December 1999 Volume 1, Edition 2

Editor:         Dr. Scott MacDonald, Chief Economist and Director of
                Investor Relations

Deputy Editor:  Dr. Jonathan Lemco, Senior International Research Analyst

Publisher:      Keith W. Rabin, President

© 1999 KWR International, Inc. No reproduction is permitted without the
express consent of KWR International, Inc.

Please forward all feedback, editorial, circulation and reproduction
requests to


I.    U.S. Economy: Everything Coming Up Roses?
II.   Asian Internet Stocks Storm Wall Street: Trend or Flash-in-the-Pan?
III.  Lessons for Asia: There is Nothing New About Structural Adjustment
IV.   Argentina's New Policy Priorities Following the Recent Election
V.    Viewpoint: Foreign Investment Transforming Asia's Economies
VI.   Latin American Notes
VII:  Approaching Investment Banks for Investment Capital
VIII. Book Review: The Long Boom: A Vision for the Coming Age of Prosperity

I: U.S. Economy:  Everything Coming Up Roses?
Scott B. MacDonald, Chief Economist and Director of Investor Relations

As the U.S. economy heads to the end of 1999, it appears that strong
growth, a dynamic stock market, low unemployment (now at 4.1 percent) and
low inflation are paving the way into 2000.  Real GDP growth for 1999 is
expected to be at 3.9 percent, with a 2.5-3.0 percent forecast for next
year. Inflation for year-end 1999 (year-on-year) will be 2.2 percent.  It
appears that the trade imbalance has peaked and many analysts are talking
about improvements in external accounts as well, though the current
account imbalance will be around 4 percent of GDP.  Moreover, the last few
months of the year have witnessed the passage of new legislation to repeal
parts of the 1933 Glass-Steagall Act and the 1956 Bank Holding Company
Act, which is a positive development for U.S. banking.  Finally, an
agreement has been reached for next year's $390 billion budget bill.

The rosy glow surrounding the U.S. economy has raised concerns about the
potential for greater inflationary pressures, which was reflected by the
Fed's November 16, 1999 decision to raise interest rates by a quarter
point to 5.5 percent.  Data before the last Fed meeting indicated that the
U.S. economy expanded by a 4.8 percent rate during the third quarter,
almost two full percentage points higher than the Fed's "target" growth
rate or the rate of growth generally perceived to be the economy's longer
term non-inflationary potential growth rate. Three other factors were
behind the decision.  One, the labor market remains exceedingly tight,
with recent data indicating the unemployment rate remaining at a
thirty-year low. The second factor is that although the official inflation
indicators do not reflect an acceleration in inflation, commodity prices
(such as oil, copper and nickel) have risen through 1999 and are expected
to either increase or remain in a close range to today's prices. The third
factor is that the Fed did not want to risk missing this opportunity to
hike rates (it was the last time to firm until February 2000).

Federal Reserve policy-makers indicated that they do not expect to
increase borrowing costs again in the short-term.  Boosting the overnight
bank lending rate by a quarter point to 5.5 percent "should markedly
diminish the risk of inflation going forward", the Fed's Open Market
Committee stated.

That stated, we expect more interest rate hikes to occur in 2000. Boston
Fed President Minehan expressed concerns earlier this month about rising
commodity prices, tight labor markets and the greater pressures on U.S.
resources stemming from the revival of external demand.  In particular,
Minehan warned that an acceleration of inflation is "inevitable" if labor
markets remain tight (which we expect going into 2000), productivity
growth "does not continue to accelerate" and non-labor costs keep growing.
She emphasized that it is a "dangerous" fallacy that "inflation is dead".
Minehan also noted that further tightening may be needed to avoid "the
excesses of zeal and over-confidence", both in the stock market and in
household spending". Considering that the NASDAQ hit a number of records
and the Dow went above 11,000 after the November 16 Fed meeting, there
appears to be an ongoing element of "over-confidence" in the stock market.

On the political front, the race for the U.S. presidency for November 2000
is taking shape, with Republican Texas Governor George W. Bush and
Democrat Vice President Al Gore still looking like frontrunners.  However,
both men may face tough challenges in the New Hampshire primaries from
Senator John McCain on the Republican side and former Senator Bill Bradley
on the Democratic side.  In recent polls taken in New Hampshire, Gore and
Bradley have both had about 40 percent support, indicating that the first
primary could be close. That stated, we expect the race to come down to
Bush versus Gore, with whoever the Reform Party's nominates coming in
third. Both Bush and Gore have strong funding behind them and the support
of most of their party's hierarchy, which provides an almost unbeatable
combination.  From the standpoint of the economy, neither frontrunner
represents the potential for a major change in policy direction.

Coming to the end of 1999, the U.S. economy remains in a moderately strong
growth mode.  If the expansion continues until February 2000, it will be
the country's longest in recent memory. Although this author believes that
the U.S. economy will eventually be forced to slow down, probably with a
recession (maybe in 2001), there are others that expect the boom to

II: Asian Internet Stocks Storm Wall Street: Trend or Flash-in-the-Pan?

