3.43.43.43.4

Financial sector lending (latest: 07/22) US$ bn 8.0 8.0 8.2 8.18.18.18.1 07-Sep

Deposits in foreign currencies (latest: 07/22) US$ bn 9.5 9.5 9.6 9.69.69.69.6 07-Sep

EXTERNAL SECTOR

Merchandise exports US$ mn 540 588 607.3607.3607.3607.3 07-Sep

Merchandise exports % yoy 7.5 6.8 -3.5-3.5-3.5-3.5 07-Sep

Merchandise imports US$ mn 580 647 520.8520.8520.8520.8 07-Sep

Merchandise imports % yoy 3.1 1.1 -18.6-18.6-18.6-18.6 07-Sep

Trade balance US$ mn -40 -59 86.586.586.586.5 07-Sep

$

next/latest

QUARTERLY INDICATORS Q2 00 Q3 00 Q4 00 Q1 01

DOMESTIC ECONOMY

GDP % yoy 5.1 3.5 -0.4 -2.6 -1.0-1.0-1.0-1.0

Private consumption % yoy 4.5 3.9 3.0 1.6 24-Aug

Public consumption % yoy 13.2 3.5 -4.4 -7.2 24-Aug

Private and public investment % yoy -0.2 -10.5 -13.0 -11.2 24-Aug

Domestic demand % yoy 4.5 2.6 -1.5 -1.7 24-Aug

Exports (goods and services) % yoy 10.0 5.5 9.1 -1.3 24-Aug

Imports (goods and services) % yoy 6.4 0.2 1.7 4.6 24-Aug

Budget balance, public sector Soles bn -1.3 -1.3 -2.4 0.3 24-Aug

Public foreign debt US$ bn 19.3 19.1 19.2 18.7 24-Aug

EXTERNAL SECTOR

Current account balance US$ mn -518 -120 -567 -459 24-Aug

Net foreign direct investment US$ mn 301 153 125 276 24-Aug

Portfolio investment US$ mn -195 -31 -17 -127 24-Aug

Capital account** US$ mn 422 177 58 394 24-Aug

Change in foreign exchange reserves US$ mn -93 34 -565 -68 24-Aug

Gross foreign debt US$ bn 28.5 28.2 28.4 27.6 24-Aug

Short-term foreign debt US$ bn 4.0 3.9 4.0 3.8 24-Aug

* month-end ** incl. residual items

next/latest

MONTHLY AND QUARTERLY FIGURES

Page 56: Spotlight 09 01

56 Dresdner Bank Lateinamerika, Spotlight 9/2001, Venezuela

VENEZUELA:VENEZUELA:VENEZUELA:VENEZUELA:VENEZUELA: "SOFT" EXCHANGE CONTROLS

SUMMARY AND OUTLOOK

The already unfavorable economic climate is likely to have suffered even more owing to the recent measures imposed to

combat capital flight, since the country's economic policy is true to form in trying to counteract undesirable developments

with dirigistic, interventionist remedies. In addition, a clear economic policy concept called for by the private sector still

remains to be tabled. Meanwhile, there are increasing signs of public-sector demand not rising as sharply as expected. In

light of this situation we anticipate a GDP growth rate for the year 2001 as a whole of only 2.5% (instead of 3.3%). Our

forecast that the current account surplus - above all, due to lower oil exports - will fall to approx. US$ 5 billion, continues

to apply. Owing to the greater level of uncertainty, however, we have corrected our exchange rate forecast and now

anticipate the latter to stand at a US$ rate of 750 (previously 740) bolívares.

Area 912 050 sq. kmPopulation 24.2 million (+ 2.2% p.a.)

State president Hugo Chávez FríasFinance minister Nelson MerentesCentral bank president Diego Luis Castellanos Escalona

Next elections State president: 2006Parliament: 2006

GDP per capita US$ 4 975 (2000)

Investment 18% of GDP (2000)Savings 30% of GDP (2000)

Exchange rate system Gradual devaluation within theexchange rate band

Monetary policy Inflation targeting

Exports (2000) 28% of GDPPurchasing countries (1999) USA 51%, Brazil 5%, Colombia 4%Products Crude Oil and derivatives 84%,

metals and metal goods 5%

Imports (2000) 13% of GDPSupplier countries USA 39%, Colombia 7%, Brazil 5%Products (1999) Raw materials 54%, machinery and

equipment 26%

Rating Moody’s: B2 S&P: B

Page 57: Spotlight 09 01

57Dresdner Bank Lateinamerika, Spotlight 9/2001, Venezuela

1998 1999 2000 2001f 2002f

DOMESTIC ECONOMY

GDP change (real) % 0.2 -6.1 3.2 2.5 2.5

GDP US$ bn 95.8 103.3 120.5 131.4 138.1

Inflation (year-end) % 29.9 20.0 13.4 13.0 22.0

Inflation (average) % 35.8 23.6 16.2 12.8 17.6

PUBLIC SECTOR

Budget balance, central government % GDP -3.7 -2.3 -2.1 -4.5 -5.2

Budget balance, public sector % GDP -4.9 0.4 3.9 -3.0 -4.0

Public debt % GDP 28.0 27.0 27.0 25.0 25.0

Amortization US$ bn 3.3 6.0 5.8 n.a. n.a.

Gross financing needs US$ bn 7.8 5.3 1.1 n.a. n.a.

EXTERNAL SECTOR

Merchandise exports US$ bn 17.6 20.8 34.0 27.0 25.8

Merchandise imports US$ bn 15.1 13.2 16.1 17.3 18.0

Trade balance US$ bn 2.5 7.6 17.9 9.7 7.8

Current account balance US$ bn -3.3 3.7 13.4 5.0 2.9

Current account balance % GDP -3.4 3.6 11.1 3.8 2.1

Net foreign direct investment US$ bn 4.3 2.7 3.8 3.4 3.0

Foreign exchange reserves, year-end ** US$ bn 11.9 12.3 13.1 9.3 8.0

Import cover **) ***) months 5.8 7.2 6.4 4.3 3.6

US$ exchange rate, year-end Bolívares 565 648 700 750 875

US$ exchange rate, average Bolívares 548 606 680 722 790

FOREIGN DEBT

Gross foreign debt US$ bn 38.3 37.0 34.1 34.0 35.0

Foreign debt % exports *** 180 153 90 109 117

Short-term foreign debt US$ bn 7.4 7.0 7.4 7.6 7.9

Foreign debt amortization US$ bn 3.9 3.7 3.3 2.9 3.0

Foreign debt service US$ bn 6.5 6.4 6.0 5.2 5.4

Foreign debt service % exports *** 31 26 16 17 18

FINANCIAL MARKETS (year-end)

Deposit rate, 90 days % 35.3 17.3 13.5 16.0 22.0

ICB stock index (bolívar based, 2001: 08/22) 4789 5418 6825 6848

IFCI stock index (US$ based, 2001: 08/22) 453 397 472 472

Bond market yield (2001: 08/22)* % 16.1 14.8 15.0 14.2

Yield spread (2001: 08/22)* bp 1046 785 911 838

* 91/4 % US$-Bond (2027) ** Central bank only *** goods and services f=forecast

ANNUAL FIGURES AND FORECASTS

Page 58: Spotlight 09 01

58 Dresdner Bank Lateinamerika, Spotlight 9/2001, Venezuela

89

101112131415161718

Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01

%

-10-8-6-4-202468

10

II/97 I/98 IV/98 III/99 II/00 I/01 IV/01f

yoy, %

-6-5-4-3-2-1012345

1998 1999 2000 2001f 2002f

% of GDP

PUBLIC SECTOR BUDGET BALANCE

GDP CHANGE (REAL)

UNEMPLOYMENT RATE Economic policy: staying on the wrong track

In our recent Latin American Spotlight update, we reported on a poll

taken among corporations, the outcome of which showed that while the

economic climate remained quite bleak, at least there was a slight

improvement on the previous year. If this poll were to be repeated today,

corporate sentiment would probably be a great deal worse again since

the country's dirigistic economic policy – the main reason for the

widespread dissatisfaction in the private sector – was recently tightened.

