BellSouth and Verizon signaled yesterday that their Latin American operations were preparing to default on hundreds of millions of dollars of debt because of economic problems in Brazil and Argentina.

BellSouth's subsidiary, BCP, missed a $375 million debt payment yesterday ... and has been unable to reach a definitive solution for BCP's debt situation ...

... currency devaluation and economic slowdown are at the heart of BellSouth's problems ... revenue is almost entirely in local currency, while its debt is mostly in dollars.

The default by the BellSouth unit would be one of the largest by a subsidiary of an American company in Brazil ... BellSouth may need to take a charge against earnings because of its unit's difficulties in Brazil.