Scott B. MacDonald and Keith W. Rabin

In the second half of 1999, a number of Asian Internet and other high tech
companies have ventured forth and issued equity shares on the U.S. NASDAQ
market.  Their reasons for listing on U.S. equity markets include the vast
depth of these markets and investor interest in the sector.  In the United
States alone, internet users are now estimated to have surpassed the 100
million mark and that number is expected to rise further, while users in
other countries, especially in Asia are expected to climb. According to
Forrester Research, the number of Internet users worldwide conservatively
estimated stood at 130 million in 1999, up substantially from 1998's 95
million and is projected to reach 350 million by 2003.  What this means is
growing demand and a need to service that market.

One of the fastest growing regions for Internet use is in Asia.
According to Asia Cyberatlas, China, India and Korea have been
identified as major areas of opportunity. The region has
lagged behind in Internet usage, but is now rapidly moving
into such areas as e-commerce and on-line shopping.

Though the vast bulk of China's 1.2 billion people have not logged on to
the Internet, usage is growing.  Moreover, China has a sizeable young
population, which already constitutes the biggest users of the Net and
will continue to provide an expanding market.  According to official
statistics, about 10 percent of Chinese Net users are aged between 16
and 20; 67 percent are between 21 and 30 (Susan V. Lawrence, "Widening
Web", Far Eastern Economic Review, November 18, 1999, p. 55). China is
not alone is watching an expansion of Internet usage.  Korea is
witnessing a similar trend.  According to the Korean Ministry of
Information and Communication domestic Internet users numbered
4,368,000 as of the end of May 1999, 1,260,000 more than were registered
at the end of 1998. In both cases, Internet usage has included everything
from chat rooms to e-commerce.

A new generation of companies are taking shape in Asia and they are not of
the conglomerate mode.  In most cases, big is not beautiful.  By and
large, the new companies are relatively small, have flexible management
teams, are conversant in English, and are driven by brain power.  There is
little fear of goods sitting in inventory. In Korea, a total of 21,526
business start-ups were established in seven major cities in the January-
September 1999 period, marking a 45.7 percent year-on-year rise and
exceeding the level for all of 1997, a record year for the number of small
businesses established.  Most importantly, many of the new companies were
in the field of data communications, including Internet-related services.
According to South Korea's government agency on smaller businesses, a
total of 257 data communications firms were launched in September,
comprising 10.6 percent of new businesses launched during the month.

For many of the new Internet companies, there is a pressing need to find
capital to fuel expansion.  At the same time, local capital markets are
limited and traditional business views remain suspicious of such companies
that are new and unproven.  Consequently, many of Asia's new Internet
companies are looking to the NASDAQ for capital.  Among those companies
that have issued stock are Infosys Technologies (from India), Korea
Thrunet (Korea), I-Cable (Hong Kong), (China), and Satyam
Infoway (India).  According to industry sources, there is a growing
pipeline of Indian Internet-related companies expected next year,
including Videsh Sanchar Nigam Limited (VSNL), Mahanagar Telephone Nigam
Limited (MTNL), BPL, Zee Group, and Modicorp.  The following are three
brief profiles of Asian Internet companies:

Infosys Technologies is an India-based information technology service
company.  It provides managed software solutions, which include custom
software development, maintenance and re-engineering services as well as
dedicated offshore software developmental centers.  It is listed on the
NASDAQ, with a market cap of $13,889 million, 66,139 shares outstanding,
with 1,331,000 shares held by institutions (2.0% of the total). On
November 17, 1999 it was announced that Infosys and Aetna, Inc. had
reached a strategic agreement under which the Indian company will support
the U.S. company's offshore initiatives and assist the company in
transforming itself into an electronic business enterprise.  As of
November 22, 1999, the stock closed the day at $230 a share on the NASDAQ.

I-Cable Communications is part of Wharf Holdings and is the larger firm's
multimedia arm.  I-Cable says that it has more than 430,000 pay-TV
subscribers, about 26 percent of the total homes in Hong Kong with access
to cable, and about 70,000 Internet customers.  Its broadband Internet
service, originally scheduled to start at the end of 1999, will start in
early 2000, which would allow subscribers to connect to the Internet more
than 100 times faster than through dial-up modems. I-Cable raised $486
million by selling shares for the first time.  International money
managers paid $27 each for 18 million American depository shares, each
representing 20 underlying I-Cable shares, which are now traded on the
NASDAQ (as of November 18, 1999).  I-Cable traded around $30 as of
November 29, 1999.

Korea Thrunet Co., is a high-speed Internet services provider and the
first Korean firm to go public on the NASDAQ. Formed in July, 1996 by
major shareholders TriGem Computer, Inc. and Korea Electric Power Corp.,
the firm has attracted substantial interest from foreign technology
companies, such as Microsoft, which now owns 5.4%. On November 16, 1999,
Thrunet issued 10.1 million shares at $18 each, raising $182 million.
Investors subscribed to buy 10 times more stock than was available, even
after the initial target of 9.8 million.  Interestingly enough, Thrunet's
success came a day after the Korean government shelved a $740 million
global share sale for Korea Tobacco & Ginseng Corp., a state-controlled
tobacco monopoly.  Thrunet provided to be attractive due to the sector it
represented.  The company states that it is the leading provider of
high-speed Internet services in Korea, with 90,693 end users as of
September 30, 1999.  That compares with 12,000 end users at the end of
1998. As of December 1, 1999, Korea Thrunet (KOREA) was trading over $50.