Two weeks ago, the central bank announced measures targeted at

restricting the flow of foreign exchange – and, therefore, at stemming the

tide of capital flight and bolstering the bolívar, which has come under

significant devaluation pressure again. Banks are only allowed to hold

12% (previously 15%) of their capital in foreign currency. Sales of foreign

exchange to companies not resident in Venezuela were prohibited. In

addition, the minimum reserve rate for state deposits was raised from

17% to 30%.

The central bank continues to rule out a maxi-devaluation of the bolívar,

which is meanwhile expected to be overvalued by more than 40%. It is

this policy of keeping the bolívar strong to check inflation that is being

sharply criticized by the business community as local companies suffer

substantial competitive drawbacks compared with their foreign rivals.

Small- to medium-scale enterprises which frequently only have scarce

capital resources are suffering in particular. And this is discouraging

investment in exactly those businesses which were intended by the

government to make a decisive contribution toward improving living

standards among low-income groups by creating the necessary jobs.

The unemployment rate still averaged 14.1% from January to June 2001

and is thus only one percentage point lower than two years ago, when

state president Chávez took office. Whereas his approval ratings among

the population were still high at 56% according to the latest opinion

polls, his popularity has nevertheless fallen to its lowest level since he

took office (92%). This indicates that dissatisfaction with the high level of

unemployment, the unfavorable economic situation and the crime rate

is growing.

Economic activity: only poor growth anticipated

The economic outlook has soured. Following the recent measures

adopted in foreign exchange transactions, we assume that the uncertainty

in economic terms will grow, which is likely to impact negatively on

growth trends. This also applies to the agreement reached by the oil-

exporting countries to cut their production further starting in September.

Page 59: Spotlight 09 01

59Dresdner Bank Lateinamerika, Spotlight 9/2001, Venezuela

0

10

20

30

40

50

60

70

80

Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01

% inflation yoy deposit rate lending rate

0

10

20

30

40

50

60

70

Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01

%, yoy

16

18

20

22

24

26

28

30

32

34

Jan 00 Apr 00 Jul-00 Oct-00 Jan-01 Apr-01 Jul-01

US$/barrel

OIL PRICE VENEZUELA

MONEY (M2)

INTEREST RATES AND INFLATIONHowever, there has also been a lack of growth impetus from public-

sector demand (which made a decisive contribution toward the 3.2%

GDP increase in the year 2000) in the course of this year. Only since

April has central government spending increased again in real terms

year-on-year; from January through May 2001, it was still slightly below

the previous year's level, however. In the case of state spending

programs, including measures relating to infrastructure and social

institutions, concessions frequently need to be made due to administra-

tive deficiencies, often resulting in projects not only being delayed but

only put into practice to an extent of about 70%. The new finance minister

Nelson Merentes, who became successor to José Rojas at the end of

July, is to push these projects more vigorously from now on. However,

we anticipate that state spending in the year 2001 as a whole will be

lower than previously assumed; hence, the impetus in a number of

economic sectors, especially the construction industry, commerce and

the transport sector, is likely to turn out weaker. We have revised our GDP

growth forecast for the year 2001 downward from 3.3% to 2.5%. A posi-

tive side effect of the low growth in public spending: the deficits in each

of the aggregate public-sector and in the central government's budgets

are likely to turn out a percent-age point lower in the year 2001 than

previously assumed.

Monetary sector: further unrest looming

The foreign exchange-related measures will not fail to impact on the

local money market either, the reason being that banks, most of which

are likely to have exploited their foreign exchange holding potential to

the full, are now forced into US$ sales and to generate a higher demand

for bolívares. Thus, the level of liquidity, which was already tight at times

in the past several months owing to the high volume of capital flight, is

likely to shrink further. From end-2000 to end-July 2001 the M2 money

supply has even declined by 10% in nominal terms – compared with the

previous year's level there was already a slight real drop in July.

Accordingly, interest rates, which have been on the rise since May,

could continue to increase further. However, this would militate against

the government's objective of keeping the level of interest rates on lending

low to generate higher GDP growth. In the event of higher interest rates,

a further dirigistic economic policy step may be in the offing: state

president Chávez has repeatedly threatened to impose controls on

interest rates.

External sector: declining oil production - but higher prices

At the end of July major oil-exporting countries agreed to cut pro-duction

Page 60: Spotlight 09 01

60 Dresdner Bank Lateinamerika, Spotlight 9/2001, Venezuela

-5

0

5

10

15

20

1997 1998 1999 2000 2001f 2002f

balance US$ bn current account trade

0

2.5

5

7.5

10

12.5

15

17.5

20

Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01

US$ bn central bank FIEM stabilization fund

08/21

600

620

640

660

680

700

720

740

760

Aug-99 Feb-00 Aug-00 Feb-01 Aug-01

Bolivares/US$

EXCHANGE RATE

CURRENCY RESERVES

EXTERNAL SECTOR

Luz Knees +49 40 3595 3488

yet again. Within the scope of the arrangements entering into force as of

the beginning of September, Venezuela pledged that it would cut oil

production by about 4%. We adhere to our forecast, however, that the

country will earn well over US$ 21 billion in oil export revenues in the

year 2001 as a whole. In view of the price movements of Venezuela's oil

exports which, after weaker tendencies in June and the first half of July,

are meanwhile pointing upward, we anticipate a slightly higher average

price than previ-ously – US$ 21.25/bl rather than US$ 21/bl (2000: US$

25.91/bl). In addition, we expect non-oil exports and imports for the year

2001 as a whole to rise by 7% to 8%. While the trade and current ac-

count surpluses will remain significantly lower than the previous year's

record figures, Venezuela's current account surplus – which we continue

to believe will amount to approx. US$ 5 billion (just short of 4 % of GDP)

– puts the country in an unassailable lead among the major countries in

the region.

Exchange rate: bolívar set to come under pressure again soon

In August the dire situation on the foreign exchange market intensified

once again. Chávez had again expressed his concern with capital

flight, which averages approx. US$ 1 billion per month. The fact that the

government is now thinking of imposing import restrictions has kindled

the flames of unrest. The bolívar's depreciation accelerated. Foreign

currency reserves fell significantly, even after the exchange control

measures were announced on August 9, since the demand for foreign

exchange by non-banks apparently soared after that date. In the

meantime, however, the foreign currency supply has increased as the

banks are now transacting their business in conformity with the new

regulations. On August 14 the exchange rate of the US$ fell by 3 bolívares

to 729.50 bolívares. Foreign currency reserves, which fell by approx.

