Daily Press Cuttings

Friday 30th March 2001

Nigeria: The sins and miscalculations of their fathers have become the debt burden of Nigeria’s present generation. The Nigerian debt problem has its roots in the free spending days of Shehu Shagari, the country’s last civilian president, in the early 1980s. His administration, aided and abetted by gullible donors, rapacious western bankers – especially from the US – and big spending Nigerian businessmen, borrowed the country into a debt-trap from which it has still to emerge. At the end of 2000 Nigeria estimated its external debt at just over $28 bn. Of this, only $8.5 bn represents loans still to be repaid. The rest – more than 70% - is arrears that accrued under military rule. Akin Arikawe, director-general of Nigeria’s Debt Management Office, explains that the bulk of the debt was either borrowed at very low interest rates in the early 1980s when the London Inter-Bank Offer Rate (Libor) was around 3%, or from the massive trade arrears built up over the same period. The combination of the collapse of oil prices in the mid-1980s, the quadrupling of Libor to around 13% by 1989 and the advent of military rule – when debt service payments were unilaterally capped well below what was due – created the arrears problem. Nigeria does not qualify for the IMF and WB HIPC initiative. The reality, as one of the IMF official says, is that providing HIPC relief for Nigeria would effectively double the amount needed for a programme that is already underfunded.

Environment: President George Bush has declared that the Kyoto protocol is unfair to the US because it does not require developing countries to make commitments to curb greenhouse gas emissions. According to Vanessa Houlder in her article "Sharing the burden of cutting emissions likely to be opposed", most developing countries, such as China and India, view the idea of sharing the industrialised world’s responsibility for curbing emissions at this stage as politically unacceptable. Nonetheless, in spite of developing country insistence that the industrialised world should take a lead in cutting emissions, there has been a tacit assumption that they would become involved in target setting in the second or third decade of this century.

South Korea: Creditors yesterday agreed to provide $2.2bn to Hyundai Engineering & Construction (HEC) under a debt-for-equity swap to save South Korea’s largest builder from collapse. The move, taken after HEC reported losses of $2.3bn last year that wiped out its equity capital, is controversial since it is the sixth bail-out for the builder in the past year.

Russia: A liquid market in rouble-denominated corporate bonds is about to develop in Russia for the first time, bankers say. The market is set to boom in size because "the rouble is relatively stable, a lot of companies are underleveraged, and a lot of banks and investors are wondering what to do with their roubles", says James Fenkner, a strategist at the investment bank Troika Dialog. Another key factor is that the Russian government, a big issuer of treasury bills before the August 1998 financial crash, started running a budget surplus last year and so has stopped crowding out the debt market.

Hong Kong: Figures released by the local government yesterday put Hong Kong among the top foreign direct investment (FDI) recipients in the world – attracting $64bn in 2000 – with the US and China. FDI increased by a staggering $31bn in the fourth quarter last year, which the government attributes to significant merger and acquisition activities. As there was a net outflow of foreign direct investment of $8.7bn in that quarter, this "FDI" was most likely the proceeds of money raised on Hong Kong’s capital markets by Chinese state-owned companies, which then transferred the money to China. Some $20bn was raised overseas last year by large Chinese companies.

South Africa/Diamonds: South Africa’s Diamond Board is to be abolished before the end of the year. Phumzile Mlambo-Ngeuka, the minister of minerals, said the Board suffered from "poor corporate governance". Last year she launched an investigation into allegations that Board inspectors were involved in illegally importing diamonds. The latest controversy concerns the fact that four members of the Board are also De Beers sightholders, in other words, diamond dealers allowed to buy directly from the company.

Ethiopia/Coffee: The halving over the past year in the world price for coffee has caused hardship for Ethiopia’s 700,000 small-scale coffee growers. A return of just 32 US cents a pound for their coffee barely covers production costs. And while the coffee is grown organically, it is not certified organic and growers do not benefit from the higher prices that organic coffee commands. Coffee originated in Ethiopia and is a central part of the economy. About a quarter of the population depend on the crop for part of their livelihood, and the country depends on exports of coffee for about 65% of foreign earnings.