Asian Internet companies are an expanding menu from which U.S. investors
will be allowed to pick and choose. As with domestic U.S. Internet
companies, they will represent opportunity as well as risk.  However, the
Asian market is now in its early stages and the first wave of companies
represents an opportunity to get in on the ground floor.  These companies
will also become attractive to Asian investors as well.  As Kazunori
Jinnai, deputy general manager at Daiwa SB Capital Markets Co. stated:
"Which is more attractive? The information technology sector?  Or the
no-growth shipbuilding industry? Demand for IT-related services is soaring
in the U.S., and Japan is heading that way." (Quoted from,
"Asian Stocks: Region's Telecom, Computer-Related Companies Rise",
November 19, 1999)

The attractiveness of the NASDAQ for Asian Internet companies will
continue.  The NASDAQ is also attracting Internet companies from other
countries as well.  Already there are a number of Israeli Internet
companies, such as IGOLD, that have issued stock on the NASDAQ.
[Altogether there are a total of 79 Israeli companies listed in
US stock markets.] Consequently, Asian companies will face competition
for investor dollars from companies from other countries as well as
domestic U.S. companies. This is a positive thing, especially as it
will maintain pressure on most firms to maintain transparency and

It will also maintain pressure on the corporate sectors in Asia,
in particular, forcing the larger companies to adapt to a global
corporate behavior that has shifted away from conducting business
in an opaque fashion.

III: Lessons for Asia: There is Nothing New About Structural Adjustment

Scott B. MacDonald, Chief Economist

As the debate rages about whether Asia's political economy is changing and
if the challenge of globalization is being met, the question of attitude
has often been brought up.  For example, it is argued by some that
Japanese culture is group-oriented, risk adverse and looks to the state
for guidance. Consequently, the Japanese are resistant to change,
especially if it brings with it an end to life time employment, a reduced
role for the state and the advent of Anglo-American-like rough and tumble
business practices.  Any criticism or slowdown of Japan's effort to
overhaul and globalize its economy is viewed in much of the Western press
as evidence that at heart Japanese men and women really do not want to
change.  The same has been argued about Korea, Thailand and Malaysia.

Yet many Americans forget the late 1980s and early 1990s in their own
country, when the first shocks of globalization shook the economy and
helped force change.  U.S. business, dominant in global markets in much of
the post-war era, had become complacent and corporate structures brittle
and incapable of introducing the rapid changes required to compete in a
rapidly changing business environment.  Moreover, Japanese and European
competitors had recovered from the damage sustained during the Second
World War and began acquiring market share.  Although the global business
environment was undergoing a massive transformation, many American
business leaders as well as the public clung to the ideas of long-time
employment with the same company and the idea that corporate well-being
was linked to the well-being of the local community. Moreover, new ideas
had difficulty moving up often highly hierarchical management structures.

The expansion of the junk bond market in the United States in the 1980s
let a genie out of the bottle.  Although there was a growing recognition
that U.S. business needed to change, especially if it were to compete
internationally, societal pressures slowed the process.  Much like the
Japanese public today, there was a fear of the unknown and the past model
still had considerable appeal.  When financiers such as Michael Milken,
Henry Kravis and others entered the scene and turned the junk bond into a
major vehicle for hostile takeovers, they were hardly perceived as heroes
by the public.  Indeed, the well-publicized tale of the takeover of RJR
Nabisco in 1988, "Barbarians at the Gates" by Bryan Burrough and John
Helyar provided a lurid tale of greed on Wall Street to a backdrop of
strategy meetings, society dinners and publicity blitzes.  The 1980s were
often referred to as the "go-go" years, backed by the pro-free market
Reagan presidency and a moto that "greed is good."

Of course, the arrest and sentencing to prison of Milken in 1990, for
violations of securities and tax laws, mainly on insider-trading charges,
appeared justified to a public weary of hostile takeovers, leveraged
buy-outs, and junk bonds.  For James Stewart, the Wall Street Journal
reporter who covered the scandals from their emergence in 1986 and wrote
the best-selling "Den of Thieves", Milken's transgression "dwarfs any
comparable financial crime. During this crime wave the ownership of entire
corporations changed hands, households names vanished in takeovers,
thousands of workers lost their jobs, companies loaded up with debt,
profits were sacrificed, bondholders and shareholders lost many millions
more."  These words seemed to strike true in the last years of the 1980s
when a substantial number of junk-bond-funded companies failed, such as
Integrated Resources, Federated Department Stores, Continental Airlines,
Pan American, Revco, and Allied Stores.  For many young people emerging
from universities, the employment arena was indeed confusing, if not

Although the 1980s decade of greed had many ugly aspects, it did set the
stage for a sweeping overhaul of U.S. business, forcing it to make badly
needed changes.  Today, the once "notorious" junk bond market has become a
well-established and respectable part of global finance and is referred to
as the "high-yield market".  Many large, well-established investors have
diversified into high-yield bonds, which have had an excellent long-term
performance. At the same time, a number of those companies that failed,
such as Continental and Federated, have come back as much more efficient
and competent firms.  As Charles Morris in his "Money, Greed and Risk",
notes: "The often violent restructuring of American industry during the
1980s,  led to very large increases in efficiency and productivity --
manufacturing productivity grew especially rapidly during the 1980s -- and
America has now recaptured leadership from the Europeans and Japanese in
most key industries.  Instead of shareholders losing ëmany millions',
stock market valuations increased by more than a trillion dollars between
1982 and 1989."