US$ 750 million in the first half of August, to US$ 16.4 billion (US$ 6.6

billion of which in the FIEM stabilization fund), rose to reach US$ 16.6

billion by August 21. The bolívar is likely to come under devaluation

pressure once again following the adjustment process. While we

consider the imposition of "hard" exchange controls unlikely in the short

term as the level of foreign currency reserves remains high – almost

eight months' import cover including FIEM reserves, the general

uncertainty has grown. At the end of 2001 we now expect a US$ rate of

750 bolívares (previously 740 bolívares). Foreign currency reserves

may amount to approx. US$ 16 billion by end-2001 (incl. US$ 6.7 billion

in the FIEM).

Page 61: Spotlight 09 01

61Dresdner Bank Lateinamerika, Spotlight 9/2001, Venezuela

MONTHLY INDICATORS Apr 01 May 01 Jun-01 Jul-01

DOMESTIC ECONOMY

Industrial production (private sector) % yoy 9.1 4.44.44.44.4

Car sales % yoy 63.6 81.7 67.1 70.170.170.170.1 07-Sep

Unemployment rate % 14.5 13.1 13.313.313.313.3

Consumer prices % yoy 12.1 12.6 12.5 13.013.013.013.0 03-Sep

Consumer prices % mom 1.1 1.5 1.0 1.51.51.51.5 03-Sep

Producer prices % yoy 7.6 7.5 7.4 7.37.37.37.3

Producer prices % mom 0.7 0.4 0.9 0.60.60.60.6

Money supply M2 (latest: 08/10)* Bolívar bn 15161 14409 14856 14991 15187151871518715187

Money supply M2 (latest: 08/10)* % yoy 17.4 13.8 14.9 12.1 14.514.514.514.5

Lending rate (latest: 08/10)* % 20.6 20.6 25.5 23.5 21.721.721.721.7

Deposit rate (latest: 08/10)* % 12.5 13.1 15.3 15.1 13.813.813.813.8

Interbank interest rate (latest: 08/22)* % 3.1 5.5 7.5 3.7 27.427.427.427.4

Volume of lending (latest: 08/03)* Bolívar bn 8009 8003 8109 8078.0 8146814681468146

Volume of lending (latest: 08/03)* % yoy 27.8 23.0 22.0 18.5 19.719.719.719.7

Volume of deposits (latest: 08/03)* Bolívar bn 13556 13064 13502 13169.0 13490134901349013490

Volume of deposits (latest: 08/03)* % yoy 25.8 23.5 22.4 16.6 25.525.525.525.5

EXTERNAL SECTOR

Oil price (Venezuelan exports, latest: 08/17) US$/barrel 22.29 23.20 22.00 20.58 22.0422.0422.0422.04

Oil price (Venezuelan exports, latest: 08/17) % yoy 1.2 -8.6 -21.0620739 -22.7477477 -20.1-20.1-20.1-20.1

Foreign exchange reserves (CB, latest: 08/21)* US$ bn 11.53 10.90 10.46 10.57 10.0010.0010.0010.00

Forex reserves (FIEM***, latest: 08/21)* US$ bn 6.06 6.33 6.57 6.59 6.606.606.606.60

US$ exchange rate (latest: 08/22)* Bolívares 712 715 719 725.0 730730730730

next/latest

QUARTERLY INDICATORS Q2 00 Q3 00 Q4 00 Q1 01

DOMESTIC ECONOMY

GDP % yoy 2.7 2.9 6.1 3.5 31-Aug

GDP, private sector % yoy 4.4 3.2 6.3 4.5 31-Aug

GDP, public sector % yoy 0.2 2.5 5.8 1.9 31-Aug

Oil sector % yoy 0.6 4.5 9.3 2.9 31-Aug

Manufacturing industry % yoy 4.1 1.0 6.9 4.6 31-Aug

Financial services and real estate % yoy 1.5 1.4 1.8 2.2 31-Aug

Commerce % yoy 7.3 3.5 5.4 4.5 31-Aug

Budget balance, public sector Bolívares bn 1217 939 -526 797

EXTERNAL SECTOR

Merchandise exports US$ bn 8.18 8.54 9.58 7.26 31-Aug

Exports of oil and derivatives US$ bn 6.86 7.28 8.08 6.01 31-Aug

Merchandise imports US$ bn 4.18 4.25 4.30 3.61 31-Aug

Trade balance US$ bn 4.00 4.29 5.28 3.65 31-Aug

Current account balance balance US$ bn 2.85 3.10 3.95 2.62 31-Aug

Net foreign direct investment US$ bn 1.25 1.02 0.83 0.26 31-Aug

Portfolio investment US$ bn -0.52 -0.44 -0.34 0.11 31-Aug

Capital account** US$ bn -1.22 -0.88 -2.55 -2.26 31-Aug

Change in foreign exchange reserves (CB) US$ bn 0.74 1.53 -0.60 -1.04

Change in foreign exchange reserves (FIEM)*** US$ bn 0.57 0.60 1.69 1.45

*month-end ** incl. residual items ***macroeconomic stabilization fund

next/latest

MONTHLY AND QUARTERLY FIGURES

Page 62: Spotlight 09 01

FINANCIAL MARKETS:FINANCIAL MARKETS:FINANCIAL MARKETS:FINANCIAL MARKETS:FINANCIAL MARKETS: LATIN AMERICAN STOCK MARKET INDICES

62 Dresdner Bank Lateinamerika, Spotlight 9/2001, Lateinamerika

ARGENTINA

300400500600700800900000100200300

Aug-99 Feb-00 Aug-00 Feb-01 Aug-01400

500

600

700

800

900

1000

1100

1200

1300 Merval (Peso) IFCI (US$)

BRAZIL

COLOMBIA

PERU

LATIN AMERICA

CHILE

MEXICO

VENEZUELA

70

80

90

100

110

120

Aug-99 Feb-00 Aug-00 Feb-01 Aug-01300

400

500

600

700

800 IPSA (Peso) IFCI (US$)

4000

5000

6000

7000

8000

9000

Aug-99 Feb-00 Aug-00 Feb-01 Aug-01400

500

600

700

800

900

1000

1100 IFC (Peso) IFCI (US$)

4000

5000

6000

7000

8000

9000

10000

Aug-99 Feb-00 Aug-00 Feb-01 Aug-01300

350

400

450

500

550

600 ICB (Bolivar) IFCI (US$)

8000

10000

12000

14000

16000

18000

20000

Aug-99 Feb-00 Aug-00 Feb-01 Aug-010

100

200

300

400

500

600 Bovespa (Reais) IFCI (US$)

400

600

800

1000

1200

Aug-99 Feb-00 Aug-00 Feb-01 Aug-01100

150

200

250

300

350

400

450 IBB/ GBC (Peso) IFCI (US$)

GBC

IBB

1000

1200

1400

1600

1800

2000

Aug-99 Feb-00 Aug-00 Feb-01 Aug-01100

120

140

160

180

200 IGBVL (Sol) IFCI (US$)

100

200

300

400

500

600

700

800

900

1000

Aug-99 Feb-00 Aug-00 Feb-01 Aug-01

IFCI Emerging markets IFCI Latin America

Page 63: Spotlight 09 01

FINANCIAL MARKETS:FINANCIAL MARKETS:FINANCIAL MARKETS:FINANCIAL MARKETS:FINANCIAL MARKETS: LATIN AMERICAN BOND YIELD SPREADS

63Dresdner Bank Lateinamerika, Spotlight 9/2001, Lateinamerika

ARGENTINA BRAZIL

COLOMBIA

PERU

LATIN AMERICA

CHILE

MEXICO

VENEZUELA

400

600

800

1000

1200

1400

Aug-99 Feb-00 Aug-00 Feb-01 Aug-01

bps 9 3/4 % US$ bond (2027)

