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100 | <s>[INST] Starting in 1976, Chile began implementing deep [/INST] free-market reforms, including privatizing and opening up the economy to competition. </s> |
101 | <s>[INST] At the same time, it [/INST] froze the exchange rate and raised interest rates. </s> |
102 | <s>[INST] "Every day, imported goods were cheaper and ours were more [/INST] expensive because of inflation," says Mr. Fantuzzi, who calls this phase "a second expropriation, this time by financial means". </s> |
103 | <s>[INST] To survive, Fantuzzi cut its staff to 190 [/INST] workers from 500, cut wages and diversified from kitchenware into washing machines and other appliances. </s> |
104 | <s>[INST] Starting in the mid-1980s, then-Finance Minister Hernan [/INST] Buchi devalued the currency to make Chile's products more affordable to foreign buyers. </s> |
105 | <s>[INST] He also steadily lowered import tariffs while [/INST] deregulating the economy, forcing companies to adapt to competition or die. </s> |
106 | <s>[INST] The result: At Fantuzzi, "we exported nothing eight years ago; [/INST] today, 27% of our sales of about $15 million are exported to 20 countries," says Mr. Fantuzzi. </s> |
107 | <s>[INST] The company, which now employs 350 [/INST] people, has completed its fourth consecutive year in the black. </s> |
108 | <s>[INST] Painful as it was, Chile's transformation bred [/INST] a consensus that this was the right path for a small economy. </s> |
109 | <s>[INST] "We bought the idea and firmly believe in [/INST] it," says Andres Navarro, president of software-maker Sonda, which is 49%-owned by Digital Equipment Corp. </s> |
110 | <s>[INST] "You don't find any big [/INST] labor or special-interest group against the road we chose. </s> |
111 | <s>[INST] In the presidential elections late this [/INST] year, I don't see anybody proposing any big change". </s> |
112 | <s>[INST] "Chilean entrepreneurs have shown capacity to go out, look for product [/INST] niches and do it," says Anthony Wylie, general manager of Fundacion Chile, a nonprofit group that seeks to boost exports. </s> |
113 | <s>[INST] A decade ago, this century-old industry was [/INST] dying, with local consumption falling fast because of Chile's economic distress. </s> |
114 | <s>[INST] Led by such wineries as Concha [/INST] y Toro and Santa Rita, Chilean winemakers started looking abroad. </s> |
115 | <s>[INST] Rodrigo Buzeta, Santa Rita's exports director, [/INST] remembers spending a week in New York calling on distributors. </s> |
116 | <s>[INST] "Everywhere the answer was the same: [/INST] `No, we're too busy with French and California wines,'" he says. </s> |
117 | <s>[INST] "But in the U.S., if you send [/INST] a bottle with oxidation, they throw it in your face," says Mr. Buzeta. </s> |
118 | <s>[INST] So winemakers set about changing, often with the help [/INST] of foreign investors such as members of France's Rothschild family, who bought 50% of Los Vascos. </s> |
119 | <s>[INST] Cement vats to ferment wine [/INST] were replaced by automatically cooled, stainless-steel ones. </s> |
120 | <s>[INST] Old wooden barrels that gave red wine its heavy taste [/INST] were replaced with oak barrels from France and the U.S. that impart a more delicate, fruity favor. </s> |
121 | <s>[INST] The standard yellow bottles for [/INST] Chardonnay took the place of Chile's green ones. </s> |
122 | <s>[INST] Chile overtook Germany to become the [/INST] third biggest wine exporter to the U.S., behind Italy and France. </s> |
123 | <s>[INST] Total wine exports in 1992 are [/INST] estimated at $127 million, up from $9 million in 1984. </s> |
124 | <s>[INST] While these figures are a long way from Chile's annual $1 billion worth of fruit exports, winemakers expect [/INST] continued strong growth and see this as a sign that the country is moving to more value-added exports, like furniture and canned goods, to complement traditional exports of copper, fish meal and fresh fruit. </s> |
125 | <s>[INST] Chile's government is now hoping for a free-trade [/INST] agreement with the U.S. to lock in its reforms and provide a new boost. </s> |
126 | <s>[INST] Its interest in such a pact [/INST] has less to do with trade than investment, though. </s> |
