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Leo/Monika, Mea culpa. I forgot to include you on my distribution list. Sorry. KC -----Original Message----- From: =09Carter, Karen E. =20 Sent:=09Wednesday, November 07, 2001 3:10 PM To:=09Crane, 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:=09Reed, Andrea V.; Allan, David Subject:=09FW: Latin America Monitoring Importance:=09High Sensitivity:=09Confidential Please find attached Competitive Intelligence's current assessment of recen= t events in several emerging markets, particularly Argentina. As the situa= tion 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 qu= estions, please feel free to forward them to me as Brendan Fitzsimmons supp= orts a very broad audience and may not be able to field the request. Thank= s. -----Original Message----- From: =09Fitzsimmons, Brendan =20 Sent:=09Tuesday, November 06, 2001 6:04 PM To:=09Carter, Karen E. Cc:=09Johnston, Robert; Landry, Kimberly Subject:=09Latin America Monitoring Importance:=09High Sensitivity:=09Confidential Hello Karen: I have returned to Houston after a trip to the East Coast: In Washington an= d 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 financ= ial and economic communities. =20 Here is an overall update with some specifics highlighted: As we had reported in July and August and as we discussed lat month, the ba= sic thesis still holds, at Treasury and the IFIs and in the emerging market= financial community: i.e. =20 Differentiation in DC and NY: Argentina is on its own and Brazil will be gi= ven support, as will Turkey and Indonesia. Policy since 9/11 relative to P= akistan has been indicative of the evolving Washington calculus; experience= of sustained weakness and unexpected shock of 9/11 has revealed that conta= gion 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 t= o strengthen the base policy bias of quarantine/reinforce relative to BA an= d 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 =20 Another waiting game vis-?-vis Argy: Despite the 'effective default' condit= ions in Argy and a new spate of downgrades, the once again much rumored swa= p/restructure is by no means a settled issue, and even if/once achieved sti= ll 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 p= rimarily 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 O= PEC 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 West= ern Hemisphere supply security. The end of the Congressional year in DC, w= ar politics, and the upcoming OPEC meeting next week will continue to contr= ibute near term volatility Domestic US politics: Current breakdown of post-9/11 bipartisan consensus n= ow in full throat as appropriations and special needs bills are facing prob= lems 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, despit= e an attempt late last week by the White House to bring more executive pres= sure to bear, has led to concern that a final stimulus bill may not be read= y 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, includin= g 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 heigh= tened 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.=20 Regards, Brendan x54763
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