The American process of business restructuring is hardly over as
globalization continues to demand corporate management teams to remain
alert.  This entails ongoing awareness of technological changes, of what
foreign and local competitors are doing, and finding new ways of either
containing or cutting costs.  While most Americans enjoy the fruits of
more efficient productivity in the corporate sector (as mirrored by stock
market gains since 1992, strong economic growth and low unemployment),
not everyone is thrilled by globalization and the changes that it entails.
The ongoing structural adjustment inherent in globalization still touches
a raw public nerve when discussing the possibility of losing one's job,
pension and health coverage.  According to The Economist, opinion polls in
the United States show large majorities in favor of "acting as a global
economic leader", but as many as 46 percent feel that "the US should slow
the trend towards globalization because it hurts American workers." ("The
Politics of Trade", The Economist, October 23, 1999.)

The November 30-December 2, 1999 World Trade Organization meeting in
Seattle, Washington was a flashpoint for anti-globalization forces,
including the elected officials from King County, Washington, who have
been vocal in condemning globalization for ruining the environment and
encouragoing child labor.  Active in denouncing the evils of
globalization in Seattle were the Ruckus Society from Berkeley,
California, and Mexico's rebel movement, the Zapatistas.  Many of these
groups share the same sentiments as Jose Bove, a French sheep farmer, who
protested American tariffs on French cheeses by attacking a local
McDonald's with his tractor.

Despite the trepidation over ongoing structural change attached to
globalization, the United States is hardly likely to retreat from a
process that has helped bring about eight years of solid economic growth,
low unemployment and a long bull run in the stock market.  This is evident
in that none of the major presidential candidates in either the Democratic
or Republican parties is anti-globalization or anti-free trade.  Although
Pat Buchanan's stab at winning the nomination of the Reform party has
added some excitement in terms of his isolationist views, the mainstream
remains in favor of McDonald's, MTV and Microsoft -- even if this means
ongoing structural changes in the U.S. economy.

For Japanese, Koreans and other Asians looking to the United States for
insights to structural adjustment, the picture can therefore be somewhat
confusing.  Yet there are a few key lessons to be drawn from the U.S.

1. To remain competitive in a globalized world economy, structural changes
are essential (albeit painful). This means moving ahead with difficult,
yet necessary corporate reorganizations and downsizings, not a reshuffle
of assets, liabilities and personnel;
2. The process of structural change brings with it a slower transformation
of societal attitudes as each culture must come to terms with what
globalization means and how to assimilate the good as well as how to deal
with the bad points.  It must be remembered that because the United States
went through structural adjustment and is relatively globalized, it did
not lose its sense of being American.  Similarly, as Japanese or Koreans
embrace structural change and globalization, it does not mean that they
will stop being Japanese or Korean.
3. Structural change is an ongoing effort that requires constant
vigilance.  This means that governments, the private sector and the public
must be flexible and willing to comprehend new ideas.  It also means that
business will have to find that delicate balance between implementing new
management and production techniques and maintaining cultural comfort.
4. While the government can help promote change, it is ultimately in the
private sector where the major adjustments must be made -- both in terms
of business strategies and attitudes.

Structural change is going to continue in both Asia and the United States
as well as in Europe and Latin America.  With ongoing technological and
communications breakthroughs, the global economy will continue to be hit
by the same hard-to-resist waves of changes that rocked it during the
second half of the nineteenth and early twentieth centuries.  Japan made
substantial changes in 1868 with the Meiji Restoration and again in the
aftermath of World War II.  Korea made an amazing transformation in its
economic and social development following 1953, the end of the Korean War.
The same transformations are evident in Thailand and Malaysia beginning in
the 1970s.  For all the painful adjustments occurring in Japan, there is
nothing new about structural change and Asia is not alone.

IV: Argentina's New Policy Priorities Following the Recent Election

Jonathan Lemco, Senior International Research Analyst

>From an investor's perspective, Argentina has been extremely volatile in
the past two years.  What was once an investor darling championed for its
educated workforce, its fairly transparent accounting methods, its solid
banking system, and its currency peg to the U.S. dollar (through the
currency board), became a source of nail-biting.  Public spending shot up
as the state sector ballooned, public sector labor shortages increased and
economic growth stagnated and then stopped.  Most importantly, Argentina's
vulnerability to Brazil's economic woes, and especially the former's
currency devaluation in January, became more salient.  The October 24th
presidential election of the center-left Alliance led by Fernando de la
Rua signaled that positive change might be realized in the near-term.

