Leo/Monika,

Mea culpa.  I forgot to include you on my distribution list.  Sorry.

KC
 -----Original Message-----
From: 	Carter, Karen E.  
Sent:	Wednesday, November 07, 2001 3:10 PM
To:	Crane, Bob; Klein, Stephen; Fiandt, Terri; Crump, Jim; Conner, Andrew R.; Bryja, James; Braune, Carlos; Ferrell, Daniel; Juvane, Danilo; Hermans, Greg; Kristal, Yana; Carter, Ray; Tamariz, Angel; Tamariz, Angel; Bhatia, Om
Cc:	Reed, Andrea V.; Allan, David
Subject:	FW: Latin America Monitoring
Importance:	High
Sensitivity:	Confidential

Please find attached Competitive Intelligence's current assessment of recent events in several emerging markets, particularly Argentina.  As the situation there appears to be getting more dire, we will continue monitoring the potential ramifications for other emerging markets such as Brazil.  Please note that this information is highly proprietary and should not be shared outside Enron Industrial Markets.  Additionally, if you have any further questions, please feel free to forward them to me as Brendan Fitzsimmons supports a very broad audience and may not be able to field the request.  Thanks.

 -----Original Message-----
From: 	Fitzsimmons, Brendan  
Sent:	Tuesday, November 06, 2001 6:04 PM
To:	Carter, Karen E.
Cc:	Johnston, Robert; Landry, Kimberly
Subject:	Latin America Monitoring
Importance:	High
Sensitivity:	Confidential

Hello Karen:

I have returned to Houston after a trip to the East Coast: In Washington and New York I had the opportunity to further discuss and update the issue of Argentina, and Latin America more broadly, with sources in both the financial and economic communities.  

Here is an overall update with some specifics highlighted:

As we had reported in July and August and as we discussed lat month, the basic thesis still holds, at Treasury and the IFIs and in the emerging market financial community: i.e.
 
Differentiation in DC and NY: Argentina is on its own and Brazil will be given support, as will Turkey and Indonesia.  Policy since 9/11 relative to Pakistan has been indicative of the evolving Washington calculus; experience of sustained weakness and unexpected shock of 9/11 has revealed that contagion is a secondary driver right now
Differentiation between BA and Sao Paulo: Decoupling of Brazilian Real and C-Bond from Argy Peso NDFs and FRB in currency and bond markets continues to strengthen the base policy bias of quarantine/reinforce relative to BA and SP, as has relative flight to quality in the EM asset class that has been seen over the last few weeks, most notably in case of Mexico  
Another waiting game vis-?-vis Argy: Despite the 'effective default' conditions in Argy and a new spate of downgrades, the once again much rumored swap/restructure is by no means a settled issue, and even if/once achieved still leaves open the underlying problem of the peso-$ peg, w/ a dollarization above parity scenario still lurking.  As with the saga all year, this is primarily a political drama being conveyed through economic channels
Oil in the policy mix: Collapse and continuing pressure in oil market will expose and exacerbate underlying fault-lines both within OPEC and between OPEC and non-OPEC producers: apart from obviously more visible Russian role, this will continue build in a focus on regional players inside and outside the cartel: Venezuela (including internal Chavez dynamic, Venezuela within OPEC, and price v. market share debate) and Mexico, incl. relative to Western Hemisphere supply security.  The end of the Congressional year in DC, war politics, and the upcoming OPEC meeting next week will continue to contribute near term volatility
Domestic US politics: Current breakdown of post-9/11 bipartisan consensus now in full throat as appropriations and special needs bills are facing problems in committees, on the floors of both chambers and/or in the face of a conferencing.  Of particular importance at this time is the Senate Finance Committee's consideration of a stimulus bill.  The lack of progress, despite an attempt late last week by the White House to bring more executive pressure to bear, has led to concern that a final stimulus bill may not be ready until just before Christmas, and there remains a danger that no stimulus bill will go through.  A new wrinkle in this drama is the effort by Alaskan Sens. Stevens and Murkowski to potentially attach an energy bill, including ANWR drilling, to any Senate stimulus bill, focusing on national security interests in order to sway moderates.  Given that the markets have already priced in a stimulus bill by around thanksgiving and on the order of $100B, there is downside risk in delay or defeat.  These dangers have been heightened further over the past week as weak data has come in even weaker than expected, putting a further premium on a sooner, more dramatic recovery

Let me know if this is helpful and if there are any macroecon or political specifics that you are particularly concerned about. 


Regards,
Brendan
x54763