World Trade: Jagdish Bhagwati and Arvind Panagariya in their article "The truth about protectionism" say poor countries are the worst offenders when it comes to obstructing free trade. They outline 4 fallacies that threaten the formation of good trade policy in the poorest countries. The first is that rich country protectionism is greater than poor-country protectionism and that this reflects how unfair and asymmetrical the world’s trading system is. In fact, poor countries continue to have higher trade barriers than rich countries, say the authors. The second fallacy is that trade barriers against the poor countries reflect rich countries’ wickedness or hypocrisy. But say the authors, having given few concessions, the poor countries get little in return. The third fallacy is that it is wrong to ask poor countries to dismantle their trade barriers when these exist in rich countries. This, say the authors, is an elementary error of economics. "If your trading partner throws rocks into his harbour, that is no reason to throw rocks into your own." The last fallacy is that exports from poor countries fail to grow because of protection in rich countries. Although rich-country protectionism is rightly condemned, say the authors, poor countries need to realise that their own protectionism is often the cause of their dismal export and economic performance.

Telecommunications: Vodafone Group PLC, who borrowed heavily to buy German company Mannesmann AG and third-generation wireless licenses, slashed its debt from £13.2bn to £7bn with the sale yesterday of Italian operator Infostrada. Its borrowings compare with debts of £37bn at Deutsche Telekom AG and £30bn at British Telecommunications.

US Economy: The US economy slowed with GDP rising at a 1% annual rate during the last quarter of 2000, as businesses curtailed their spending. After-tax corporate profits were down 4.3% during the quarter, which is the largest decline since the 8.4% drop registered in the first quarter of 1998. After-tax profits were up 0.6% in the third quarter and up 2.5% in the second quarter.

Environment: The US administration confirmed its opposition to the 1997 Kyoto Protocol on climate change with President Bush’s decision not to submit the climate accord for Senate ratification. "We will not do anything that harms our economy, because first things first are the people who live in America," said Mr Bush at a news conference. "It’s in our national interests that we develop a strong energy policy with a realistic common-sense environmental policy." Rebuffing Chancellor Gerhard Schroeder of Germany, who was visiting the White House, Mr Bush said that "a domestic "energy crisis" made capping carbon dioxide emissions from power plants – thought to be a contributor to global warming – unfeasible." Rejecting Mr Bush’s "America first" policy, European officials warned of broader repercussions Thursday if he sticks by a decision to pull out of the Kyoto agreement, reported the Associated Press from Brussels.

Soviet Bloc: According to Alan B Krueger in his article "Soviet Bloc Lessons: Privatisation Alone Isn’t Enough", the downturn in Central and Eastern Europe that followed the introduction of markets and privatisation of state-owned businesses took economists by surprise. Permitting free markets to allocate goods and services was supposed to improve the efficiency of production, not cause a depression. Four years after the Velvet Revolution in the Czech Republic, GNP was down 13% while in Russia, the "basket case of transition", there was a protracted 45% fall in production.

Thursday 29th March 2001

Argentina: Economy Minister Domingo Cavallo’s plan to revitalise Argentina’s ailing economy received a big boost when the lower house of Congress approved a proposal granting the government emergency economic power. The proposal, which is expected to win easy passage in the Senate, gives Mr Cavallo expanded authority to make policy changes that will streamline government and improve the business climate.

Renewed economic problems in Argentina have been ringing alarm bells at some of the rating agencies over European companies with exposure to Latin America. One of those companies is Repsol YPF SA, the Spanish oil-and-gas company whose Argentine subsidiary, YPF SA, had its credit rating lowered by Standard & Poor’s to double-B-plus earlier this week in the wake of the agency’s downgrade of Argentina to single-B-plus from double-B-minus. YPF’s ratings still remain three notches above Argentina’s single-B-plus rating thanks to the dollarisation of the economy.