We think that the de la Rua victory is a sign that Argentina's government
will encourage the continued emergence of market forces.  Investors should
be cautiously delighted that the populist Peronist Party has lost power
and the "free-market with a human face" Alliance will govern.  This will
be the first time since 1983 that an Argentine government will rule
without a majority in either chamber of the Congress, both of which are
held by the Peronistas.  This should contribute to national political
legitimacy, although we are concerned that it might make it harder to
pass necessary labor and tax reforms.

We do not expect a major change in economic policy from that of the
outgoing Menem government, and we think the one-on-one peg of the peso to
the dollar will remain, thereby ensuring currency stability.  Even more
importantly, we are willing to grant the new government the benefit of the
doubt, for now, that it will tackle its widening budget deficit (expected
to be $5.7 billion as of year-end 1999 and possibly $10 billion at year-
end 2000 if austerity measures are not implemented).  This is the
government's first priority, and investors should watch the forthcoming
2000 budget for any tax and spending changes planned.  Since tax revenues
are already at 30 percent of GDP, the greater focus will be on spending
cuts. If the fiscal deficit is reduced by the projected $5 billion in
2000, then we suspect that, in time, the international investment
community will reward Argentina accordingly.

But in the next two years, Argentina can only expect little or no growth,
given its strong currency and its lack of competitiveness vis-Ã-vis other
Latin American and Asian economies.  To cover its financing gap,
Argentina's government wants to raise $17 billion from the capital markets
in 2000.  At the same time, the De la Rua administration is seeking a $12
billion line of credit from the IMF.

The De la Rua government had to deal with a number of trade disputes with
Brazil, which have threatened to disrupt trade liberalization through
Mercosur.  The more that Argentina and Brazil can coordinate macroeconomic
policy, and particularly exchange rate policy, the more likely are trade
and investment ties to increase.  But De la Rua has also pledged to help
businesses operating within the nation's rigid currency system by lowering
interest rates and bringing about more flexible labor rules.  The
President-elect has also indicated that he will restructure public service
ministries and eliminate redundancies.  The telecommunications industry is
already being deregulated.  Toll-road concessions are likely to be
restructured as well.  Further privatization of public sector industry is
expected, though the scale will be considerably smaller than years prior
due to the fact that the major sectors have already gone through the

We think that investors should remain cautious about Argentina for the
foreseeable future.  Key factors to determine Argentina's short and
medium-term economic future are the strength of the U.S. dollar and
successfully addressing the burgeoning external debt, the widening budget
deficit and a restructuring of domestic labor markets.  Failure to make
changes in the last three areas will only serve to put Argentina under
pressure for another economic crisis.

V: Viewpoint - The following article was previously published by
Bridge News and the Korea Economic Weekly

Foreign Investment Transforming Asia's Economies

By Keith W. Rabin and Scott B. MacDonald

As Asia proceeds toward economic recovery, substantial attention has been
devoted to whether governments and corporations have taken sufficient
measures to initiate corporate restructurings and reform.  This misses the
point.  One can develop a half-full or half-empty argument concerning
structural and corporate reform.  One cannot, however, debate the massive
surge if capital into Asia.

Korea alone had a massive $9 billion inflow of foreign direct investment
last year.  And in the first eight months of this year, FDI was up 77
percent from the corresponding period last year.  In Japan, foreign direct
investment almost doubled from 1997 to 1998, totaling a record $10.5
billion.  Thailand, Singapore and Taiwan are also seeing an upsurge of
foreign investment.

The 1997-98 regional economic crisis left an impression on Asian leaders.
They know that if it were possible to obtain sufficient resources from a
single domestic market, a diversified investor base allows a more stable
supply of capital and lower risk premiums.  This can be demonstrated in
the integration of financial markets, such as the recently announced
cooperative agreement between Japan's Softbank and the U.S. NASDAQ market.

Creditworthy corporate and financial entities have also begun to
incorporate listings abroad (American and global depository receipts) as
part of their financing strategies.  ICICI of India, Korea Thrunet and
Internet Initiative Japan Inc. are three recent examples of this
accelerating trend.  Foreign executives and investors entering into these
investments are not beholden to traditional methods of conducting business
in Asia.  They will be less tolerant of cross-guaranteed loans, a reliance
upon main banks and corporate parents and maintenance of non-productive
assets in an inefficient corporate structure.

They will also demand greater transparency and disclosure.  One example of
a major foreign director investor making an impression on local markets is
America's GE Capital.  Over the last two years, it has made eight major
investments in four Asian countries, expanding its assets to about $20
billion in the region.  Its takeover of Japan's Lake Corp., a major
consumer finance firm, was accompanies by a radical overhaul of the
business, including centralization of its back-office operations and the
establishment of a call center, reducing costs and adding greater

GE Capital also instilled discipline in planning and budgeting and in
charting out short- and long-range strategies.  The company went through
similar processes after its purchase of Toho Mutual Life, an ailing
insurer, and Japan Leasing.  In all cases, GE Capital sought to inculcate
a new business culture that includes everything from stripping out bad
assets and cherry-picking the best employees to introducing casual-dress
Fridays and let-your-hair down workout sessions. In most cases, the
American company's efforts look successful in turning around corporate
performances and adding a new element of competition into local markets.

