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Cablegate: Gol Refinances $500 Million in Eurobonds (Economic Week In

VZCZCXRO0102
RR RUEHBC RUEHDE RUEHDH RUEHKUK RUEHROV
DE RUEHLB #1285/01 3420804
ZNR UUUUU ZZH
R 080804Z DEC 09
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC 6144
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RHEHAAA/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 02 BEIRUT 001285

SIPDIS

SENSITIVE

E.O. 12958: N/A
TAGS: ECON EFIN PGOV LE
SUBJECT: GOL REFINANCES $500 MILLION IN EUROBONDS (ECONOMIC WEEK IN
REVIEW, NOVEMBER 30 - DECEMBER 6, 2009)

CONTENTS
--------

-- GOL REFINANCES $500 MILLION IN EUROBONDS
-- WILL LEBANON BE AFFECTED BY THE DUBAI CRISIS?
-- LEBANON MAKES IT EASIER TO PAY TAXES
-- IT SECTOR EXPECTED TO GROW BY 7% IN 2009, INTEL OPENS NEW
RESEARCH CENTER


GOL REFINANCES $500 MILLION IN EUROBONDS
----------------------------------------

1. (SBU) On December 3, the GOL successfully issued $500 million in
Eurobonds to replace an equal value of maturing Eurobonds. The
issue consisted of two tranches: a five-year $250 million bond at a
5.875% coupon and a 15-year $250 million bond at a 7% coupon. Both
issues were over-subscribed and demand for the 15-year bond
substantially surpassed the 5-year bond, according to the head of
the Economic Unit at the Finance Ministry, Rola Azour. She noted
that foreign fund managers showed great interest in the 15-year
bond, and subscribed to 43% of this issue. This indicates
confidence in the resilience of the Lebanese economy, Azour
asserted.

WILL LEBANON BE AFFECTED BY THE DUBAI CRISIS?
---------------------------------------------

2. (U) Central Bank of Lebanon (CBL) Governor Riad Salameh publicly
stated that Lebanon would not be affected by instability in
international and regional markets, most notably the recent crisis
in Dubai triggered when investment giant Dubai World announced the
restructuring of $26 billion in debt. Salameh backed his reassuring
remarks by quoting positive economic indicators, including a $6
billion balance of payments surplus and a 20% year-on-year increase
in bank deposits. The Lebanese pound is stable with no CBL
intervention, and CBL reserves have reached $27 billion excluding
gold, he said.

3. (SBU) Meanwhile, the head of economic research at Byblos Bank,
Nassib Ghobril, said it was impossible completely to rule out a
potential impact on Lebanon from the crisis given Lebanon's open
economy and its strong linkages to the Gulf region. Lebanese banks
holding financial instruments in the Dubai stock market could be
hit, believed Ghobril, as well as those with outstanding loans to
companies related to Dubai World. He added that Lebanon could also
suffer as a result of the revaluation of sovereign risk in the
region as a whole. Ghobril expects a slowdown in capital inflows
from the Gulf, as well as some deposit withdrawals, though not on a
large scale. As for remittances, he said that although many
Lebanese live in Dubai, many more reside in the rest of the Gulf and
are expected to continue sending money home.

LEBANON MAKES IT EASIER TO PAY TAXES
------------------------------------

4. (U) Lebanon ranked 34th out of 183 countries worldwide and 9th
out of 19 MENA countries in the World Bank/
PricewaterhouseCoopers Paying Taxes 2010 index. This constituted a
notable improvement compared to the previous survey, when Lebanon
ranked 45th worldwide and 10th within the MENA region in terms of
ease of paying taxes. The index highlighted Lebanon's progress in
simplifying the process of paying taxes with the introduction of
electronic payment and payment at any post office.

IT SECTOR EXPECTED TO GROW BY 7% IN 2009,
INTEL OPENS NEW RESEARCH CENTER
-----------------------------------------

5. (U) The information technology (IT) sector in Lebanon is expected
to grow by 7% by the end of 2009, according to Mindwire, a leading
IT distributor in the Middle East. This is attributed to extensive
reform in related sectors (including telecom, education, banking,
and media), and the increase in DSL subscribers. Earlier this year,
Business Monitor International (BMI) estimated the size of the
Lebanese IT sector at around $251 million in 2008, and expected it
to increase to $350 million in 2013. BMI stated that the sector
remained below its potential, constrained mainly by an unstable
political outlook at the time, while noting Lebanon's weak telecom
infrastructure.

6. (U) Drawing on Lebanon's potential in the area, the U.S. firm
Intel opened an IT research center in Beirut in November. The
Middle East Energy Efficiency Research Center, intended to develop
energy efficient IT solutions, is based at the American University
in Beirut and works in collaboration with the Lebanese University.
It is part of a network linking it with Egypt's Nile University IT

BEIRUT 00001285 002 OF 002


research center ad Saudi Arabia's King Abdullah University of
Sciece and Technology.

DAUGHTON

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