Argentina: The IMF yesterday moved to quash fears that Argentina could be unable to meet payments on its debt before its next disbursement at the end of May. In recent days, Argentina has said it would have enough money to meet payments on its $124 bn debt this quarter, despite an unexpected shortfall in tax revenues at the start of the year and a rise in spending. Yesterday, spokesman Thomas Dawson said the IMF "agrees with that assessment". Still, an economy ministry official yesterday confirmed negotiations were continuing to place a $1.5bn bond with local banks to build a financing "cushion" for the difficult months ahead.

Turkey: Kemal Dervis, Turkey’s new economic minister, left Washington yesterday, recognising he faces significant obstacles in raising large amounts of international finance to help Turkey emerge from economic crisis. Turkey has more than $6bn available – some $4bn which it can draw upon this year – under a December agreement, which will have to be renegotiated following its February devaluation and banking crisis. Mr Dervis told reporters this week that the IMF, WB and Turkish government "are all agreed" that the recovery programme needs additional net foreign financing, "We do believe that something close to $10bn or $12 bn of additional short-term foreign support is necessary," he said. The money is wanted to fill holes in the Turkish budget caused largely by the banking collapse.

Letter: Thomas C. Dawson, Director of External Relations Dept of the IMF, responds to the article about the IMF’s financing provided to Russia in 1998 was not used to serve the goals of the IMF. Mr Dawson writes that the IMF has established that, after receiving Fund financing, the Central Bank of Russia used an approximately equivalent amount in exchange market intervention to support the rouble. Pricewaterhouse Coppers confirmed these facts in a detailed report of the central bank’s activity in the foreign exchange markets in the relevant period, including review of the counterparties and amounts involved.

Mexico: Yesterday 23 Zapatista rebels in ski-masks strode on to the floor of the Mexican chamber of deputies and proclaimed the beginning of a political struggle. Comandante Esther said that the absence of their more familiar leader Subcomandante Marcos was intentional: the military mission was over. "The person speaking to you is not the military leader of a rebel army, but the political leadership of a legitimate movement," she said.

Ivory Coast: The main opposition party, which boycotted presidential and legislative elections last year, trounced the governing party of President Laurent Gbagbo in weekend voting for mayors in Ivory Coast, according to election results. Diplomats and analysts said the elections were important because they were the first in which all the main parties in the country had participated since a coup in December 1999 led to 10 months of military rule. The European Union and the United States closely watched the vote, saying clean elections were crucial to restoring international aid, which has been cut off since the cup.

Sudan: Oil has become the new front line in the 18-year battle between Sudan’s Muslim government in the North and Christian and animist rebels in the South. Critics argue that oil profits aid the government in a civil war in which more than 2 million people have died. Members of Congress have recently written to the Treasury, the Securities and Exchange Commission and the New York Stock Exchange, saying oil companies that do business in Sudan, an act they argue violates the spirit of US sanctions, should not be allowed to trade on the stock market.

Wednesday 28th March 2001

World Bank: Governments and international financial institutions gave Africa $280 billion of economic assistance between 1980 and 2000, but the money didn’t always benefit the countries it was intended to help, according to a World Bank report. The report, titled "Aid and Reform in Africa: Lessons from Ten Case Studies," says that foreign assistance to Africa has had a mixed effect. "The message is, we need to be discriminating when we look at reform countries," said David Dollar, a researcher at the World Bank who co-authored the report. The report cites two countries, Uganda and Ghana, for having made effective use of the aid they received. But the report offers little praise for Zambia and Ivory Coast. "The report shows that aid cannot buy reform in poor countries that are flatly opposed to it," says Shanta Devarajan, an economist at the bank who also co-authored the report. World Bank president James Wolfensohn criticised developed nations for reducing assistance to Africa in recent years. In a statement issued in addition to the report, Mr Wolfenshon said the amount of aid Africa receives fell to $19 a person in 1998, down from $32 a person in 1990. "It is painfully ironic that just at the time when many African governments are putting in place effective social and economic policies, and committing to reform, development aid is being cut," he added.