127 | <s>[INST] With an across-the-board import tariff of 11% [/INST] and export-led growth, Chile would derive only small gains from a free-trade accord. </s> |
128 | <s>[INST] Chile runs a small trade deficit with the U.S., and the Chilean American [/INST] Chamber of Commerce estimates that annual U.S. exports to Chile could grow to $2.5 billion in five years from about $1.6 billion in 1991. </s> |
129 | <s>[INST] But, says Jose Antonio Guzman, president of Chile's Confederation of Production [/INST] and Commerce, "if Chile is acceptable as a partner to the U.S., it will draw the attention of investors. </s> |
130 | <s>[INST] A free-trade agreement can bring in [/INST] investment from third countries seeking access to the U.S. market". </s> |
131 | <s>[INST] Though the government is waking up [/INST] to the problem, Chile's environmental standards are still lax. </s> |
132 | <s>[INST] Then there's intellectual property; the U.S. pharmaceutical industry [/INST] is unhappy that Chile offers only 15-year patent protection, not 20 as in Mexico. </s> |
133 | <s>[INST] However, compared with Mexico, there is less direct competition between Chile and [/INST] the U.S. And some exports, such as Chile's counter-seasonal fruit harvests -- mainly grapes, cherries and apples -- are even complementary. </s> |
134 | <s>[INST] U.S. companies might see Chile more as a place to establish [/INST] a base for business in South America than as a location for Mexican-style maquiladoras, factories that assemble products for re-export. </s> |
135 | <s>[INST] "Chile is definitely on a roll, and on [/INST] a roll for the foreseeable future," says Mr. Lobo, managing director of investment bank Celfin. </s> |
136 | <s>[INST] "I can see what would [/INST] slow it down, but not what would stop it". </s> |
137 | <s>[INST] ___ Document 131 of 400 Treasury prices edge up as slight rise in core inflation [/INST] is explained away Author: Vogel, Thomas T, Jr; Lauricella, Thomas D Publication info: Wall Street Journal , Eastern edition [New York, N.Y] 10 Dec 1993: PAGE C15. </s> |
138 | <s>[INST] accountid=28034 Abstract: Prices of long-term Treasury securities rose slightly on [/INST] Dec 9, 1993 as traders explained away news showing a slight increase in the core inflation rate. </s> |
139 | <s>[INST] The benchmark 30-year Treasury bond rose less than 1/4 [/INST] point to 101 7/32 while its yield dropped to 6.15% from 6.16% the day before. </s> |
140 | <s>[INST] Full text: NEW YORK -- Prices of long-term Treasury [/INST] securities rose slightly as traders explained away news showing a slight increase in the core inflation rate. </s> |
141 | <s>[INST] Bond investors fear inflation because it [/INST] reduces the value of investments with a fixed rate of return. </s> |
142 | <s>[INST] The center of attention yesterday was supposed to be [/INST] the morning's eagerly awaited producer-price index report for November and initially, traders found plenty to respond to. </s> |
143 | <s>[INST] The Labor Department reported the PPI was unchanged during the month, but [/INST] what the market latched onto was an unexpected 0.4% rise in the so-called core rate, the PPI excluding food and energy. </s> |
144 | <s>[INST] Treasury prices dropped in a flurry of selling but the declines [/INST] proved short-lived as traders realized that most of the 0.4% increase was due to a 2.1% gain in car prices. </s> |
145 | <s>[INST] That jump in auto [/INST] prices followed a 3.9% plunge in October. </s> |
146 | <s>[INST] Rather than representing real changes in prices, the increase "reflects difficulty seasonally adjusting that component [/INST] around the new model year," said Doug Schindewolf, money-market economist at Smith Barney Shearson Inc. As a result, the market viewed the report as an aberration, Mr. Schindewolf said. </s> |
147 | <s>[INST] Once sentiment shifted to the view that [/INST] the data did not reflect an upswing in inflation, prices spurted higher. </s> |
148 | <s>[INST] The benchmark 30-year Treasury bond rose less than 1/4 [/INST] point, or less than $2.50 for a bond with a $1,000 face value, to 101 7/32. </s> |
149 | <s>[INST] Its yield, which moves in the opposite [/INST] direction of the price, dropped to 6.15% from 6.16% on Wednesday. </s> |