120

140

160

180

200

220

240

260

Aug-99 Feb-00 Aug-00 Feb-01 Aug-01

bps 6 7/8 % bond (2009)

200

250

300

350

400

450

500

Aug-99 Feb-00 Aug-00 Feb-01 Aug-01

bps 11 1/2 % US$ bond (2026)

600

700

800

900

1000

1100

Aug-99 Feb-00 Aug-00 Feb-01 Aug-01

bps 9 1/4 % US$ bond (2027)

400

500

600

700

800

900

1000

Aug-99 Feb-00 Aug-00 Feb-01 Aug-01

bps 10 1/8 % US$ bond (2027)

300

400

500

600

700

800

900

1000

Aug-99 Feb-00 Aug-00 Feb-01 Aug-01

bps 7 5/8 % US$ bond (2007)

400

500

600

700

800

900

1000

Aug-99 Feb-00 Aug-00 Feb-01 Aug-01

bps FLIRB 3 3/4 (2017)

400

500

600

700

800

900

1000

1100

1200

Aug-99 Feb-00 Aug-00 Feb-01 Aug-01

bps JP Morgan Latin America Eurobond-Portfolio (LEI)

Page 64: Spotlight 09 01

64Dresdner Bank Lateinamerika, Spotlight 9/2001, Latin America

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65Dresdner Bank Lateinamerika, Spotlight 9/2001, Latin America

DBLA - AN OVERVIEW

Chairman of the Supervisory Board:Chairman of the Supervisory Board:Chairman of the Supervisory Board:Chairman of the Supervisory Board:Chairman of the Supervisory Board:DrDrDrDrDr. Joachim v. Joachim v. Joachim v. Joachim v. Joachim v. Harbou. Harbou. Harbou. Harbou. Harbou

Board of Managing Directors:Board of Managing Directors:Board of Managing Directors:Board of Managing Directors:Board of Managing Directors:Holger FHolger FHolger FHolger FHolger F. Sommer. Sommer. Sommer. Sommer. Sommer, Chair, Chair, Chair, Chair, ChairmanmanmanmanmanHorst Herrmann (São Paulo)Horst Herrmann (São Paulo)Horst Herrmann (São Paulo)Horst Herrmann (São Paulo)Horst Herrmann (São Paulo)RicharRicharRicharRicharRichard Vd Vd Vd Vd Voswinckeloswinckeloswinckeloswinckeloswinckel

Geographic Heads (Dresdner Bank Group):Geographic Heads (Dresdner Bank Group):Geographic Heads (Dresdner Bank Group):Geographic Heads (Dresdner Bank Group):Geographic Heads (Dresdner Bank Group):

Horst Tiedemann, Horst Tiedemann, Horst Tiedemann, Horst Tiedemann, Horst Tiedemann, MiamiCentral America and Caribbean,Central America and Caribbean,Central America and Caribbean,Central America and Caribbean,Central America and Caribbean,Colombia, EcuadorColombia, EcuadorColombia, EcuadorColombia, EcuadorColombia, Ecuador, V, V, V, V, VenezuelaenezuelaenezuelaenezuelaenezuelaTel.: (+1 305) 810 3118Fax: (+1 305) 810 3117

Luis Niño de Rivera, Luis Niño de Rivera, Luis Niño de Rivera, Luis Niño de Rivera, Luis Niño de Rivera, México CityMex i koMex i koMex i koMex i koMex i koTel.: (+52 5) 258 3004Fax: (+52 5) 258 3010

PrPrPrPrProf. Drof. Drof. Drof. Drof. Dr. W. W. W. W. Winston Fritsch, inston Fritsch, inston Fritsch, inston Fritsch, inston Fritsch, Rio de JaneiroBraz i lBraz i lBraz i lBraz i lBraz i lTel.: (+55 21) 3824 3500Fax: (+55 21) 3824 3501

Pedro R. Nowald, Pedro R. Nowald, Pedro R. Nowald, Pedro R. Nowald, Pedro R. Nowald, Buenos AiresArgentina, Paraguay and UruguayArgentina, Paraguay and UruguayArgentina, Paraguay and UruguayArgentina, Paraguay and UruguayArgentina, Paraguay and UruguayTel.: (+54 11) 4590 7900Fax: (+54 11) 4590 7910

Ewald DoerEwald DoerEwald DoerEwald DoerEwald Doernernernernerner, , , , , Santiago de ChileBolivia, Chile, PeruBolivia, Chile, PeruBolivia, Chile, PeruBolivia, Chile, PeruBolivia, Chile, PeruTel.: (+56 2) 731 4444Fax: (+56 2) 671 3307

Dresdner Private Banking - The Americas:Dresdner Private Banking - The Americas:Dresdner Private Banking - The Americas:Dresdner Private Banking - The Americas:Dresdner Private Banking - The Americas:

Andreas Ehlebracht, Andreas Ehlebracht, Andreas Ehlebracht, Andreas Ehlebracht, Andreas Ehlebracht, MiamiTel.: (+1 305) 810 3735Fax: (+1 305) 810 3737 oder 4050

Hans-Georg Martens, Hans-Georg Martens, Hans-Georg Martens, Hans-Georg Martens, Hans-Georg Martens, HamburgTel.: (+49 40) 3595 3531Fax: (+49 40) 3595 3868

David WDavid WDavid WDavid WDavid W. Roda, . Roda, . Roda, . Roda, . Roda, MiamiTel.: (+1 305) 810 3739Fax: (+1 305) 810 4053

Argent ina:Argent ina:Argent ina:Argent ina:Argent ina:Representative Office Buenos AiresRepresentative Office Buenos AiresRepresentative Office Buenos AiresRepresentative Office Buenos AiresRepresentative Office Buenos AiresTorre Alem PlazaAvenida Leandro N. Alem 855, piso 231001 Buenos AiresCasilla 574, 1000 Buenos AiresTel.: (+54 11) 4590 7900Fax: (+54 11) 4590 7910E-Mail: [email protected] Country Manager andSenior Country Manager andSenior Country Manager andSenior Country Manager andSenior Country Manager andRepresenta t ive :Representa t ive :Representa t ive :Representa t ive :Representa t ive :Juan G. GrubenJuan G. GrubenJuan G. GrubenJuan G. GrubenJuan G. GrubenSenior Country Manager:Senior Country Manager:Senior Country Manager:Senior Country Manager:Senior Country Manager:Marcelo ImhoffMarcelo ImhoffMarcelo ImhoffMarcelo ImhoffMarcelo ImhoffCountry Manager and AssistantCountry Manager and AssistantCountry Manager and AssistantCountry Manager and AssistantCountry Manager and AssistantRepresenta t ives :Representa t ives :Representa t ives :Representa t ives :Representa t ives :Rodolfo G. KempterRodolfo G. KempterRodolfo G. KempterRodolfo G. KempterRodolfo G. KempterMichael Kromm (CCB)Michael Kromm (CCB)Michael Kromm (CCB)Michael Kromm (CCB)Michael Kromm (CCB)Country Managers:Country Managers:Country Managers:Country Managers:Country Managers:Juan E. KochJuan E. KochJuan E. KochJuan E. KochJuan E. KochMathias PfaeffliMathias PfaeffliMathias PfaeffliMathias PfaeffliMathias PfaeffliDolores Pérez del CerroDolores Pérez del CerroDolores Pérez del CerroDolores Pérez del CerroDolores Pérez del CerroChristian Wentzel (CCB)Christian Wentzel (CCB)Christian Wentzel (CCB)Christian Wentzel (CCB)Christian Wentzel (CCB)CTF: Eva Göb-CribbCTF: Eva Göb-CribbCTF: Eva Göb-CribbCTF: Eva Göb-CribbCTF: Eva Göb-Cribb

