Date: Thu, 19 Dec 1996 14:07:14 -0800
Subject: M-G: Peru Crisis Highlights Risk for Investors (fwd)


Here is a post from the Peru list.  At least it looks
like one good thing will come out the hostage situation
anyways, people trying to make a buck from the misery 
of the Peruvian masses will be somewhat disappointed this
week.  
-Jay / Detroit


> To: latco-AT-psg.com
> 
> >From the "Hemispheric Trade Listserver" <trade-AT-americas.fiu.edu>
> 
> 
> >From: "Rene Ramos" <ramosr-AT-americas.fiu.edu>
> >Organization: Summit of the Americas Center
> >Subject: Peru Crisis Highlights Risk for Investors
> >
> >Thursday December 19 7:35 AM EST 
> >
> >Peru Crisis Highlights Risk for Investors
> >
> >MEXICO CITY (Reuter) - The Peruvian hostage crisis on Wednesday
   was the latest setback for investors in Latin America, who have
   had to stomach risks of guerrilla attack, assassination and
   devaluation in hope of fat returns. 
> >
> >Recently, they have had little to show for their pluck. 
> >
> >Those who backed the stunning economic and political success story of
> >Peru under President Alberto Fujimori in the 1990s woke up to learn 
   that hundreds of partygoers at a glittery reception in the Japanese
   ambassador's residence in Lima had been taken hostage by communist
   guerrillas late on Tuesday. That was the sort of threat investors 
   had long believed Fujimori had crushed. 
> >
> >"You just panic. You try to reduce your risk," said Gary Evans, senior
> >strategist at Lehman Brothers in New York, explaining the reaction of
   dumbstruck investors to a country that until recently was an 
   emerging-market star. 
> >
> >As traders pushed sell buttons, the Peruvian Stock Exchange suspended
> >trading, facing losses of more than 4 percent in its General Index. 
   That was a second blow for investors, who were left with no escape 
   route in their scramble to get out. 
> >
> >According to Evans, battle-hardened traders long used to the ups and
> >downs of Latin America's fickle markets saw buying opportunities as 
   their more jittery counterparts fled. But whether their optimism would
   be more than fleeting depended on the outcome of the crisis. 
> >
> >"Is this going to change the fundamental paradigm in Peru? Is this a
> >major threat to the government? The jury is still out, but I don't 
   think so," Evans said. 
> >
> >One thing was clear, however. Latin America in the last three years has
> >been no picnic for foreign investors chasing fast profits. 
> >
> >Almost exactly two years ago, a surpise overnight peso devaluation in
> >Mexico thrust much of Latin America into an economic morass from which
   it is still struggling to emerge. 
> >
> >Investors in New York heckled and jeered the Mexican finance minister of
> >the time as he sought to explain to them how in a few tragic days before 
   Christmas 1994 he had wiped billions of dollars off the value of their
   investments. 
> >
> >If Mexico's economy has rebounded from the crisis this year, its stock
> >market remains at pre-crisis levels in dollar terms. One reason: leftist
   guerrillas in Mexico, who were shrugged off by investors and the
   government as a farce until they launched bloody overnight attacks 
   late August. 
> >
> >The abrupt resignation in July of Domingo Cavallo, architect of
> >Argentina's dramatic economic resurgence; guerrilla attacks in Colombia;
   and the phoenixlike resurgence of the Tupac Amaru Revolutionary Movement,
   which infiltrated the ambassador's residence in Lima, have all helped
> >tarnish Latin America's image as a reform-bent region and a honeypot for
> >investors. 
> >
> >Some analysts say the perils are now fully understood. 
> >
> >"We've been in an extended bear market in Latin America for what amounts
> >to three years,"  Ernest Brown, economist at New York investment bank 
   Morgan Stanley, said. 
> >
> >"Anyone who's invested is not all starry-eyed by the opportunities. They
> >weigh the risk, and after three years, the skittish money has been shaken out." 
> >
> >Brown was sanguine about the hostage crisis, expressing confidence that
> >investors in Peru would not be frightened off by the rebels. "Most
   investors assume that the economic development story in Peru does not
   depend on local security being bulletproof and Switzerlandlike," he said. 
> >
> >But while investors in Peru may weather the storm, some analysts are
> >ringing a warning bell over Latin America in general, saying the    persisent 
sluggishness of theregion's economies is breeding "reform 
   fatigue" among citizens unable to escape the poverty trap. That
> >could translate into unrest. 
> >
> >"We perceive the beginning of a disenchantment with the reform process
> >in many countries," Lehman Brothers' Evans wrote in a recent report. 
  "Though not yet translated into a major or cohesive political movement,
   the minor change in sentiment increases the event risk in many emerging
   market countries."
> >
> >
> Latin American Trade Council of Oregon	17702 Overlook Circle
> latco-AT-ortel.org				Lake Oswego, Oregon 97034 EUA
> http://www.latco.org			Tel 503-699-0646 Fax 503-699-0528
>
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