150 | <s>[INST] Meanwhile, Argentina completed the sale [/INST] of $1 billion of noncallable 10-year global notes yesterday. </s> |
151 | <s>[INST] The notes were priced with a coupon of 8.375% [/INST] at 99.368 to yield 8.47%, 2.8 percentage points above the yield of the 10-year U.S. Treasury note. </s> |
152 | <s>[INST] According to James B. Quigley, head of global-debt offerings at Merrill Lynch, [/INST] well over half of the investors in North America who purchased the Argentina notes had never invested in developing-nation debt markets. </s> |
153 | <s>[INST] These buyers "were not the traditional high-yield or emerging [/INST] markets investors," said Mr. Quigley, and included insurance companies, some pension funds, and corporate bond funds. </s> |
154 | <s>[INST] "It's fair to say that with this [/INST] deal Latin American and other emerging markets have emerged," he said. </s> |
155 | <s>[INST] Global notes are securities [/INST] sold simultaneously in the world's major markets. </s> |
156 | <s>[INST] The offering from Argentina was the first junk-rated [/INST] global offering as well as the first global offering from a Latin American nation. </s> |
157 | <s>[INST] The notes were rated single-B-1 by [/INST] Moody's Investors Service and double-B-minus by Standard & Poor's. </s> |
158 | <s>[INST] The issue was sold through underwriters led by Merrill [/INST] Lynch, Salomon Brothers Inc. and Banco Rio de la Plata SA, an investment bank in Argentina. </s> |
159 | <s>[INST] When Argentina began looking for underwriters for the offering just a few weeks ago, many in [/INST] the market did not expect it to be able to sell the notes at a yield that was less than three percentage points above U.S. Treasury notes, said Mr. Quigley. </s> |
160 | <s>[INST] "It is a culmination of two trends in 1993," said [/INST] Mr. Quigley: the tendencies of investors to buy lower-rated credits and to seek bonds with longer maturities. </s> |
161 | <s>[INST] In secondary-market trading late yesterday the price of the [/INST] issue rose about 30 cents for each $1,000 face value, according to one money manager. </s> |
162 | <s>[INST] Meanwhile in the U.S. Treasury market, prices seesawed [/INST] for most of the day after the initial gyrations in response to the inflation report. </s> |
163 | <s>[INST] Amid the gyrations, securities maturing [/INST] in 10 years or more, outperformed shorter maturities. </s> |
164 | <s>[INST] Traders were reported to be setting arbitrage trades [/INST] betting that the yield gap spread between short-term and long-term maturities would narrow. </s> |
165 | <s>[INST] Known as yield-curve flattening trades, traders [/INST] initiate those positions through buying bonds while selling the shorter issues. </s> |
166 | <s>[INST] "We've had a rush to the flatteners," said Lawrence Leuzzi, head of fixed income at S.G. Warburg & Co. Behind [/INST] the re-emergence of the curve flattening trades was a growing sense that the Federal Reserve may have to push interest rates higher next year if the economy sustains a faster pace of growth into the first quarter of 1994. </s> |
167 | <s>[INST] "For the month, inflation is OK, but that [/INST] doesn't mean that down the road we might not see some problems," Mr. Leuzzi said. </s> |
168 | <s>[INST] Analysts said it is just that concern that has [/INST] prompted Fed officials to make rumblings that indicate short-term interest rates may be on the way north. </s> |
169 | <s>[INST] On Tuesday, Fed Vice Chairman David Mullins said the [/INST] central bank cannot afford to wait until inflation appears in the official statistics before acting. </s> |
170 | <s>[INST] Yesterday afternoon, Fed Governor Susan Phillips was quoted as saying that [/INST] while inflation is not currently a problem, capacity constraints on the economy could cause inflation pressures to build next year. </s> |
171 | <s>[INST] In the meantime, traders must still contend with [/INST] a report on the November consumer-price index, which is scheduled to be released today. </s> |
172 | <s>[INST] Forecasts center on a 0.2% rise [/INST] in the CPI, with a 0.3% gain excluding food and energy. </s> |