By opening the Pandora's box of foreign investment, Asian governments and
corporations have, knowingly or not, unleashed an unrelenting force that
will maintain ongoing pressure to maximize profitability and move toward
greater economic rationalization.  Failure for Asian corporations to
follow suit would have serious consequences.  As M.R. Chatu Mongol
Sonakul, Governor of the Bank of Thailand, noted about foreign direct
investors in an address to Thai bankers: "They come in with new capital
and technology. They bring their worldwide extensive network."  He warned
Thai bankers about the need to restructure: "Wake up, begin your fight
now or in a couple of years you will get trampled."

Foreign investors, through their need to monitor, value and maximize their
investments, will insist on greater attention to shareholder interests,
international accounting standards, more professional management and
Western corporate governance practices.  U.S.-based Tiger Funds, one of
the largest equity investors in the world, has already it will take a more
active management role in firms in which it holds a major ownership stake.

All of these changes will take place irrespective of whether they are
mandated by government policy.  This will inevitably mean greater numbers
of outside directors on Asian boards, increased transparency and more
attention to the needs of analysts and active and passive investors.
Short of nationalization, this trend appears irreversible.  Over time,
these pressures will mandate that Asian corporations focus on sharply
defined core competencies and take steps to maximize their profitability.
Those companies that are slow to react and to introduce efficiencies will
be at a real competitive disadvantage.  They will not receive the
investment capital, influx of ideas or pressure to innovate needed to
sustain their economic viability.

Consequently, foreign investment flows serve as a key leading indicator of
a nation's dedication to achieving real corporate reform.  It is also
highly supportive of structural adjustment programs.  Countries such as
Korea, Japan and Thailand that are introducing regulatory measures to
facilitate foreign investment will decidedly benefit from the increased
competition, efficiency and incentives it introduces throughout their
economies. At the same time, it should be underscored that foreign direct
investment by itself is not a panacea for all that ails Asia.  It is
central to the process of rebuilding Asia for the 21st century,
hand-in-hand with those in the region that want change.

VI: Latin American Notes

By Scott B. MacDonald, Chief Economist and Director of Investor Relations

Brazil - Inflationary Concerns?:  Although there has been a growing
euphoria over Brazil, we still have our doubts.  The challenges that dog
the country are still substantial and if interest rates continue their
upward direction, which we believe is likely in 2000, the country's
external debt burden becomes that more onerous. Politics remain a headache
for the Cardoso administration, especially with municipal elections
looming around the corner, not to mention presidential elections in a
couple of years.  Most recently, inflation in Sao Paulo rose at its
fastest pace in more than eight months.  Consumer prices climbed 12.1%
in the 30 days ending November 15, up from 1.14% in the 30-day timeframe
prior.  The root cause for rising inflation is that companies are passing
on the higher costs of imported goods, due to the lower value of the real
to the US dollar earlier in the year. A number of economists believe that
pressure to raise prices may grow in coming weeks as economic growth picks
up, Christmas shopping begins and workers receive their year-end bonus in
early December.  The increase in inflation, however, is likely to force
the central bank to consider raising interest rates.  Already at a central
bank policy meeting in mid-November, the institution shifted its bias on
future rate moves to neutral from a bias to lower rates.  Considering the
hike in interest rates in the United States in November that pressure is
likely to grow.  Brazil's benchmark inflation target is 8% this year,
which is appearing questionable considering that the inflation rate was
at 7.3% for the first 10 months of 1999.

Chile Returns to Positive Growth: The Chilean economy returned to positive
economic growth for the first time in September after 11 months of
contraction.  According to the Central Bank, real GDP growth for the month
of September was 1.1% year-on-year.  The Central Bank also reported that
the trade balance recorded a surplus of $64.3 million in October, with
exports reaching a $1,309.2 million, a 17.1% increase year-on-year, with
imports at $1,244.9, still falling 9.9% year-on-year.  Firming copper
prices are helping export expansion, a trend expected to continue into
next year.  On the political front, Chile goes to the polls on December
12 to vote for its next president.  Although the center-left candidate
Ricardo Lagos dominated in opinion polls early in the campaign, his
center-right opponent Joaquin Lavin has narrowed the lead to a few points
and threatens to break the center-left's 10-year run in office.  Both
Lagos and Lavin are supportive of the country's economic programs and
represent a high degree of continuity with market-oriented policies.

VII: Approaching Investment Banks for Investment Capital

By Scott B. MacDonald and Keith W. Rabin

As Asia and effected emerging markets climb out of economic crisis, it
appears that everyone wants to talk to an investment banker.  After all,
investment banks represent one path to badly needed capital.  And right
now these economies need a lot of money to recapitalize their banks and
restructure their corporations. On top of that, national and local
governments still have priority lists of critical infrastructure projects.
Somehow, somewhere capital must be raised.  Investment banks are good at
this, hence their attractiveness as partners for development.  And there
are plenty of institutions to choose from -- Goldman Sachs, Credit Suisse
First Boston and Merrill Lynch -- to name but a few.  Most of them have
offices located in major financial centers and other markets throughout
the world.