Bol iv ia:Bol iv ia:Bol iv ia:Bol iv ia:Bol iv ia:Representative Office La PazRepresentative Office La PazRepresentative Office La PazRepresentative Office La PazRepresentative Office La PazCalle Rosendo Gutiérrez No 136 esq. Av. ArceEdificio Multicentro, Torre B, Piso 8Casilla 1077La PazTel.: (+591 2) 44 32 14Fax: (+591 2) 44 32 15E-Mail: [email protected] Manager andCountry Manager andCountry Manager andCountry Manager andCountry Manager andRepresenta t ive :Representa t ive :Representa t ive :Representa t ive :Representa t ive :Catrin PietschCatrin PietschCatrin PietschCatrin PietschCatrin PietschCountry Manager:Country Manager:Country Manager:Country Manager:Country Manager:Claus-Dietmar BagusatClaus-Dietmar BagusatClaus-Dietmar BagusatClaus-Dietmar BagusatClaus-Dietmar Bagusat

Braz i l :Braz i l :Braz i l :Braz i l :Braz i l :Dresdner Bank BrasilDresdner Bank BrasilDresdner Bank BrasilDresdner Bank BrasilDresdner Bank BrasilDresdner Bank Brasil S.A.Banco MúltiploDresdner Bank Lateinamerika AG,Niederlassung São PauloManagement :Management :Management :Management :Management :PrPrPrPrProf. Drof. Drof. Drof. Drof. Dr. W. W. W. W. Winston Fritschinston Fritschinston Fritschinston Fritschinston FritschJoão Pinheiro Nogueira BatistaJoão Pinheiro Nogueira BatistaJoão Pinheiro Nogueira BatistaJoão Pinheiro Nogueira BatistaJoão Pinheiro Nogueira BatistaMartin DuisbergMartin DuisbergMartin DuisbergMartin DuisbergMartin DuisbergRolf-Otto LaddeRolf-Otto LaddeRolf-Otto LaddeRolf-Otto LaddeRolf-Otto LaddeClient Information and Coordination:Client Information and Coordination:Client Information and Coordination:Client Information and Coordination:Client Information and Coordination:Ricardo CohenRicardo CohenRicardo CohenRicardo CohenRicardo Cohen

Head Office:Head Office:Head Office:Head Office:Head Office:Neuer Jungfernstieg 16, 20354 HamburgPostfach 30 12 46, 20305 HamburgTel.: (+49 40) 3595-0Fax: (+49 40) 3595 3314Telex: 214 236-0 dl dS.W.I.F.T. DRES DE HLhttp://www.dbla.com

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66Dresdner Bank Lateinamerika, Spotlight 9/2001, Latin America

Braz i l :Braz i l :Braz i l :Braz i l :Braz i l :São Paulo:São Paulo:São Paulo:São Paulo:São Paulo:Centro Empresarial TransatlânticoRua Verbo Divino, 1488 - 1° e 2° andaresChácara Santo Antônio04719-904 São Paulo-SPCaixa Postal 3641, 01060-970 São Paulo-SPTel.: (+55 11) 5188 6700Fax: (+55 11) 5188 6900Telex:11 53 207 dbla br, 11 53 208 dbla brS.W.I.F.T. DRES BR SP, DBBM BR SPE-Mail: [email protected] Information and Coordination:Client Information and Coordination:Client Information and Coordination:Client Information and Coordination:Client Information and Coordination:Mar ía do Carmo C.A. SilvaMar ía do Carmo C.A. SilvaMar ía do Carmo C.A. SilvaMar ía do Carmo C.A. SilvaMar ía do Carmo C.A. Silva

Rio de Janeiro:Rio de Janeiro:Rio de Janeiro:Rio de Janeiro:Rio de Janeiro:Av. Presidente Wilson, 231-17° andar, Centro20030-021 Rio de Janeiro-RJTel.: (+55 21) 3824 3500Fax: (+55 21) 3824 3501E-Mail: [email protected] Information and Coordination:Client Information and Coordination:Client Information and Coordination:Client Information and Coordination:Client Information and Coordination:Michael MagrathMichael MagrathMichael MagrathMichael MagrathMichael Magrath

Belo HorizonteBelo HorizonteBelo HorizonteBelo HorizonteBelo HorizonteRua Paraíba, 1000 - 6° andarEdifício Asamar30130-141 Belo Horizonte-MGTel.: (+55 31) 3261 7737Fax: (+55 31) 3261 3667E-Mail: [email protected] Information and Coordination:Client Information and Coordination:Client Information and Coordination:Client Information and Coordination:Client Information and Coordination:Lúcio Antônio VieiraLúcio Antônio VieiraLúcio Antônio VieiraLúcio Antônio VieiraLúcio Antônio Vieira

CampinasCampinasCampinasCampinasCampinasRua Sacramento, 126 - 5° andar, Centro13010-210 Campinas-SPTel.: (+55 19) 3234 3414Fax: (+55 19) 3234 3745Telex: 1 93 013 dbla brE-Mail: [email protected] Information and Coordination:Client Information and Coordination:Client Information and Coordination:Client Information and Coordination:Client Information and Coordination:Nelson TNelson TNelson TNelson TNelson Torororororrrrrreseseseses

Cur i t ibaCur i t ibaCur i t ibaCur i t ibaCur i t ibaEdifício Curitiba TradeAv. Dr. Carlos de Carvalho, 417 - 13° andar, sala1303, Centro80410-180 Curitiba-PRTel.: (+55 41) 324 4221Fax: (+55 41) 324 4697E-Mail: [email protected] Information and Coordination:Client Information and Coordination:Client Information and Coordination:Client Information and Coordination:Client Information and Coordination:Raul RibasRaul RibasRaul RibasRaul RibasRaul Ribas

Dresdner Brasil Representações Ltda.Dresdner Brasil Representações Ltda.Dresdner Brasil Representações Ltda.Dresdner Brasil Representações Ltda.Dresdner Brasil Representações Ltda.(formerly Sudamero Consultoria Ltda.)Centro Empresarial TransatlânticoRua Verbo Divino, 1488 - 2° andar04719-904 São Paulo-SPCaixa Postal 166501064-970 São Paulo-SPTel.: (+55 11) 5188 6700Fax: (+55 11) 5188 6980E-Mail:[email protected]

Cayman Islands:Cayman Islands:Cayman Islands:Cayman Islands:Cayman Islands:Grand Cayman BranchGrand Cayman BranchGrand Cayman BranchGrand Cayman BranchGrand Cayman BranchAnderson Square BuildingP.O. Box 714 GTGrand Cayman, Cayman Is., B.W.I.Tel.: (+1 345) 949 8888Fax: (+1 345) 949 8899Telex: 4 285 dl cpS.W.I.F.T. DRES KY KXE-Mail: [email protected] :Management :Management :Management :Management :Bor Alexander van der WeerdenBor Alexander van der WeerdenBor Alexander van der WeerdenBor Alexander van der WeerdenBor Alexander van der WeerdenCarsten OergelCarsten OergelCarsten OergelCarsten OergelCarsten OergelSenior TSenior TSenior TSenior TSenior Trrrrrust Manager:ust Manager:ust Manager:ust Manager:ust Manager:David R. PerryDavid R. PerryDavid R. PerryDavid R. PerryDavid R. Perry