Brazil: Yamada Group is a department-store and supermarket chain that focuses on poor Brazilians who toil in Amazon’s vast off-the-book economy. Brazil is experiencing a consumer credit boom now that hyperinflation had been brought under control and the economy is growing. The swelling ranks of holders of Yamada cards include fishermen, coconut vendors, gold miners and street hawkers. They lack steady income and employment documents used for a traditional credit-worthiness check. "We are proud to specialise in the informal economy," says Fernando Yamada, the chain’s managing director. "These people have huge spending potential." Yamada says its default rate is 3.5%, compared with Brazil’s national average of 5.5% for name-brand credit cards. The credit limit established for each card holder is usually the equivalent of half of the client’s monthly income.

Editorial/Sovereign Debt: In Europe, the 1991 Maastricht Treaty says that EU member states should not have national deficits above 3% of GDP and that total government debt to be no higher than 60% of GDP. In the US nearly all current tax-cut proposals are tethered to some arcane interplay between surplus projections and national-debt repayment. Currently, the debt-to-GDP ratio in the US is around 35%. That’s about half the average of other industrial economies and well below a ratio of 50% the point beyond which many economists argue that the size may become worrisome. Since Treasuries represent claims on the US government, they are therefore backed by the money-printing and taxing power of the government and are considerable stable and risk-free assets. If the US surplus is returned to taxpayers, instead of paying off the debt, the economy could be several trillion dollars richer when the boomers start to retire. If the debt is paid down to zero, the government, after 2011, is likely to start investing any surpluses in private assets. The issue is economic growth.

Turkey: Turkey needs $10bn to $12bn in loans to recover from a financial crisis that has seen the lira lose 30% of its value, the country’s new economy minister, Kemal Dervis said. In an effort to convince potential lenders that it is serious about reforms, Mr Dervis announced earlier this month a series of emergency measures - merging state banks and speeding up privatisation. However, fears that the government won’t take strong enough action saw Istanbul’s benchmark stock index drop to below 8000 on Tuesday, for the first time since the February 22 currency devaluation.

Russia: The Russian government has decided not to seek new standby credit from the IMF. Russia is said to be proposing a "joint declaration" on policy by the government and the central bank, to which the IMF would give its approval to an economic programme. This would suggest that there would be no binding agreement ratified by the IMF board, but it would allow for consultations with the IMF, and some monitoring, over the life of the programme. Such a "staff-monitored programme would be less intrusive than the alternative, but might offer some comfort to investors, although it remains to be seen how useful an arrangement of this kind would be."

Japan: The Japanese government backtracked yesterday on an apparent pledge to Washington that it would tackle the disposal of commercial bank’s bad debts "within six months". The confusion has aroused concern that Japan’s political leadership is weakening in its resolve to force the banks to write off £182bn of non-performing loans. However, some politicians fear that active measures dealing with the bad-loan situation would be perceived by some voters as leading to bankruptcies and unemployment.

Argentina: The Argentinean government sold £350m in Treasury bills at an interest rate of nearly 11% yesterday. However, following the auction, Domingo Cavallo, Argentina’s economy minister, said the country would not borrow any more money on capital markets until interest rates fell dramatically. The bold statement was seen as an attempt to break the will of speculators and regain investor confidence.

Greece: Greece’s central bank has stepped up measures to counter money-laundering amid international concern about Greek banks’ role in handling funds from Slobadan Milosevic, the former Yugoslavian president, and his associates. Officials from the Bank of Greece’s supervision department are examining customer and transaction records at three Greek banks suspected of doing business with Mr Milosevic. Another three banks, including a Greek-Cypriot operation, are due to be investigated. The money to which the Milosevic regime had access includes some $4bn in hard currency confiscated from private accounts in the early 1990s and about $1bn raised later by the privatisation of Telecom Serbia, the telephone company.

