Latin American market roundup

SANTIAGO, Chile, Aug. 13 (UPI) -- Equities in Latin America's largest markets were up this week as local indexes tracked Wall Street movements and domestic news boosted investor's spirits.

In Brazil, President Luis Inacio Lula da Silva is once again mired in parliamentary negotiations over the approval of an ambitious pension reform plan aimed at curtailing the system's drain on the public budget.

Even as the lower house approved the reform's main provisions last week, parliamentary disputes over a number of proposed amendments have bogged down the bill's eventual approval. Lula's own governing Workers Party (PT) has proven unreliable in supporting the bill as some of its more left-inclined elements have refused to back up a measure that seeks to raise retirement ages and cut benefits for future workers. The bill should cut government expenditures by as much as $18.7 billion over 20 years.

Meanwhile, stock market traders are awaiting a pivotal decision by the Federal Appeals Court over which one of Brazil's inflation rate indexes will determine the country's telephone rates. Scheduled for a review on Wednesday, the court decision was nonetheless postponed.

Courts had previously decided that the IPCA inflation index would be used as a reference for phone rates, although investors are hoping that they change their mind and restore the previously used IGP-DI index, which tends to set higher inflationary rates.

Stock trading helped Wednesday to prop up Brazil's currency, the real, after a wave of speculative attacks from investors holding central bank debt swap contracts maturing Thursday. Nearly three-fourths of the $1.3 billion swaps are set to expire that date.

Nonetheless, the real managed to overturn losses in previous sessions thanks to the news that Bradesco, the country's third-largest bank, successfully completed a $400 million securitization deal.

For the week, Brazil's Bovespa stock index gained 794 points to close Wednesday at 13,682.

In Mexico, stocks were mixed as investors continued tracking Wall Street's movements.

Mexican President Vicente Fox's standing among international investors was potentially threatened Wednesday after news surfaced of the crippling debt problems of the country's largest state.

Home to nearly 14 million people as well as headquarters for important U.S. companies, Mexico state requested both the government and its creditors to renegotiate a whooping $3 billion of debt. Among the state's main creditors figure Citigroup subsidiary Banamex and Spain's BBVA subsidiary Bancomer.

The state's inability to meet its debt commitments undermine President Fox's previous attempts to narrow the fiscal deficit as well as the positive investment-grade ratings the country had recently garnered due to the successful implementation of this policy. According to analysts, the government will in all likelihood be forced to bail out the state due to its significant influence in the country's global finances. Nonetheless, Fox is risking to set a negative precedent among other indebted states.

Mexico's IPC index was up 138 points for the week to end Wednesday at 7,368.

In Argentina, the country's Vice President Daniel Scioli confirmed Wednesday a controversial rate hike for privatized utility companies.

Public service firms have been persistently demanding that the government introduce temporary rate increases as a way to alleviate the losses derived from the Argentine peso's devaluation and the authorities' decision to change the companies' dollar contracts into peso contracts. The firms' debts, however, have remained dollar-denominated, further hurting their finances.

The move was widely interpreted by analysts as a nod to repeated calls by the International Monetary Fund (IMF) to reassure foreign investors operating in the country that the Argentine government is willing to uphold its contractual obligations.

Argentina and the IMF are once again undergoing a series of talks aimed at securing a new three-year financial help plan for the beleaguered country. As the multilateral organization has made clear its desire for Argentina to implement a rate hike as well as a number of structural reforms, Congress is presently discussing the renegotiation of public service contracts.

Although presidential spokesman Miguel Nunez later went on to say that the rate hike had not a definite date and that there was much to be discussed about the implementation of the measure, Scioli's statement was confirmed by other high-ranking government officials.

According to cabinet chief Alberto Fernandez, there is no question as to whether the utility rates will be raised, but only as to how will the measure be enacted.

The authorities' mixed signals regarding the rate hike mostly owes to the fact that the measure will have a severe impact on lower-income Argentines. President Nestor Kirchner is accordingly trapped between enacting a potentially unpopular measure while intending to make good on his word to the numerous heads of government and foreign CEOs he has met as of late regarding the protection of the international investors' rights.

Argentina's Merval index lost 20 points this week to end Wednesday at 718.

Chile faced Wednesday a general strike called by the country's largest labor union. Organizers were protesting what they deem is the country's exploitative labor legislation and the fact that the socialist administration of President Ricardo Lagos does not make private companies respect the workers' rights.

The protest was the first of its kind in almost two decades as well as the largest strike since Chile returned to democracy in 1990. Sporadic violence ensued in the center of the capital city of Santiago, managing to disrupt the normal working of services.

Even though government authorities downplayed the effects of the strike, business organizations estimated that nearly 13 percent of private laborers did not show up for work.

Chile's stock markets were not disrupted, however, as the country's leading stock index closed Wednesday with a rise of more than 1 percent at 1,373 points, signaling a 50 point gain for the week.

In Venezuela, markets continued to move to the tune of its biggest stock, that of telephone company CANTV, which makes up 40 percent of the country's main stock index. Whereas the CANTV stock suffered losses last week, its recovery in the last few sessions marked a rebound for the country's stock market.

The Venezuelan economy, however, continues trying to make ends meet as the country's National Assembly approved Wednesday a $3 billion restructuring plan for its foreign debt.

Given how the country has not recovered from the severe impact of last year's massive strike and the consequent $7.5 billion in lost oil revenue, the Venezuelan parliament authorized the issuance of new debt bonds in dollars and euros for the coming months. Investors will be able to swap these for maturing Venezuelan bonds as the country faces $2 billion in debt payments by the end of 2003.

For the week, Venezuela's IBC index lost 601 points to end at 14,373.

In Colombia, the government of President Alvaro Uribe is facing tough negotiations in Congress as it tries to pass its budget bill for 2004. Both the Colombian Congress' lower and upper houses sent the budget plan back to government on Wednesday, stating that its expansive nature could not be financed.

Uribe is seeking to increase the budget by 15 percent in 2004, a measure that would yield a fiscal deficit of 2.5 percent of the country's GDP. This would contravene the IMF's recommended deficit of 2.1 percent and is accordingly being questioned in Congress. Final voting on the budget must take place by October 20.

Colombia's IGBC index lost eight points to end at 2,117 Wednesday.