Chi le :Chi le :Chi le :Chi le :Chi le :Representative Office Santiago de ChileRepresentative Office Santiago de ChileRepresentative Office Santiago de ChileRepresentative Office Santiago de ChileRepresentative Office Santiago de ChileEdificio Dresdner BNPHuérfanos 1219, EntrepisoCasilla 9972Santiago de ChileTel.: (+56 2) 688 0411Fax: (+56 2) 688 0422E-Mail: [email protected] Manager and AssistantCountry Manager and AssistantCountry Manager and AssistantCountry Manager and AssistantCountry Manager and AssistantRepresenta t ive :Representa t ive :Representa t ive :Representa t ive :Representa t ive :Jan von DobbelerJan von DobbelerJan von DobbelerJan von DobbelerJan von Dobbeler

Dresdner Banque Nationale de ParisDresdner Banque Nationale de ParisDresdner Banque Nationale de ParisDresdner Banque Nationale de ParisDresdner Banque Nationale de ParisHuérfanos 1219Casilla 10492Santiago de ChileTel.: (+56 2) 731 4444Fax: (+56 2) 671 3307Telex: 64 53 47 dres bk clS.W.I.F.T: DRES CL RME-Mail: [email protected] i tung:Le i tung:Le i tung:Le i tung:Le i tung:Ewald DoernerEwald DoernerEwald DoernerEwald DoernerEwald DoernerMichel Gonzá lezMichel Gonzá lezMichel Gonzá lezMichel Gonzá lezMichel Gonzá lezF i rmenkundengeschä f t :F i rmenkundengeschä f t :F i rmenkundengeschä f t :F i rmenkundengeschä f t :F i rmenkundengeschä f t :Miguel Ángel Delp ínMiguel Ángel Delp ínMiguel Ángel Delp ínMiguel Ángel Delp ínMiguel Ángel Delp ínAlfonso P írizAlfonso P írizAlfonso P írizAlfonso P írizAlfonso P íriz

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67Dresdner Bank Lateinamerika, Spotlight 9/2001, Latin America

Dresdner BNP Paris S.A.Dresdner BNP Paris S.A.Dresdner BNP Paris S.A.Dresdner BNP Paris S.A.Dresdner BNP Paris S.A.Corredores de BolsaCorredores de BolsaCorredores de BolsaCorredores de BolsaCorredores de BolsaEdificio Dresdner BNPHuérfanos 1219, 5° pisoSantiago de ChileTel.: (+56 2) 696 0096Fax: (+56 2) 699 5083General Manager:General Manager:General Manager:General Manager:General Manager:Sergio Anguita G.Sergio Anguita G.Sergio Anguita G.Sergio Anguita G.Sergio Anguita G.

Colombia:Colombia:Colombia:Colombia:Colombia:Representative Office Bogotá, D.C.Representative Office Bogotá, D.C.Representative Office Bogotá, D.C.Representative Office Bogotá, D.C.Representative Office Bogotá, D.C.Carrera 7 No. 74-56, piso 16Edificio CorficaldasBogotá, D.C.Apartado Aéreo 59303Bogotá, D.C. 2Tel.: (+57 1) 347 0566, 254 8650Fax: (+57 1) 313 2763, 313 2783E-Mail: [email protected] Country Manager andSenior Country Manager andSenior Country Manager andSenior Country Manager andSenior Country Manager andRepresenta t ive :Representa t ive :Representa t ive :Representa t ive :Representa t ive :Karsten ReinhardKarsten ReinhardKarsten ReinhardKarsten ReinhardKarsten ReinhardCountry Managers:Country Managers:Country Managers:Country Managers:Country Managers:Narda Ramírez (CCB)Narda Ramírez (CCB)Narda Ramírez (CCB)Narda Ramírez (CCB)Narda Ramírez (CCB)Jesús A. VJesús A. VJesús A. VJesús A. VJesús A. Vaca Muraca Muraca Muraca Muraca Murciaciaciaciacia

Costa Rica:Costa Rica:Costa Rica:Costa Rica:Costa Rica:Representative Office San JoséRepresentative Office San JoséRepresentative Office San JoséRepresentative Office San JoséRepresentative Office San JoséEdificio Torre Mercedes, 8° pisoCalle 24, Paseo ColónApartado 162, 1007 Centro ColónSan José, Costa RicaTel.: (+506) 295 6790Fax: (+506) 295 6880E-Mail: [email protected] Manager andCountry Manager andCountry Manager andCountry Manager andCountry Manager andRepresenta t ive :Representa t ive :Representa t ive :Representa t ive :Representa t ive :Claus ElsnerClaus ElsnerClaus ElsnerClaus ElsnerClaus Elsner

Ecuador :Ecuador :Ecuador :Ecuador :Ecuador :Representative Office QuitoRepresentative Office QuitoRepresentative Office QuitoRepresentative Office QuitoRepresentative Office QuitoAvda. Naciones Unidas yRepública de El SalvadorEdificio Citiplaza, piso 11Casilla 17-01-2179QuitoTel.: (+593 2) 970 747/48/49/50Fax: (+593 2) 970 753E-Mail: [email protected] Manager andCountry Manager andCountry Manager andCountry Manager andCountry Manager andAssistant Representative:Assistant Representative:Assistant Representative:Assistant Representative:Assistant Representative:John ViaultJohn ViaultJohn ViaultJohn ViaultJohn ViaultSenior Country Manager /Senior Country Manager /Senior Country Manager /Senior Country Manager /Senior Country Manager /Investment Management:Investment Management:Investment Management:Investment Management:Investment Management:Wolfgang LeanderWolfgang LeanderWolfgang LeanderWolfgang LeanderWolfgang Leander

Guatemala:Guatemala:Guatemala:Guatemala:Guatemala:Representative Office GuatemalaRepresentative Office GuatemalaRepresentative Office GuatemalaRepresentative Office GuatemalaRepresentative Office Guatemala(Guatemala, Honduras and Belize)(Guatemala, Honduras and Belize)(Guatemala, Honduras and Belize)(Guatemala, Honduras and Belize)(Guatemala, Honduras and Belize)5a Avenida 15-45, Zona 10Edificio Centro EmpresarialTorre II, 10° piso, Of. 1001-801010 GuatemalaApartado 57-F, 01901 GuatemalaTel.: (+502) 333 7205-07,363 2550,363 2553, 363 2560Fax: (+502)333 7208, 363 2556E-Mail: [email protected] Country Manager andSenior Country Manager andSenior Country Manager andSenior Country Manager andSenior Country Manager andRepresenta t ive :Representa t ive :Representa t ive :Representa t ive :Representa t ive :Bernd KleinworthBernd KleinworthBernd KleinworthBernd KleinworthBernd KleinworthCountry Manager and AssistantCountry Manager and AssistantCountry Manager and AssistantCountry Manager and AssistantCountry Manager and AssistantRepresenta t ive :Representa t ive :Representa t ive :Representa t ive :Representa t ive :Bertram HeydBertram HeydBertram HeydBertram HeydBertram HeydCountry Managers:Country Managers:Country Managers:Country Managers:Country Managers:Carlos LemosCarlos LemosCarlos LemosCarlos LemosCarlos LemosDavid SilvesterDavid SilvesterDavid SilvesterDavid SilvesterDavid SilvesterSören Kruse (CCB)Sören Kruse (CCB)Sören Kruse (CCB)Sören Kruse (CCB)Sören Kruse (CCB)

