Latin American markets roundup

SANTIAGO, Chile, March 17 (UPI) -- Stocks in Latin America were mostly up this week with Brazil appearing to stave off potential inflation risks and Argentina posting strong economic growth figures.

Fresh from last week's stand off with the International Monetary Fund (IMF) over a loan payment for $3.1 billion, the Argentinean government once again delivered Wednesday a stringent rebuke to the multilateral agency. The latest rift in the conflicted relationship between the South American nation and the IMF was triggered by calls from fund official Anne Krueger for Argentina to raise its primary surplus target of 3 percent of the country's GDP for the next two years.

Argentinean Cabinet Chief Alberto Fernandez stated that Krueger had "a very weird view of things which has a scarce relation to reality" and stressed that Argentina would "definitely" refuse to raise its GDP surplus target.

Argentina and the IMF agreed in September to establish the aforementioned surplus target for 2004 as part of an overall financial aid accord. Goals for subsequent years, however, were not discussed and can be the potential subject of heated controversy when both parties meet in June for talks on the progress of Argentina's aid plan.

Fernandez also criticized a previous statement by Krueger that Argentina should have abandoned its convertibility scheme pegging the local currency to the dollar years before the collapse of the nation's economy in December 2001. Krueger claimed that she could not respond for the IMF's policies and the fact that the fund kept lending money to Argentina even when signs of the collapse became more evident, given how she was not part of the Washington-based agency.

Fernandez stated that by that same token, Argentinean President Nestor Kirchner was not part of the government that defaulted on a debt of nearly $100 billion but nonetheless was waging "a very hard fight" in his negotiations with the IMF.

In spite of the polemics, Argentina's economy seems to recover at a strong pace as the country's national statistics agency revised Wednesday its GDP growth figure upward to an 8.7 percent expansion in 2003. The revised yearly result was more than the 8.4 percent preliminary estimate released in February as well as the stiff 10.9 percent contraction that Argentina's GDP experienced in 2002.

For the week, Argentina's Merval stock index gained 14 points to close Wednesday at 1254.

Brazil's central bank made a slight cut Wednesday to its benchmark interest rate from 16.5 percent to 16.25 percent, reaching its lowest level in nearly three years. The decision to cut the interest rate for the first time in what goes of the year owed to "recent indications" of waning inflationary risks according to a statement released by the bank after its monthly meeting.

Concerns over inflation had led the authorities to maintain the interest rate in what goes of 2004 after seven consecutive monthly cuts last year amounting to a 10 percent reduction.

Brazilian president Luiz Inacio Lula da Silva met Tuesday in Rio de Janeiro with Argentinean counterpart Nestor Kirchner to discuss a common strategy to deal with the IMF as well as strengthen economic ties in the region.

Brazil and Argentina want the IMF to modify its accounting provisions to allow developing nations to increase investment in infrastructure. The two nations issued a call for the fund to discount infrastructure investments from their budget surplus goals. The measure would allow both countries to soften the economic impact of the economic austerity measures being implemented under IMF guidance.

Brazil's corporate front saw Wednesday the official confirmation by the country's largest air carriers that potential merger plans between both companies have been called off. Airline companies Varig and TAM had been considering a merger since early 2003 as Varig faced serious prospects of bankruptcy. Debt-ridden Varig nonetheless saw its business slowly pick up last year buoyed by an improving economy.

For the week, Brazil's Bovespa stock index gained 230 points to close at 21,900.

In Mexico, the government is considering to launch a case against the United States before the World Trade Organization (WTO) following an ongoing dispute between both countries over telecommunications regulations. A WTO panel ruled last week that Mexico has not implemented cost-based rates for phone calls coming from the U.S.

Mexico, which has until June to appeal, is studying whether to request a WTO dispute panel to look into issues such as the growing number of U.S. calls entering the country and making use of Mexican networks without paying the mandatory rates.

On the corporate side, shares in local company Cemex, the world's third largest cement producer, were on the rise following its announcement Tuesday that its cement volumes in both the United States and Mexico would grow by 6 percent during the year's first quarter. Cemex stocks rose .69 percent on Wednesday. In addition, Cemex is expecting to earn some $535 million during the same period.

State-owned oil company Pemex stated Wednesday that it plans to raise between $7 billion and $8 billion in financing for this year, both in the domestic market and abroad. The announcement follows Mexican President Vicente Fox's claim that Pemex would not be privatized. Fox's words were made on the occasion of the 66th anniversary of Pemex's expropriation by the Mexican government as he issued a call for a reform to grant the company greater autonomy. The government takes more than 60 percent of Pemex's revenues in taxes.

For the week, Mexico's IPC index lost 40 points to close at 9,959.

Meanwhile, the Chilean economy continues to ride high amid the record-high prices that its premium commodity, copper, is garnering in the international markets. Copper, which makes up for almost 40 percent of Chile's exports has as of late is registered its highest price in the London Metal Exchange in more than eight years.

State-owned copper company Codelco stated Wednesday that it would invest some $5.8 billion between 2004 and 2009. Codelco is expecting to triple this year the $600 million in profits it made during 2003.

The mining industry has managed to grab the forefront of Chilean news due to a growing debate over the implementation of a royalty tax to mining companies operating in the country. Congressmen from the government coalition led by socialist President Ricardo Lagos are preparing a bill to tax the extraction of non-renewable mining resources amid the uproar of local mining executives. The proposed bill is set to be forwarded to the Chilean Congress in incoming weeks.

For the week, Chile's IPSA stock index lost 38 points to end at 1,475.

In Venezuela, the central bank reacquired Wednesday some $38.5 million in certificates of deposit due by the end of March and early April. The operation sought to buoy financial liquidity, which according to analysts will be affected Thursday as banks and investors are expected to pay some $1.6 billion in mixed-currency bonds issued by the government.

The bonds, which had a dollar-denominated percentage, were a total success among local investors as they seek to send more money out of the country. Venezuela has been under stiff currency controls during the last year as the government of President Hugo Chavez decided to curtail free convertibility of the local currency, the bolivar, to the U.S. dollar. The exchange controls halted five years of capital flight, spurred by the growing animosity between the Chavez administration and the local business community.

For the week, Venezuela's IBC stock index gained 38 points to close at 27,724.

Colombia's economy officially started the year on a positive note as industrial production grew 3.7 percent in January, according to a survey released Wednesday by the National Association of Industrialists (ANDI). The report was the first diagnose on the Colombian economy in 2004, a year in which the country's GDP is expected to grow by 4 percent compared to last year's 3.6 percent GDP expansion. Industrial sales similarly grew by 6.5 percent in January compared to the same period in 2003.

Although the ANDI surveys tend to differ from official government statistics, the report confirmed the dynamic trend of growing production and internal demand showcased by the Colombian economy by the end of last year. The government National Statistics Department is expected to release its own figures by March 23.

For the week, Colombia's IGBC index gained 20 points to close at 3,110.