Middle East: At the Arab summit, the first in a decade, Arab leaders are expected today to agree to launch a free-trade area by 2005, two years ahead of schedule, and to call for the immediate removal of technical and administrative barriers to trade. Political disagreements between neighbours, slow reforms throughout the region and different economic systems will continue to impede a fast move towards integration. But Arab officials say there is now at least a greater understanding that joining forces will help attract foreign investment.

Mozambique: Writing from Maputo, Joe Hanlon reports that more than 180,000 have fled the continuing floods in central Mozambique and are living in temporary accommodation centres, according to UN and government officials. Officially, the UN World Food Programme says it is meeting the demand for 80 tonnes of food a day to feed Mozambique’s displaced population; but privately, UN officials admit that the two planes, two helicopters and the small fleet of trucks used for transporting the food to the centres are insufficient.

US: Walt Disney, the world’s second-largest media company, said last night it was cutting 4,000 job – 3% of its worldwide workforce – as the slowdown in the US economy continued to bite. The California-based company expects to save between $350m and $400m a year from the redundancy programme.

WTO: As the article "WTO can help world’s poor farmers" points out, during recent years, industrialised countries spent on average about $7bn each year subsidising their exports of agricultural commodities such as wheat, flour, cheese, butter, poultry and beef. This is where, say the article’s authors, the WTO can help. "The same body that has been vilified as a tool of multinational corporations and rich countries may be the Third World farmer’s best hope, perhaps the only one, in the battle against unfair competition from subsidised agricultural exports….and tariff escalation ." But the article also points out that the WTO uses the wrong criteria to determine which countries need special exemptions to protect and promote domestic food production. Nonetheless, "though the rules may not be perfect, they are certainly better than no rules at all….When all that counts is raw power, the small and weak are likely to suffer the most."

Tuesday 27th March 2001

Aids: In the latest response to the growing public outcry over the international Aids crisis, Abbott Laboratories is planning to sell its two Aids drugs and its HIV diagnostic test at "no profit" in sub-Sahara Africa. Several hundreds companies, most notably Pfizer Inc. and Roche Holdings Ltd, have yet to reduce their prices of their Aids-related medicines as sharply. In Uganda, Sowedi Muyingo, who buys Aids drugs for Medical Access Ltd, a non-profit drug distributor, said "It is really not much of an offer because nobody here can afford even the new price."

Mexico: Mexico announced last week the issue of $3.3 bn of new international bonds in exchange for restructured Brady bonds. Brady bonds enable countries to restructure billions of dollars in default bank loans into bonds. They are often backed by US Treasuries to give investors more security. 10 years after the first Brady plan was approved in Mexico, countries in Latin America and eastern Europe are replacing their restructured debt with new instruments, which allow them to cut the cost of borrowing and to rid themselves of the stigma attached to Brady bonds.

Argentina: Argentina’s economy minister, Domingo Cavallo, was last night close to securing emergency powers from Congress to curb the country’s economic crisis. He will have broad powers to reorganize state agencies and restructure the tax system and will be able to use state assets as collateral for loans. He plans to put in place an emergency fund to underpin credit with the proceeds of a tax on financial transactions in an effort to lower interest rates quickly. But congress members said he would not be able to privatise state entities such as Banco Nacion or the tax collection authority without debate in Congress. Nor will he be able to alter state pensions or the labour code, or sack state workers or cut their wages – all things that have already occurred under the present government.

US: US banks continued to tighten credit standards for their corporate customers even as demand for loans declined to around the lowest level in a decade, reported the Federal Reserve yesterday. A significant deterioration in financial conditions for worthy borrowers is a familiar feature of a sliding economy and the latest evidence is likely to provide further support for those, inside and outside the central bank, urging a further cut in short-term interest rates.