Méx ico :Méx ico :Méx ico :Méx ico :Méx ico :ReprReprReprReprRepresentative Ofesentative Ofesentative Ofesentative Ofesentative Office México, D.Ffice México, D.Ffice México, D.Ffice México, D.Ffice México, D.F.....Bosque de Alisos 47-A, 4° pisoCol. Bosques de las Lomas05120 México, D.F.Tel.: (+52 5) 258 3170Fax: (+52 5) 258 3199E-Mail: [email protected] Country Manager andSenior Country Manager andSenior Country Manager andSenior Country Manager andSenior Country Manager andRepresenta t ive :Representa t ive :Representa t ive :Representa t ive :Representa t ive :Stephen LloydStephen LloydStephen LloydStephen LloydStephen LloydCountry Manager:Country Manager:Country Manager:Country Manager:Country Manager:Rainer HenselRainer HenselRainer HenselRainer HenselRainer Hensel

Dresdner Bank México, S.A.Dresdner Bank México, S.A.Dresdner Bank México, S.A.Dresdner Bank México, S.A.Dresdner Bank México, S.A.Bosque de Alisos No. 47-B, 4° pisoCol. Bosques de las Lomas05120 México, D.F.Tel.: (+52 5) 258 3000Fax: (+52 5) 258 3100S.W.I.F.T. DRES MX MXE-Mail: [email protected]:Management:Management:Management:Management:Luis Niño de RiveraLuis Niño de RiveraLuis Niño de RiveraLuis Niño de RiveraLuis Niño de RiveraCorporate Banking:Corporate Banking:Corporate Banking:Corporate Banking:Corporate Banking:Daniel GorinsteinDaniel GorinsteinDaniel GorinsteinDaniel GorinsteinDaniel Gorinstein

El Salvador:El Salvador:El Salvador:El Salvador:El Salvador:Representative Office San SalvadorRepresentative Office San SalvadorRepresentative Office San SalvadorRepresentative Office San SalvadorRepresentative Office San Salvador(El Salvador and Nicaragua)(El Salvador and Nicaragua)(El Salvador and Nicaragua)(El Salvador and Nicaragua)(El Salvador and Nicaragua)Edificio ConstruMarket 3er nivelAv. Albert Einstein 17CLomas de San FranciscoAntiguo CuscatlánLa Libertad, San SalvadorTel.: (+503) 273 4738Fax: (+503) 273 4765E-Mail: [email protected] Manager andCountry Manager andCountry Manager andCountry Manager andCountry Manager andRepresenta t ive :Representa t ive :Representa t ive :Representa t ive :Representa t ive :Jörg DittmerJörg DittmerJörg DittmerJörg DittmerJörg DittmerCountry Managers:Country Managers:Country Managers:Country Managers:Country Managers:Horacio Vivas (CCB)Horacio Vivas (CCB)Horacio Vivas (CCB)Horacio Vivas (CCB)Horacio Vivas (CCB)

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68 Dresdner Bank Lateinamerika, Spotlight 9/2001, Latin America

Panama:Panama:Panama:Panama:Panama:Panama BranchPanama BranchPanama BranchPanama BranchPanama BranchTorre Dresdner BankCalle 50 y Calle 55 EstePanamá 7, R.P.Apartado 5400, Panamá 5, R.P.Tel.: (+507) 206 8100Fax: (+507) 206 8109Telex: 3 106 dl pg, 2 244 dl pg,

2 420 dl pgS.W.I.F.T. DRES PA PAE-Mail: [email protected] :Management :Management :Management :Management :Klaus Mü l lerKlaus Mü l lerKlaus Mü l lerKlaus Mü l lerKlaus Mü l lerCorporate Banking:Corporate Banking:Corporate Banking:Corporate Banking:Corporate Banking:Zenobia de FuentesZenobia de FuentesZenobia de FuentesZenobia de FuentesZenobia de FuentesPrivate Banking:Private Banking:Private Banking:Private Banking:Private Banking:Thorsten LührsThorsten LührsThorsten LührsThorsten LührsThorsten Lührs

Pa raguay :Pa raguay :Pa raguay :Pa raguay :Pa raguay :Representative Office AsunciónRepresentative Office AsunciónRepresentative Office AsunciónRepresentative Office AsunciónRepresentative Office Asunción14 de Mayo 337Edificio Asubank, 10° pisoAsunción 1215Casilla 196Asunción 1209Tel.: (+595 21) 49 47 10Fax: (+595 21) 44 12 68E-Mail: [email protected] Managers:Country Managers:Country Managers:Country Managers:Country Managers:Gloria de GrauGloria de GrauGloria de GrauGloria de GrauGloria de GrauChristan WentzelChristan WentzelChristan WentzelChristan WentzelChristan Wentzel(CCB, based in Buenos Aires)(CCB, based in Buenos Aires)(CCB, based in Buenos Aires)(CCB, based in Buenos Aires)(CCB, based in Buenos Aires)

P e r u :P e r u :P e r u :P e r u :P e r u :Representative Office LimaRepresentative Office LimaRepresentative Office LimaRepresentative Office LimaRepresentative Office LimaAv. Rivera Navarrete 620, Piso 9San IsidroLima 27Apartado 18-0624Lima 18, MirafloresTel.: (+51 1) 212 5060Fax: (+51 1) 212 5165E-Mail: [email protected] Country Manager andSenior Country Manager andSenior Country Manager andSenior Country Manager andSenior Country Manager andRepresenta t ive :Representa t ive :Representa t ive :Representa t ive :Representa t ive :Georg-Wilhelm von WedemeyerGeorg-Wilhelm von WedemeyerGeorg-Wilhelm von WedemeyerGeorg-Wilhelm von WedemeyerGeorg-Wilhelm von WedemeyerCountry Manager:Country Manager:Country Manager:Country Manager:Country Manager:Silvia StangeSilvia StangeSilvia StangeSilvia StangeSilvia Stange

Uruguay :U ruguay :U ruguay :U ruguay :U ruguay :Repräsentanz MontevideoRepräsentanz MontevideoRepräsentanz MontevideoRepräsentanz MontevideoRepräsentanz MontevideoMisiones 1372, Esc. 502Casilla 133311.000 MontevideoTel.: (+598 2) 916 0152, 916 0718Fax: (+598 2) 915 1283E-Mail: [email protected] Manager andCountry Manager andCountry Manager andCountry Manager andCountry Manager andRepresenta t ive :Representa t ive :Representa t ive :Representa t ive :Representa t ive :Karsten SchwenckKarsten SchwenckKarsten SchwenckKarsten SchwenckKarsten Schwenck