173 | <s>[INST] Last month, the CPI proved [/INST] a bearish surprise for the bond market. </s> |
174 | <s>[INST] The index gained 0.4% overall [/INST] in October, or 0.3% excluding food and energy. </s> |
175 | <s>[INST] Late yesterday the Federal Reserve reported that its widely [/INST] watched M2, a measure of money supply, dropped $400 million in the week ended Nov. </s> |
176 | <s>[INST] That puts M2 growth rate at 1.5% compared with the [/INST] fourth-quarter base of last year, which is just within the Fed's target range of 1% to 5%. </s> |
177 | <s>[INST] M2 includes currency, checking accounts, [/INST] money-market funds and certificates of deposit smaller than $100,000. </s> |
178 | <s>[INST] The Treasury sold $16.10 billion of [/INST] one-year bills yesterday at an average discount rate of 3.47%. </s> |
179 | <s>[INST] Here are the details from the auction: [/INST] Rates are determined by the difference between the purchase price and face value. </s> |
180 | <s>[INST] Thus, higher bidding narrows the [/INST] investor's return while lower bidding widens it. </s> |
181 | <s>[INST] The percentage rates are calculated on a [/INST] 360-day year, while the coupon equivalent yield is based on a 365-day year. </s> |
182 | <s>[INST] Corporate & Junk Bonds The new issue corporate [/INST] debt market saw $2.21 billion of debt priced yesterday, including Argentina's $1 billion global offering. </s> |
183 | <s>[INST] Most deals went well, according to syndicate [/INST] officials, and are expected to trade well in the after market. </s> |
184 | <s>[INST] Investment-grade bond prices generally followed those of [/INST] Treasurys in moderate activity, with yield spreads unchanged by late in the session. </s> |
185 | <s>[INST] Another global note isn't faring [/INST] nearly as well as the Argentina note sold yesterday. </s> |
186 | <s>[INST] Worries about a brewing political crisis between the U.S. and North Korea [/INST] have pushed down the price of Korea Electric Power Co.'s 6 3/85 coupon 10-year global notes since they were sold last month. </s> |
187 | <s>[INST] The price of the notes has dropped two points, [/INST] or $20 for a bond with $1,000 face value, since they were sold to 96.55. </s> |
188 | <s>[INST] Similarly, Korea Development Bank sold debt last month [/INST] at 0.98 percentage point over Treasurys, and the spread has widened to 1.30 percentage points. </s> |
189 | <s>[INST] KDB's 6 3/4 coupon 12-year notes have dropped [/INST] 1.29 points, or $12.90 for a bond with a $1,000 face value, to 98.33. </s> |
190 | <s>[INST] North Korea has been in the news practically every day since [/INST] the deals were sold, noting North Korea's weak economy and its refusal to let officials inspect its nuclear power plants. </s> |
191 | <s>[INST] Municipal Bonds Municipal bonds finished unchanged to 3/8 [/INST] point higher yesterday, having remained strong after gaining as much as 1/2 point last session. </s> |
192 | <s>[INST] Traders say there's no end in sight to the climb that began [/INST] a week ago, as demand remains strong before the heavy bond calls next month that will drain supply from the market. </s> |
193 | <s>[INST] New York City's 5.50% Fiscal 1994 Series D [/INST] general obligation bonds due 2004 finished unchanged at 99 1/2 to 100, yielding 5.50%. </s> |
194 | <s>[INST] However, the Florida Board of Education's 5.125% [/INST] bonds due 2018 closed 3/8 point higher at 97 5/8, yielding 5.28%. </s> |
195 | <s>[INST] Because the ongoing price rise is depressing [/INST] yields, new-issue activity remains very brisk as the year draws to a close. </s> |
196 | <s>[INST] This session's supply -- unusually heavy [/INST] for a Thursday -- totaled more than $750 million. </s> |
197 | <s>[INST] 's first credit-card securitization drew demand strong enough [/INST] for the global deal to be boosted in size and quickly sell out yesterday. </s> |
198 | <s>[INST] The secondary-mortgage market, meanwhile, was subdued [/INST] and prices ended slightly firm after barely wavering all day. </s> |
199 | <s>[INST] Among 6.5s for January delivery, Ginnie Maes rose 3/32 to [/INST] 99 18/32, Freddie Mac Golds were up 1/32 at 99 20/32 and Fannie Maes advanced 2/32 to 99 15/32. </s> |
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