-Caveat Lector- Soros Disputes Charge of Inside Trade on Brazil Reuters 16-FEB-99 NEW YORK, Feb 16 (Reuters) - Hedge fund guru George Soros and a former aide disputed on Tuesday an assertion in an Internet article that Soros had profited from prior knowledge of the aide's pending appointment as head of Brazil's central bank. "We will take issue with with Mr. Krugman's article," said a spokesman for Soros Fund Management. Economist Paul Krugman of the Massachusetts Institute of Technology wrote in an article posted on the Internet "Slate" magazine that "Soros was buying up large quantities of Brazilian debt at deep discounts" at a time when one of his chief aides was negotiating a job with Brazil's central bank. Markets cheered the Feb. 2 announcement that Soros aide Arminio Fraga had been picked as Brazil's next central bank chief. Brazil's dollar bonds jumped higher on news of the appointment, which has yet to be confirmed. In a note posted on his Web site late on Tuesday, economist Krugman wrote: "I had been told by several investment industry sources that Quantum Fund had bought heavily just before the appointment of Fraga, and that there were many suspicions about whether Quantum had had inside information." Some of the funds run by the Soros group are under the Quantum name. "What I suspect -- but only suspect -- is that what Fraga actually did was simply to tell his employer that negotiations were in progress, and that this information alone indicated that the wild rumours about Brazil were unfounded. In that case he was careless but not venal. Quantum should have stayed out of the market, but by all accounts did not," Krugman wrote. The economist said he was surprised by the stir caused by his comments but stuck by his words. The former Soros aide headed for Brazil was not amused. He told a Brazilian newspaper he was "upset" by the assertion, adding he would explain his position before Brazil's senate during hearings to confirm his post as central bank president. Fraga said Brazil Finance Ministry's executive secretary Pedro Parente approached him about the job on Saturday, Jan. 30. President Fernando Henrique Cardoso then called Fraga on Sunday, at which point he accepted the post and then quit his job with Soros the next day. Some market experts said they doubted Soros had made a quick buck from the Brazilian turmoil. "The accusations are not credible," said Paul Dickson, analyst at the investment bank Lehman Brothers Inc., pointing out that rumours about some sort of a role for Fraga in the Cardoso administration had circulated for weeks. Soros has been somewhat closely involved with recent developments in Brazil. He was among a dozen select bankers that met with Finance Minister Pedro Malan at a session organised by the Federal Reserve Bank of New York last month just days after Brazil let the real currency float on January 18. The hedge fund guru has been critical of Brazil's decision to maintain exhorbitantly high interest rates to defend the currency, arguing that higher borrowing costs are choking Latin America's largest economy and throwing the region into recession. ((--N.A. Treasury Desk; 212 859-1562 )) Copyright 1999 Reuters Limited.All rights reserved. ================================= Robert F. Tatman [EMAIL PROTECTED] [EMAIL PROTECTED] Remove "nospam" from the address to reply. NOTICE: In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. 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