Jeff, great job this morning on CNBC. You were on during our morning crude/products meeting, and the guys were clapping adn doing the old Arsenio Hall thing at the end of the interview...
We get these South American reports frequently from our competitive intelligence group, and they are usually very good, politically, and economically. I can forward them to you, or add you to the distribution list if your interested.
The other Jeff
From: Fitzsimmons, Brendan
Sent: Thursday, July 12, 2001 12:36 PM
To: Shankman, Jeffrey A.; Hickerson, Gary; Hannon, Kevin; Kinneman, Jeff; Fiala, Markus; Pizzolato, Paul; Gordon, Michael; Shahi, Pushkar; Stuart III, William; Su, Ellen; Seyfried, Bryan; Wiggs, Brett; Shapiro, Richard; Collonges, Remi; Lee, Derek; Scott, Eric
Cc: Tholan, Scott; Johnston, Robert
Subject: Please Read - Argentina/Brazil Alert
Everything is fluid at the moment as the Argy conf. call at 9 this morning did not have its intended effect in the markets. We will update as we get further reports.
Brendan Fitzsimmons 713.345.4763
Robert Johnston 713.853.9934
Here's what we know:
Cavallo is at the edge, very reliably reportedly asking for more power from De La Rua or else. Markets are already rife with resignation rumors
Domestic political opposition to deficit cut plan is general in Argentina - both in coalition and among opposition, particularly federal v. provincial leaders. Implementing past cuts still incomplete and willingness to take further local, domestic pain for international markets is very weak.
Efforts afoot to try and swap out of short-term Letes (91-day) debt into 1 year, but current conditions (200%+ overnight rates) make it all but impossible
There is no sign of any willingness, either at the IMF or Treasury, to do anything for Argentina. Recent events have only confirmed O'Neill's bias against bail-out - he believes it will only be a temporary save and that current problems will be constantly revisited going forward
USTreasury briefed Fed yesterday on strategy and the bottom line is that Brazil is seen as the best place to make a stand. There are three arguments behind this:
- First, there is nothing that can reliably save Argy at this point and it is better to husband resources and credibility for use elsewhere if Argy blows-up;
- Second, there are reasons to support Brazil, both for itself and for international contagion concerns: defending Brazil is the best way to quarantine Argy effects; Brazil has problems internally, but they are seen a more likely to be solved than in Argy aid that they have been exacerbated by Argy;
- Third, defending Brazil is seen as first line defense of Mexico, which is seen as necessary to defend for domestic US political and economic reasons, apart from the additional international concerns.