Despite the obvious connection of capital needs and investment banks, the
link between actual need and receiving capital is not so clear.  In fact,
one of the great stumbling blocks is exactly how to approach an
investment bank.  There are fundamental questions that must be addressed
-- for example, what exactly is an investment bank and what can it
realistically provide?

An investment bank is an institution oriented to the issuing of debt and
equity securities. Many also trade those securities in the secondary
market, act as a venture capital agent and provide advisory services in a
wide rage of areas, including mergers and acquisitions and project
finance.  Although investment banks sometimes provide loans (in the form
of bridge financing), their bread and butter business is to use other
people's money, namely that of the investor.  Above all else, investment
banking is a relationship business: an investment banks brings an issuer
to the market, where it uses its relationships with investors to market
a particular security.  The better the research, deal execution and
follow-through, the better the reputation of the investment bank and the
greater the deal flow.

For those needing capital, investment banks can make it happen through a
new issue or by investing their own venture capital.  Yet, the story must
be good, presenting a clear picture of why a particular investment
justifies the attention and capital of the bank and their network of
investors.  This is a criticial point for anyone approaching an investment
bank for a meeting.  It is essential to have a purpose, supported by a
story that will differentiate their company, institution or government
from others.

There are many examples of businessmen showing up at a meeting with an
investment banker without having a clearly stated purpose.  One example
includes a delegation of about 10 Chinese businessmen from one of the
biggest steel works in China who requested a meeting in New York with a
major investment bank.  A suitable mix of investment bankers was assembled
for the meeting.  After the wedding-like ceremony of trading cards and
shaking hands was completed, everyone took their seats.  An awkward pause
ensued.  A comment was made about the weather in New York, a safe subject.
Another pause ensued.  Finally, the senior investment banker gently
inquired: what is it we can do for you?  The senior Chinese business
leader perked up "We want money."  The investment banker responded: "How
much money?"  After a collective putting of the heads together by the
senior members of the delegation, the answer came: "As much as we can get."

While one can certainly admire the pluck of the Chinese delegation, the
hoped for deal never occurred.  The large size of the delegation did not
translate into what makes a deal happen -- the right information.  The
Chinese steel company lacked internationally recognized accounting
reports, it was never made clear as to how exactly the money raised would
be spent, and the company was adverse to getting a rating from a major
rating agency. The messages sent to the investment bankers were that the
company lacked transparency in its financial operations, had little
intention of providing any better disclosure and lacked sophistication in
approaching the international financial community.  Considering these
points, the Chinese steel company would not be an easy sale to investors.
Needless to say, the deal was never consumated.

The failed expedition of the Chinese company, however, provides some
insights in how to approach investment banks.  First and foremost, it is
necessary to have a clear cut idea of why you are there.  Do you need
capital as soon as possible?  Will you eventually come to either the debt
or equity markets?  They have different requirements.  Do you need
advisory services, such as help in locating potential investors of real
estate or troubled assets?  What has been the track record of foreign
investors in dealing with your company or government?  Equally important
to these factors is that you are able to demonstrate that you have a
command over your resources and a solid understanding of your financial
statements. Moreover, the idea of getting ratings, if appropriate, should
not be shrugged off as an inconvenience.  In the aftermath of the 1997-98
Asian financial crisis, investors are keen to have as much information as
possible about their potential investment, be it a bond, equity or asset.

Most investment bankers want to know what the bottom line is in terms of a
business opportunity.  Just shaking hands and hoping that something will
materialize is not a recipe for foreign investment.  When approaching an
investment bank for a meeting, it is important to bear in mind
specifically what is being asked.  Does the state or municipal government
seeking a meeting hope to issue bonds in international capital markets?
Is a company seeking a strategic partner or asking for help in finding
the right one? Is the bank seeking a customer for deeply discounted real
estate loans?

By having a straight-forward idea of what is being sought as well as
communicating this clearly, the investment bank is in a much better
position to access whether they are interested and, if so, who are the
right people to be at the meeting.

One additional factor should be taken into consideration.  If there are
concerns about what is required in approaching an investment bank, a
public relations firm that specializes in bringing potential issuers to
investment bankers and who knows how to approach investors can offer
valuable assistance.  Considering the competitive nature of international
capital markets, a little extra money spent to properly communicate the
attractiveness and essential viability of an investment opportunity can
mean the critical difference between success and failure.  In addition,
even in cases where a borrower has been able to make the right kind of
relationships and successfully enlist the support of an investment bank,
effective communications support can often help to increase valuations and
improve the terms of an offering through its ability to increase
demand and awareness within the investment community.

