By JAKE KEAVENY
             Bloomberg News

             SAO PAULO -- Brazil just passed a milestone on the road to recovery: For the
             first time since the nation devalued its currency in January, the Bovespa stock
             index crossed into positive territory -- measured not in Brazilian real, but in dollars.

             The odometer clicked over as the benchmark for Latin America's largest stock
             market surged more than 1,200 points last week, or almost 13 percent. Interest
             rates fell, and money poured in.

             The Bovespa has now done in two months what the Russian RTS Index hasn't
             done in six, or the Thai SET Index in 20: It has more than compensated investors
             based in dollars for a plunge in the local currency.

             Folks who bought the 56 stocks in the Bovespa on Jan. 1 are now up a little more
             than 4 percent in dollar terms, even though the real has lost about a third of its
             value. The speed of the recovery bodes well for Brazil, Latin America and the
             world's emerging markets.

             ``Brazil is everything,'' said Fred Searby, a Latin-stock analyst at SG Cowen. ``It
             has held the region back thus far, and it is the key to recovery.''

             Few people say Brazil is free and clear. The nation's economy is likely to shrink by
             about 4 percent this year. On top of that, a weaker real is likely to spur inflation,
             which may reach an annual rate of about 23 percent, economists say.
             Past the worst?

             Yet the stock-market rally in Sao Paulo suggests few people think Brazil will face
             the type of economic collapse that hit Russia or Indonesia. Stocks are saying
             Brazil, the largest economy in the Latin America, is probably past the worst, even
             if the pain lingers for a while.

             What sparked the rally? The appointment of Arminio Fraga as the nation's central
             bank chief in February has fueled confidence that Brazil will put its finances in
             order and head off runaway inflation. Fraga used to manage money for George
             Soros, and many on Wall Street see him as one of their own.

             A new agreement on a credit line from the International Monetary only added to
             investors' optimism. Then last week, a government report showed inflation slowed
             in the 30 days ended March 15, raising hope that prices won't spiral out of
             control, as some investors first feared. The real gained 3 percent against the dollar
             last week. A dollar now fetches about 1.85 real, down from about 2.15 early this
             month.

             Some analysts are already drawing comparisons between Brazil and South Korea,
             another nation that turned to the IMF for emergency credit, slid into recession --
             and witnessed a big rally in its stock market along the way.

             Korea, which asked for the IMF's help in December 1997, is still struggling with a
             banking industry saddled with bad debts. While evidence of an economic recovery
             is mounting, the rebound could still be fragile.

             Anticipating recovery

             Korean stocks, though, see a recovery coming: The Korea Composite Index
             surged almost 100 percent last year.

             ``Brazil could be the Korea of 1999,'' said Jay Pelosky, an emerging-market
             strategist at Morgan Stanley Dean Witter & Co. ``At the beginning of last year,
             Korea was feared; at the end, it was loved.''

             That view is borne out by the scale of last week's rally Brazil. At $346 million,
             daily trading topped the three-month average by about a fifth.

             For the week, only eight of the Bovespa's 56 members fell. The index has surged
             nearly 60 percent in reais this year, a gain only topped by the Russian benchmark.

             Utilities such as Centrais Eletricas Brasileiras SA, or Eletrobas, rose almost 20
             percent last week. Light Participacoes SA went from 1.45 reais to 18.02 reais --
             before regulators suspended the stock and said they would investigate.

             Like the Dow Jones Industrial Average, the Bovespa topped 10,000, closing
             Friday at 10,825.01.

             No high-water mark

             For Brazil, though, this is no high-water mark: The Bovespa traded at these heights
             as recently as last August, before Russia defaulted on debt and sent the world's
             emerging markets tumbling. In between, the Brazilian index twice plunged below
             5,000.

             Next to many other emerging markets, Brazil now looks like a star. The Thai SET,
             for example, is down about 54 percent in dollar terms more than 18 months after
             Thailand let its currency, the baht, slide.

             Looking back, many investors say they were prepared for Brazil to devalue the
             real, and anticipated the move by driving down the Bovespa about 38 percent in
             1998. Few people said that when Thailand bowed to market pressure in July
             1997.

             ``Brazil's was the most advertised devaluation in the world,'' said Shirish Malekar,
             who manages emerging markets investments at Strong Capital Management. The
             question now is whether Brazilian markets, in pointing to recovery, are practicing
             truth in advertising this time around.
 

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