The region's largest economy -- Brazil -- had a particularly tumultuous week, with its currency dropping to historic lows as Lula da Silva, the leftist presidential candidate of the Workers' Party, maintained his commanding lead in opinion polls.
Lula, taking his fourth run at the presidency, makes investors uneasy with his past rhetoric of "renegotiating" Brazil's debt and of reversing privatizations.
Lula has toned down his talk during this year's campaign. But as his poll numbers remain high, he is beginning to grow bolder while talking tough about plans for the Free Trade Agreement of the Americas -- or, FTAA -- the Bush Administration's actions in Latin America and the regional reliance on the International Monetary Fund and its aid package.
"As it is being proposed by the United States, the FTAA is not an integration proposal, it is annexation politics and our country won't be enclosed," Lula said on Tuesday at a forum sponsored by the Estado de São Paulo newspaper.
In both the forum this week and while speaking with the Argentine press a week ago, Lula called on the Latin American nations, which make up the Mercosur trade bloc to circle the wagons, thus giving themselves a stronger position when it comes to FTAA talks with the U.S.
While the Mercosur -- which is made up of Brazil, Argentina, Uruguay and Paraguay -- certainly needs some work, using it as leverage against the U.S. in trade talks is a bit like taking a knife to a gun battle: you are unlikely to win.
Take the annual A.T. Kearney report on foreign direct investment -- which had Brazil falling from the No. 9 position to No. 13 as a destination for investment worldwide.
"Much to the disadvantage of Latin America, hopes for an FTAA agreement have weakened amidst the economic crisis in Argentina and investor concerns about the outlook for Brazil, leading some even to pronounce the Mercosur dead," the report stated.
Ouch. While Lula's idea of shoring up Mercosur is certainly worthwhile, exactly how he will transform the four beleaguered economies making up the bloc into a weapon of negotiation is yet to be seen. As are detailed plans of what he would do as president to lead Brazil from its economic mess, aside from his saying Tuesday that he will not keep the respected Central Bank President Arminio Fraga on should he be elected.
In Argentina, an outright battle is taking shape between government officials and the IMF. The country has been negotiating for the renewal of billions of dollars in aid since the Fund halted a loan package last December for Argentina's non-compliance on debt payments.
For months, President Eduardo Duhalde and his economic team have been striving to meet the Fund's demands for new aid. The IMF says it wants the repeal of laws it deems as unfairly harsh on the business community, it wants to see Argentina create a "sustainable" economic plan, which would include a means of saving the banking sector.
On Wednesday, Economy Minister Roberto Lavagna lashed out at the IMF, saying that signs of economic stabilization in Argentina "haven't registered" with the Fund, pointing to a peso that has settled at 3.6 against the dollar and reserves that have stopped bleeding.
Lavagna brushed off criticism of the Duhalde administration for not building political consensus amongst presidential candidates in regard to IMF demands for a deal. He said Duhalde won't seek the candidates' backing of a deal "if there isn't clarity as to what the agreement with the Fund will entail."
Lavagna -- who was traveling to Washington later Wednesday for the IMF's annual meeting -- pointed to neighboring Brazil -- which signed a $30 billion loan deal with the IMF in August -- and the economic troubles it is having in the face of presidential its elections.
"The IMF already committed the error of requesting a political agreement (with Brazil) before an aid accord existed with the organization," Lavagna said. "The candidates have said 'no' and the consequences are being seen in the market."
Lavagna said that if Argentina doesn't reach an agreement with the Fund, "it won't be the end of the world. We will maintain the calm and continue working, like society has."
As for the markets, Brazil's Bovespa index ended last Thursday down 1.4 percent at 9,372. Oil company Petrobras dropped 4.3 percent on worldwide volatility in the petroleum sector, while fixed-line phone giant Telemar lost 0.7 percent. On Friday the Bovespa rose 2.3 percent to 9,585 on rumors that Lula would fall in opinion polls due out over the weekend. Petrobras rose 2.6 percent, Telemar jumped 3.6 percent.
Monday brought the news that Lula rose in the polls, which promptly sent the Bovespa down 3.35 percent to 9,264, nearing three-year lows. Telemar dropped 4.53 percent. On Tuesday, the index lost 1.1 percent to 9,155, with election worries weighing. Bradesco bank lost 2.5 percent, as did Petrobras. Wednesday saw the index rising 0.87 percent to 9,227.69, with investors saying the steep drops in the previous two days made for a technical correction. Wireless operator Telesp rose 10.77 percent, while Petrobras fell 3.4 percent and Telemar ended flat.
Argentina's MerVal index lost 0.42 percent to 376.42 Thursday. Energy company Perez Companc lost more than 1 percent after it announced the sale of an agriculture business. Bargain hunters sent the index up 1.2 percent to 380.95 on Friday. Perez Companc gained 1.1 percent.
On Monday the MerVal fell 0.36 to 375.4 in light trade. Utility Central Puerto shed 3.65 percent. Tuesday brought a rise of 0.5 percent to 377.16 for the index. Steel maker Siderca gained 1.4 percent. On Wednesday, the MerVal rose 0.78 percent to 380.12. Steel company Acindar rose 1.93 percent while Perez Companc added 2.69 percent.
In Mexico, the IPC index fell 5.3 percent to 5,645 Thursday, with Wall Street's tumble weighing. Banking shares were hit, with Grupo Financiero Inbursa shedding 6.6 percent and Banorte dropping 5.8 percent. On Friday the index climbed 2.6 percent to 5,788.78 as bargain hunters and a lift in the U.S. buoyed the market. Broadcaster Televisa rose 3.3 percent.
Monday saw the IPC following U.S. shares downward, with the index dropping 0.8 percent to 5,741.73. War talk on Iraq and the woes in Brazil worried investors. Broadcaster TV Azteca dropped 4.6 percent as J.P. Morgan downgraded its stock.
The IPC lost 0.6 percent to 5,705.67 Tuesday, with phone company Telmex slipping 1.3 percent. Political unease hurt the market, with news that the government is prosecuting the ex-head of an oil workers' union for allegedly channeling funds from the state-run oil company Pemex into the campaign fund of the former ruling party. On Wednesday, the index rose 1.8 percent to 5,808.44. The industrial group Alfa rose 5.27 percent, wireless company America Movil added 1.8 percent and Telmex gained nearly 1 percent.
In Chile, markets were closed on Thursday for a holiday, then the IPSA index slid 2 percent to 81.66 in abbreviated trading Friday. Many traders took the day off to make a long holiday weekend.
The IPSA dropped 1.7 percent to 80.18 Monday. Bank Santander Chile lost 6.4 percent. On Tuesday the index lost 1.7 percent to 78.86, with Santander losing 2.5 percent and the telecommunications company Entel dropping 6.4 percent. Wednesday brought a gain of 1.03 percent to 79.67 for the index. Bottler Andina rose 1.68 percent while energy company Enersis added almost 3 percent.
Venezuela's IBC index lost 0.5 percent to 7,351 on Thursday. Friday saw the index closing flat at 7,347 in uneventful trade. Monday brought a loss of 1.7 percent to 7,222. On Tuesday, the index closed 1 percent up at 7,297. The IBC rose 0.95 percent Wednesday to 7,367.22.