One company that successfully did its homework in approaching capital
markets was YPF, the former Argentine state-owned oil company.  In the
1970s and 1980s the company was poorly managed, overstaffed and lacked
proper financial controls.  Moreover, the Argentine economy was a
disaster, caught by a heavy external debt burden that required scheduling
and chronic high inflation and labor-management turmoil.  In the 1990s, a
new government introduced extensive economic reforms, which helped turn
the Argentine economy around.  Part of those reforms included the
privatization of YPF, partially through the issue of equity shares on
the New York Stock Exchange.  While YPF went through the process of
restructuring under new corporate leadership, it turned to the investment
banks with a clear-cut mission -- to find enough investors to help
privatize the company and reinforce the process of improving corporate
performance.  Working with communications advisors, YPF successfully
conveyed this message to the investment banks.  It was then able to turn
to investors in a concerted fashion, working in hand with the bankers.
After a series of roadshows, media outreach and follow-up meetings with
key investors, YPF was privatized in 1993 with a $3 billion equity issue
to international investors.  To many investors, it was the deal of the

VIII: Book Review: The Long Boom: A Vision for the Coming Age of Prosperity

By Scott B. MacDonald, Chief Economist and Director of Investor Relations

The most recent cheerleaders for growth without end are Peter Schwartz,
Peter Leyden and Joel Hyatt, in their aptly titled book, "The Long Boom: A
Vision for the Coming Age of Prosperity" (Perseus Books, 1999/ $26).  The
authors elaborated on a widely read and quoted article in Wired magazine,
in which they outline a future of global real GDP growth of 4 to 6 percent
for at least the next twenty years based on new technologies. These new
technologies include such things as the Internet as well as breakthrough
innovations such as nanotechnology, the engineering of individual atoms.
Simply stated, the future belongs to those that innovate, adapt and use
new technologies and have a positive vision. The three writers are from
San Francisco Bay area and are by profession, a consultant, a journalist
and an entrepreneur.  They are careful to point out that their book is not
a prediction, but an exhortatory track.  The vision thing is evident in
that their hope is that by outlining a positive view of the future, they
will increase the chance that it will happen.

Among the good things to happen are:

* Financial markets will become less volatile as new forms of global
governance emergence "to apply to the public sector the new form of
networked organization that had already transformed corporate
bureaucracies" (how this helps reduce stock market ups and downs is not
really explained);
* A new form of nonpolluting energy will replace fossil fuels;
* The average life span will increase to 120 years; and
* "wild science" will develop such things as the warp drive to power

The long boom will be sustainable and attainable to everyone on the
planet.  The ongoing penetration of new technologies in daily life, of
course, will be desirable for everyone to emulate.  Ultimately, the
apolitical Silicon Valley world view will permeate, because as the authors
state: "A different political mentality seems to be emerging on the West
Coast.  It's not about left or right; its about what works."  So much for
longstanding hatreds in Africa (i.e. Rwanda and Angola), the Balkans
(Bosnia and Kosovo) and Asia (Burma and Indonesia).

While The Long Boom is an interesting book, the authors lack a historical
perspective, negate the highly disruptive impact globalization and new
technology play on different cultures and come across as exceedingly
naðve Americans.  Indeed, as naðve Americans they state: "The Americans
have figured out an economic model that works marvelously.  The world
needs to open up just enough to see that taking some new ideas and
developing them further is in its best interests."

Added to this naðve outlook is an amazing amount of stereo-typing (which
won't really help sales in non-U.S. markets).  The authors label the
French and Southern Europeans as "Romantics" (break out the berets and
loaves of French bread), while Asians are "fantastic at absorbing new
methods and mastering set courses."  The Russians have "a remarkable
capacity for suffering", and the Japanese "resist change at all costs
for as long as possible and then adopt new ideas wholesale."

The Long Boom presents an up-beat view about the future, but falls short
of providing the gritty real-life path that will mark the way forward.  As
Businessweek's Michael Mandel noted in his review of the book: "But
Schwartz, Leyden, and Hyatt fail to acknowledge that periods of great
technological change are often highly volatile, as workers and
corporations lose their old niches.  The first half of the 20th century
was perhaps the greatest innovative era ever -- but it also included 11
recessions and a deep depression."  Optimism is good, but realistic
optimism is better -- something that this book lacks.


KWR International, Inc. (KWR) is a specialized consultancy firm dedicated
to introducing a strategic perspective into the public and investor
relations process.  Combining expertise in research, communications and
consulting services, we design and implement integrated solutions that
deliver real and sustainable value.

KWR can provide support throughout all stages of a program/project cycle.
We draw upon analytical skills and established professional relationships
to design, implement, manage and evaluate programs all over the world.
These range from small, targeted projects within a single geographical
area to large, long-term initiatives that require on-going global support.

In addition to serving as a primary manager, KWR also provides specialized
support to principal clients and professional service firms who can
benefit from our strategic insight and expertise on a flexible basis.

Drawing upon decades of experience, we offer our clients capabilities in
areas including:

Research, Monitoring and Analysis
Program Design and Development
Media and Public Relations
Investor Relations
Strategic Planning and Financial Advisory Services
Road Shows and Special Events
Materials Development & Dissemination
Project Management and Implementation
Program Evaluation
Training and Technical Assistance

Investment Promotion and Financial Communications
Marketing Communications and Trade Promotion
Public Affairs/Trade and Regulatory Issues
Economic, Financial and Political Analysis
Telecommunications / High Tech
Internet and New Media Vehicles
Tourism Promotion

For more information on KWR International, please contact:

Keith W. Rabin, President at tel. 212-532-3005,
fax 212-532-3345, e-mail:

The preceeding information is provided by:
KWR International, Inc.
New York, NY 10023
Phone: +1.212.532.3005
Fax: +1.212.799.0517

Website content © 2001 KWR International