Uzbekistan/IMF: The IMF intends to terminate its active presence in Uzbekistan. In 1996, the IMF suspended a stand-by loan programme after the Uzbecks imposed strict currency restrictions and a multi-tiered system of exchange. Government officials however promised to introduce a unified rate and make the currency freely convertible by the end of 2000. Such measures have not been carried out and there is little evidence today that the government intends to fulfil that promise or introduce other economic reforms, said Christoph Rosenberg, the IMF’s senior official in the country. Uzbekistan, with 24m inhabitants, is Central Asia’s largest state. The country is rich in mineral wealth and is the second largest exporter of cotton in the world.

UK/Arms: New measures to strengthen Britain’s arms export controls will be announced this week, alongside an increase to a maximum of 10 years in jail from 7 years for brokering or trafficking arms to embargoed destinations. However, the DTI’s draft export controls bill has been criticised because it is not expected to propose prior parliamentary scrutiny of applications for arms export licences.

Sri Lanka/Commodities: Sri Lanka continued to make strong progress in every area of the tea industry in 2000, setting records in production, exports and price. However, the country’s tea export earnings in dollar terms "were only moderate" because of the devaluation of the Sri Lankan rupee.

Burma: A report prepared for discussion in Geneva this week by the International Labour Organisation (ILO) shows that no country has imposed additional sanctions since the ILO urged members to "review the relations" with Burma to "ensure that such relations do not perpetuate the system of forced or compulsory labour in that country". Some ILO members, including the US and EU, said they were prepared to take further measures if force labour continued, with Washington saying they would implement trade sanctions, but despite strong pressure, the US has refrained to take any action. Russia, China, Japan and other Asian nations are strongly opposed to any action to ostracize Burma. Burma is a WTO member and the US, whose clothing imports from Burma rose from $185m in 1999 to $400m last year, would have difficulty imposing restrictions on its clothing exports without violating WTO rules.

WTO: Senior officials from up to 20 countries will meet in Geneva today in an atmosphere of gloom, to discuss prospects for the launch of new global trade liberalisation talks to take place in Qatar in November this year. With the Bush administration having decided to make their priority the negotiation of a Free Trade Agreement of the Americas at next month’s forthcoming summit in Quebec City, they will not even be attending today’s meeting. Meanwhile, developing-country opponents to the trading round have hardened their positions whilst the industrial countries, led by the EU and Japan, have remained split on the agenda. As their price for agreeing a new round, developing countries have posted a long list of demands ranging from extra market access for their textiles and farm exports to a discussion of anti-dumping remedies. Other concerns include a possible opt out of any new rules on investment and competition policy and the shunting of any discussion of labour standards into a new inter-agency forum involving the ILO as well as the WTO.

Globalisation: John Gray in his article "The down turn" writes that "until only a few months ago, the suggestion that the long boom on Wall Street would end in a Japanese-style crash was treated with derision. With few exceptions, western commentators insisted that it rested on sound economic fundamentals. A surprisingly large number gave credence to the idea that the US had entered a ‘new era’ of crisis-free growth. This was, of course, sheer tosh. No doubt it owed something to gains in productivity from restructuring and new technologies, but America’s millennial boom was essentially a classic speculative bubble, fuelled by loose credit and stoked up by vast inflows of foreign capital." As he warns, if aggressive cuts in American interest rates prevent further market slides and a consequent recession in the US, western governments and central banks may find themselves printing money to avoid deflation which "could find [us] back in the inflation ridden world of the 1970s".

Kenya: Richard Leakey, the conservationist who headed an anti-corruption team in Kenya, has been removed from his job by President Moi, who said he had completed his task of launching reforms. Despite Mr Moi’s comment, some analysts claimed that he was sacked. It was said that Dr Leakey fell out of favour when it became clear that international aid donors preferred to approach him rather than president Moi.

