SANTIAGO, Chile, July 29 (UPI) -- It was a mixed week for Latin American equities, as markets followed Wall Street's mood swings and both Brazil and Argentina wait for the International Monetary Fund (IMF) to review their respective loan agreements.
Argentina continues on the lookout for the IMF to complete the third review of a three-year, $13.3 billion loan agreement signed last year. The IMF has nonetheless chosen to take more time in approving what would amount to an estimated $728 million loan payment to Argentina. The delay has in turn forced the Argentinean central bank to draw money from its own reserves to pay numerous commitments with multinational lenders.
Under the terms of the IMF deal, Argentina's economic program is to be reviewed by the multilateral agency in accordance to a number of recommended structural reforms. Although Argentina has made significant macroeconomic progress in bouncing back from its worst economic crisis two years ago, it is still lagging on what is one of the IMF's foremost concerns: that the administration of President Nestor Kirchner reach an agreement with foreign creditors to restructure some $100 billion in defaulted debt.
Kirchner has, however, remained defiant in the face of criticism from both domestic analysts and owners of defaulted bonds who are requesting that the IMF be more firm in securing compliance of its demands.
"I make mistakes like anybody else but I rapidly rectify them for the benefit of my countrymen," Kirchner stated Wednesday in a rebuke to his critics. Kirchner nonetheless acknowledged "the need for a good agreement with the International Monetary Fund."
In spite of its solid GDP growth, Argentina is still struggling to recover from its economic collapse in 2002 which led its economy to shrink 11 percent. On Tuesday, Economy Minister Roberto Lavagna announced a 9 percent reduction in the number of poor people in the country. The progress attained by Argentina in this area remains insufficient, however, as according to Lavagna nearly 46 percent of the population or 15.4 million Argentineans still live under the poverty line.
For the week, Argentina's Merval stock index lost 32 points to close Wednesday at 949.
In Brazil, a scandal involving former central bank Monetary Policy Director Luiz Augusto Candiota disrupted what was shaping out to be positive week for the country's economy.
Also on Tuesday, IMF officials commended the strong recovery experienced by the Brazilian economy this year. The officials formed part of a mission reviewing the third installment of a $14 billion standby loan agreement. On the balances is a $1.3 billion installment of the loan that the IMF is expected to disburse in the short term.
The Brazilian authorities are aiming for a GDP growth to at least match initial projections of 3.5 percent in 2004. To this effect, Brazil's central bank has implemented a series of interest-rate cuts to reinvigorate the economy. Brazil grew 1.6 percent during the first quarter after a lackluster 2003, when the economy contracted .2 percent.
The optimistic mood was halted Wednesday as Candiota resigned from his post arguing that allegations that he evaded taxes would tarnish the central bank's reputation. Candiota's resignation came four days after Brazilian magazine Istoe ran an expose claiming that the economist's finances were under investigation by federal authorities after failing to report over $1 million in transactions in New York's CBC bank.
Candiota was promptly replaced by Rodrigo Azevedo, an economist at Credit Suisse First Boston in Sao Paulo.
The turmoil, however, did not upset market activity as both stocks and currency rose Wednesday following an analyst consensus that Candiota's replacement would not alter the central bank's monetary policies.
Brazil's Bovespa stock index gained 358 points for the week closing Wednesday at 22,168.
Optimism runs high among Mexican economic authorities as the Bank of Mexico rose Wednesday its growth forecast for the country's gross domestic product (GDP). Whereas the bank had stated before that the Mexican economy would expand within a range of 3.5 percent to 4 percent in 2004, it now forecasted an expansion between 3.75 percent and 4.25 percent.
The assessment by Mexico's central bank comes after Finance Ministry raised its own GDP estimate to 4 percent in view of the country's high 3.7 percent growth during the year's first quarter.
Mexico's economy is expected to experience a substantial recovery after three years of virtual stagnation, culminating in 2003's meager growth of 1.3 percent.
Bank economist Manuel Ramos Francia stated during the presentation of the quarterly inflation report that Mexico was aiming for an annual inflation target of 3 percent. Nonetheless, Mexico's annual inflation at the end of the second quarter reached 4.3 percent.
Mexico's inflation goals are primarily threatened by the growth of China and the consequent pressure it exerts on commodities. Rising interest rates are likewise expected to weigh heavily on the country's inflationary policies.
Pressure on the domestic financial market has likewise been ameliorated by revenue from oil exports and the often-overlooked remittances from Mexicans living in the United States. Remittances to Mexico reached $7.8 billion during the first half of the year, a 25.9 percent increase compared to the same period in 2003. Mexicans residing in the U.S. poured a record-high $13.2 billion into Mexico's economy last year.
Mexico's IPC stock index gained 103 points for the week closing Wednesday at 10,090.
Chile continues mired in a debate over a controversial government plan to implement a royalty payment on mining activities in the country. Although the initiative was rejected by the Chamber of Deputies last week, the proposal is yet to be voted in the Senate.
Showing that the government is not willing to give up on the initiative, Finance Minister Nicolas Eyzaguirre stated Wednesday that he was willing to consider opposition suggestions to increase tax revenues from Chile's mining industry. Eyzaguirre responded this way to statements from rightist presidential candidate Joaquin Lavin claiming that there are other ways for the government to increase the contribution of multinational mining companies to Chile's overall tax structure.
The proposal aims to implement a 3 percent royalty payment on sales for metallic mining as well as a 1 percent royalty on sales for non-metallic mining.
Eyzaguirre likewise stated that the Chilean economy was poised to grow between 5 percent and 5.5 percent next year.The minister is confident that the economy will improve its performance from the projected 4.5 percent to 5.5 percent growth in 2004.
For the week, Chile's IPSA stock index gained just four points to close Wednesday at 1,506.
In Venezuela, complications with the voter registration process are threatening to delay a highly-anticipated August 15 recall vote to decide the continuity of President Hugo Chavez.
National Electoral Council Vice-president Ezequiel Zamora warned Wednesday that organizational problems are edging the electoral process ever "close to a delay." Zamora urged the authorities to speed up preparations amid denunciations from the opposition that numerous voters have had their assigned election centers changed without any explanation.
According to Venezuela's constitution, in order to secure Chavez' removal, the opposition needs to get a number of votes equal or superior to the 3.7 million votes obtained by the Venezuelan head of state in the presidential election of 2000.
Venezuela's IBC stock index gained 167 points for the week to close Wednesday at 25,522.
Industrial output continues to spur the growth of Colombia's economy. According to figures released Tuesday by the National Department of Statistics (Dane) Colombian industrial production grew 4 percent during the first five months of the year, bolstered by a high international demand for steel and metal products.
Colombia's authorities are expecting industrial growth to reach 4.5 percent in 2004, capitalizing on the preferential access to the U.S. market enjoyed by the country's exports as laid out by the Andean Trade Preference and Drug Eradication Act.
The Colombian economy is similarly expected to grow 4 percent in 2004.
The country's economic authorities are confident in staying on track as evidenced Wednesday by Finance Minister Alberto Carrasquilla's announcement of a budget proposal for 2005. The Colombian government is seeking Congressional approval of a $34.7 billion budget for next year, an 18 percent increase compared to the budget in 2004.
For the week, Colombia's IGBC stock index lost 100 points to close Wednesday at 2,923.