U.S .A. :U .S .A . :U .S .A . :U .S .A . :U .S .A . :Miami AgencyMiami AgencyMiami AgencyMiami AgencyMiami Agency801 Brickell Avenue, 6th floorMiami, Florida 33131/USAP.O. Box 01-6039Miami, Florida 33101/USATel.: (+1 305) 373 0000Fax: (+1 305) 374 6912Telex: 4961 7905 dl usS.W.I.F.T. DRES US 3ME-Mail: [email protected] :Management :Management :Management :Management :Thomas SpangThomas SpangThomas SpangThomas SpangThomas SpangCarl WolfCarl WolfCarl WolfCarl WolfCarl WolfCorporate Banking:Corporate Banking:Corporate Banking:Corporate Banking:Corporate Banking:Sergio GoloubeffSergio GoloubeffSergio GoloubeffSergio GoloubeffSergio Goloubeff( C T F )( C T F )( C T F )( C T F )( C T F )Robert BarthelmessRobert BarthelmessRobert BarthelmessRobert BarthelmessRobert Barthelmess(CCB-Central/South America(CCB-Central/South America(CCB-Central/South America(CCB-Central/South America(CCB-Central/South America& Caribbean)& Caribbean)& Caribbean)& Caribbean)& Caribbean)Frank HuthnanceFrank HuthnanceFrank HuthnanceFrank HuthnanceFrank Huthnance(CCB-Nort America)(CCB-Nort America)(CCB-Nort America)(CCB-Nort America)(CCB-Nort America)Christian NovyChristian NovyChristian NovyChristian NovyChristian Novy(CCB-South America & Mexico)(CCB-South America & Mexico)(CCB-South America & Mexico)(CCB-South America & Mexico)(CCB-South America & Mexico)Rama K. VyasuluRama K. VyasuluRama K. VyasuluRama K. VyasuluRama K. Vyasulu(EXIMBANK/SP)(EXIMBANK/SP)(EXIMBANK/SP)(EXIMBANK/SP)(EXIMBANK/SP)Private Banking:Private Banking:Private Banking:Private Banking:Private Banking:Nicolás BergengruenNicolás BergengruenNicolás BergengruenNicolás BergengruenNicolás BergengruenThomas GoesseleThomas GoesseleThomas GoesseleThomas GoesseleThomas GoesseleInves tments :Inves tments :Inves tments :Inves tments :Inves tments :Hans AbateHans AbateHans AbateHans AbateHans Abate

VVVVVenezuela :enezuela :enezuela :enezuela :enezuela :Representative Office CaracasRepresentative Office CaracasRepresentative Office CaracasRepresentative Office CaracasRepresentative Office Caracas(V(V(V(V(Venezuela and Tenezuela and Tenezuela and Tenezuela and Tenezuela and Trinidad & Trinidad & Trinidad & Trinidad & Trinidad & Tobago)obago)obago)obago)obago)Centro Gerencial Mohedano, 9° piso,Of. A y BCalle Los Chaguaramos,La CastellanaApartado 61 379Caracas 1060-ATel.: (+58 212) 261 4097, 261 7425Fax: (+58 212) 264 6429E-Mail: [email protected] Country Manager andSenior Country Manager andSenior Country Manager andSenior Country Manager andSenior Country Manager andRepresenta t ive :Representa t ive :Representa t ive :Representa t ive :Representa t ive :Christian SommerhalderChristian SommerhalderChristian SommerhalderChristian SommerhalderChristian SommerhalderCountry Manager and AssistantCountry Manager and AssistantCountry Manager and AssistantCountry Manager and AssistantCountry Manager and AssistantRepresenta t ive :Representa t ive :Representa t ive :Representa t ive :Representa t ive :Stefan ZurawkaStefan ZurawkaStefan ZurawkaStefan ZurawkaStefan ZurawkaCTF: Marc CzabanskiCTF: Marc CzabanskiCTF: Marc CzabanskiCTF: Marc CzabanskiCTF: Marc Czabanski

Glossary of Acronyms:Glossary of Acronyms:Glossary of Acronyms:Glossary of Acronyms:Glossary of Acronyms:CCB = Corporate and Correspondent BankingCTF = Commodity & Trade FinanceRM = Risk ManagementSP = Special Products

Page 69: Spotlight 09 01

69Dresdner Bank Lateinamerika, Spotlight 9/2001, Latin America

Page 70: Spotlight 09 01

70Dresdner Bank Lateinamerika, Spotlight 9/2001, Latin America

Dresdner Bank Lateinamerika AG

Neuer Jungfernstieg 16

20354 Hamburg

Germany

Economics/Public Relations Dept.

Chief economist: Dr. Heinz Mewes

Editor: Cyrus de la Rubia, Thorsten Rülle (Miami), Walter Schäfer

Tel.: (+49 40) 3595 3494

Fax: (+49 40) 3595 3497

E-Mail: [email protected]

http://www.dbla.com

Coordination: Kai Stefani

Layout: Friederike Niemeyer, Hamburg

Closing date: August 22, 2001

“Latin American Spotlight“ is published on a quarterly basis in German and

English.

Without any liability on our part. Reprints - in part or in whole - must mention

source.

The information contained in this issue has been carefully researched and examined by DresdnerBank Lateinamerika AG or reliable third parties.But neither Dresdner Bank Lateinamerika AG norsuch third parties can assume any liability for the accuracy,completeness and up-to-datedness ofthis information.The authors ’ opinions are not necessarily those of Dresdner BankLateinamerika.Statements do not constitute any offer or recommendation of certain investments,evenof individual issuers and securities are mentioned.Information given in this issue is no substitutefor specific investment advice based on the situation of the individual investor. For personalizedinvestment advice please contact your Dresdner Bank Lateinamerika branch.

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71

1999 2000 08/22/2001** 2001f 2002f

Real GDP change *

Industrial countries % y-o-y 2.9 3.3 1.41.41.41.4 2.22.22.22.2

USA % y-o-y 4.2 4.1 1.5 2.5

Euro area % y-o-y 2.6 3.4 2.2 2.52.52.52.5

Japan % y-o-y 0.8 1.5 -0.5-0.5-0.5-0.5 0.80.80.80.8

INTEREST RATES, YEARLY AVERAGE*

USA, 3m money market rate % 5.4 6.5 3.53.53.53.5 4.0 4.0

USA, 10yr government bond yield % 5.6 6.0 4.94.94.94.9 5.2 5.7

Euro area, 3m money market rate % 3.0 4.4 4.34.34.34.3 4.5 4.4

Euro area, 10yr gov. bond yield % 4.5 5.3 4.84.84.84.8 4.9 5.3

Japan, 3m money market rate % 0.3 0.3 0.10.10.10.1 0.2 0.1

Japan, 10yr government bond yield % 1.8 1.8 1.31.31.31.3 1.3 1.5

EXCHANGE RATES, YEARLY AVERAGE *

US$/ Euro US$ 1.07 0.92 0.920.920.920.92 0.890.890.890.89 0.98

Yen/ US$ YEN 114 108 120120120120 123 122

Yen/ Euro YEN 121 100 110110110110 110 119

COMMODITY PRICES, YEARLY AVERAGE

Coffee (other milds) c/lb, NY 101.5 85.1 59.959.959.959.9 60.060.060.060.0 55.0

Copper c/lb, LME 71.0 82.0 67.367.367.367.3 71.071.071.071.0 77.0

Crude oil (WTI) US$/b 19.3 31.0 27.327.327.327.3 26.5 23.0

Crude oil (Brent) US$/b 17.9 28.5 25.425.425.425.4 25.0 21.0

Gold US$/ounce 280 278 276276276276 270 275

* Source: Dresdner Bank AG; ** daily value

GLOBAL ECONOMY - FIGURES AND FORECASTS

Dresdner Bank Lateinamerika, Spotlight 9/2001, Latin America