As a Brazilian delegation arrived in Washington Wednesday to negotiate a transitional loan agreement, both Uruguay and Argentina wait for further credit from Latin America's perennial credit machine.
Led by Economy Minister Amauri Bier, the Brazilians are seeking an immediate allocation of capital to palliate the effects of their dwindling exchange rates, as the real has lost more than 30 percent of its value against the dollar in the year so far.
Bier also hopes to negotiate a stand-by agreement that supersedes the IMF's current help program to Brazil, which expires in December. According to local newspaper Folha de Sao Paulo, Brazilian authorities expect to have the new agreement signed by Aug. 12. Several Brazilian analysts concurred with this forecast, to the point of stating that the IMF could acquiesce to the loan even earlier.
Prospects for securing the loan -- which diverse analysts estimate at between $10 billion and $20 billion -- were nonetheless threatened this weekend as U.S. Treasury Secretary Paul O'Neill decided to say out loud what he thinks of Latin American economies. O'Neill suggested that eventual aid to Brazil as well as Argentina and Uruguay could end up being diverted into Swiss bank accounts, rather than being used for its stated purposes.
Although White House spokesman Ari Fleischer called Brazil an "important friend and ally" in order to quell Brazilian indignation, his words could not prevent the negative market reaction, as investors' fears grew that there would be no IMF loan.
O'Neill's words, however, were better received by Argentine President Eduardo Duhalde, who on a radio interview Wednesday stated that "80 percent of the Argentines" agreed with what he had said.
"Money can not be delivered to a country so that it ends up in banks," Duhalde told the radio station Rivadavia.
Duhalde acknowledged that neighboring Uruguay was another victim of the financial contagion his country unleashed upon the region. Uruguay is facing a severe capital flight as total deposits in local banks have fallen by nearly 40 percent this year. This prompted authorities to close banks Tuesday, in a last-ditch attempt to curb the massive withdrawals experienced over the last weeks. The measure will continue through Friday, although its results are uncertain.
Duhalde used the examples of Uruguay, Brazil and his own country for what he deemed the "collapse" of the economic system that has been implemented in Latin America over the past years.
As for the markets, last Thursday Brazil's Bovespa index closed 2.7 percent down to 9,665 points after the real reached the level of three to the dollar, continuing its heavily downward trend. The banking industry experienced severe losses as many of its players own government bonds. Banks Itau and Bradesco fell 8.9 and 8.8, respectively. Shares on Friday experienced considerable losses as investors expressed their dissatisfaction over Finance Minister's Pedro Malan's scarce progress in securing a much-needed IMF loan. The index closed down 4.6 percent at 9,217, as Embetel -- a subsidiary of WorldCom -- fell 1.2 percent and Bellwether dropped 7.3 percent.
Although on Monday the Bovespa closed up 0.25 percent at 9,240, a potentially higher rise was stifled as the real marked an all-time low of 3.29 per dollar. The index experienced a slight recovery Tuesday, ending up 1.1 percent at 9,341 points, as traders chose to place their money in stocks rather than the government's debt instruments. Mining giant Vale do Rio Doce rose 7 percent and oil company Petrobras did so by 2.2 percent. Wednesday marked the third consecutive day of gains for the Bovespa in spite of a drop in the real, closing up 4.5 percent to 9,762. Paper producer and exporter Aracruz Celulose took advantage of the weakened currency, gaining 9.5 percent. Another exporter benefited by the weak real was Vale do Rio Doce, with a 7.1 percent gain.
Mexico's IPC index closed Thursday with a 1.5 percent fall to 5,922.34 points, as stock sales in two of its largest media companies spearheaded the downward trend. Broadcaster Televisa dropped 6.8 percent and industry rival TV Azteca lost 6.5 percent. Friday marked the last official day for companies to publish their second quarter results, as the index closed down 0.4 percent to 5,900.44. In spite of posting sizable profits, Televisa dropped 5.9 percent and TV Azteca ended slightly up with 1.7 percent. A sharp rise greeted Monday as local traders were buoyed by rises in U.S markets.
The index rose 3.5 percent to 6,103.88. Cemex shares rose 6.4 percent and retailer Walmex's did so by 6 percent. On Tuesday, the index fell 1.5 percent to 6,014.68 as losses in the influential telecommunications stocks impacted the market. Wireless company America Movil fell 3.1 percent and competitor Iusacell did so by 12.2 percent. Wednesday brought a 0.1 percent gain to 6,021.84 thanks to a late rally in the Dow Jones and the country's inextricable economic ties to the U.S. markets. Telmex shares rose 1.4 percent and Walmex stocks did so by 1.7 percent.
In Argentina, the MerVal index dropped 0.7 percent to 361.62 points last Thursday, as after three sessions of losses in a row, energy company Perez Companc closed 3.3 percent higher and its subsidiary Transportadora de Gas del Sur, TGS, rose 6.4 percent. Friday brought a 1.6 percent drop to 355.85 as traders chose to save their earnings from recent days rather than buy stocks. Consequently, market giants Perez Companc, its food subsidiary Molinos Rio de la Plata and the financial group Galicia all dropped.
Monday was uneventful as the index closed virtually unchanged at 355.83 with prices mixed, registering gains in Galicia and Banco Frances and losses in Perez Companc and Renault Argentina. On Tuesday, MerVal closed 0.85 percent higher at 358.89 as Molinos fell by nearly 2 percent after its parent company announced that it would sell some of its assets. The MerVal remained unchanged at 359.32 points on Wednesday, with TGS gaining 4.2 percent and telecommunications company Telecom going up by 3.1 percent.
Last Thursday, Chile's IPSA index of the top 40 stocks closed down 0.7 percent at 80.89 points due to the international investors' generalized anxiety over regional instability. Biggest losers were companies with operations in Argentina and Brazil, such as electricity companies Enersis with a 2.9 percent fall, and its controller Endesa Espana with a 1.4 percent drop.
News Friday on the U.S. Congress' eventual granting of the Trade Promotion Authority to President George W. Bush raised both the local hopes for a future U.S.-Chile free trade agreement as well the index, which ended 1.9 percent higher at 82.44 points.
On Monday, the index continued its rise, experiencing a 2.9 percent upsurge to 84.72 points. Tuesday saw a further 2.8 percent gain at 87.05 points. News of Endesa Espana executives stating that they would give financial support to Enersis in case of liquidity problems made the latter's shares soar 9.5 percent. Wednesday brought a 0.91 percent gain to 87.87. In spite of the IMF cutting its 2002 growth projection for Chile from 3 percent to 2.6 percent, the Santiago Stock Exchange rose spearheaded by the positive mid-year results of electricity giant Endesa. Endesa Chile stock rose 1.3 percent, buoyed by its report of a $52.4 million profit in the year's first half. Its results also benefited its subsidiary Enersis, which rose 3.73 percent.
In Venezuela, the IBC index ended Thursday 4.5 percent lower at 6,728 points, then recovered 2.4 percent to 6,890 Friday. Monday saw a new index raise of 2.5 percent, up at 7,064 points, followed by an uneventful Tuesday, when the IBC dropped 0.2 percent to 7,050. The positive trend continued Wednesday as the IBC ended 1.2 percent up at 7,134.