The West Africa

Trade: Sweden is being urged to play an active role in ensuring the Everything But Arms – EBA – policy is realised. "The poorest countries in the Third World are losers in the global trade. Their economies have been weakened by (World Bank) structural reforms and now the WTO is prohibiting and destroying their local production by encouraging the dumping of subsidised goods from Europe," notes karin Gregow, an economist with Forum Syd, an umbrella organisation for 130 Swedish NGOs. Europe is the principal trading partners of the LDCs. Although granting absolute duty-free status to LDC exporters would have had little negative impact on the economies of European countries, the original proposal – rice, sugar and bananas – was met with resistance from France, supported by Austria, Belgium, Spain and Portugal.

Monday 26th March 2001

Argentina: In a report Wednesday, Bear Stearns estimates a 40% risk of restructuring and a 10% risk of default. South American countries are already feeling the heat from the so-called "tango effect" that is being fueled by Argentina´s growing political turmoil, stubbornly moribund economy and looming liquidity crunch. And if conditions continue to deteriorate in Argentina, even the more developed markets could become temporarily unsettled, i.e. Italy and Spain which have big stakes in Argentina.

Japan: Announcements that two big Japanese banks will take huge loan write-offs, while underscoring the financial sector´s deep problems, cheered investors who have been searching for signs that the nation´s struggling lenders are starting to clear up their act. Osaka-based Daiwa Bank said last Friday that it expects to post a loss of Euro 164.7 million for the year ending March 31.Asahi Bank Ltd, said it expects to post a net loss of 10 billion yen for its fiscal year ending on March 31, as it speeds up plans to purge its own bad loans.

US: The initial public offering (IPO) market for US companies is tough, but it is even tougher in Latin America and less developed parts of Asia and Europe. Last year US market raised $97 billion, according to Renaissance Capital. Latin America companies issued $8 billion in stock, and China alone raised $21.5 billion in New York and Hong Kong by privatising state-owned assets. "You would have to see the US market recovery first, and that in turn would probably encourage emerging markets, and than after that you would see the IPO market picking up," said Subodh Kumar, chief investment strategist for CIBC World Markets in Toronto.

Russia: Russia could finalise the terms of a new short-term economic programme with the IMF within one or two weeks, according to those familiar with the negotiations. Illarionov, economic adviser to president Putin , said growth this year looked "certain" to fall below the government´s 4% target, and could even be zero "if trends continue". An IMF deal could help Russia open negotiations with sovereign creditors on restructuring its so-called Paris Club debt, amounting to almost $40 bn. Russia still hopes to secure a restructuring before 2003, when its total foreign-debt outgoings will otherwise peak at some $18bn – equivalent to about 40% of all federal-budget spending this year.

The European Bank for Reconstruction and Development is considering a £59 million loan for Unified Energy System, Russia´s electricity monopoly. If agreed, the 3 ½ year loan would lead to a wider participation of the multilateral bank in liberalising the country´s ailing energy sector. The agreement, however, depends on whether president Putin and his government are prepared to pursue the reform of the energy monopoly.

Week end edition

Mexico: Subcomandante Marcos, the leader of Mexico´s Zapatista rebels, yesterday accepted an invitation to speak in support of an indigenous rights bill before Congress, breaking a deadlock in in the country´s stalled peace process.

UK: Sarah Boseley, writes that the UK is to take part in an international trial to find how to combat a possible resurgence of Aids in the West, as resistance grows to the drugs given people who are HIV-positive. There are an estimated 300,000 people infected with HIV in the UK; each year 2,500 more become HIV positive. With the advent of ever larger combinations of more powerful drugs in the West, the moral pressure on pharmaceutical companies and western governments to get at least basic medication to some of the millions who are dying in Africa will become stronger.

UK: ThreeSquare, a business set up by the head of the Blair-endorsed campaign for membership of the single currency collapsed with debts of more than £50,000. The