Latin American stock markets roundup

Stock markets were mostly up across Latin America this week, as Brazil's economy looks to expand more than expected, though inter-regional trade is running into roadblocks.

Brazil's central bank told reporters this week that its survey of top analysts from 100 firms indicates that gross domestic product will likely jump nicely this year.

A series of solid economic numbers reported in the past weeks has economists forecasting that Brazil's GDP will expand 4.23 percent this year, as compared to earlier projections of 4 percent.

At the same time, however, those economists polled think inflation will rise as well. The survey showed that prices are forecast to increase 7.29 percent this year, up from the earlier number of 7.25 percent.

Brazil's government forecast for inflation remains at 5.5 percent for the year.

Analysts say that a hotter economy coupled with high worldwide oil prices are largely responsible for the expected increase in inflation.

It was last week that Brazil reported a higher than expected growth figure for the second quarter, as the economy expanded 5.7 percent in that period, surpassing all expectations.

In addition to growth and inflation, economists surveyed by the central bank also expect the country's trade surplus to jump to $31 billion, up from an earlier forecast of $30.5 billion.

Despite the expected rise in inflation, Brazil received a boost of confidence from the International Monetary Fund's top official this week.

IMF Managing Director Rodrigo Rato told reporters during a visit to Brazil that the government has taken necessary steps to insulate the country's economy from outside shocks.

"President Luiz Inacio Lula da Silva's government has maintained coherent macroeconomic policies and formulated an ambitions agenda of structural reforms," Rato said. "The courageous policies are bearing fruit."

Those are great words for the Lula government, which faced extreme economic turbulence when the leftist president took power nearly two years ago.

"Brazil's vulnerability was reduced and the growing capacity of resistance of the economy helped protect the country from the recent turbulence in world markets," Rato went on to say.

Antonio Palocci, Brazil's finance minister, told reporters after meeting with Rato and other IMF officials that the government had yet to decide whether to extend its current $14 billion credit agreement with the Fund. That agreement ends in March.

Lula and other government officials have long hinted that they would like to have autonomy from the IMF. But Palocci did mention to reporters the idea of creating an emergency credit line at the Fund that developing nations could tap if needed.

Brazil's Bovespa stock index ended Wednesday at 22,534, up 21 points on the week.

Argentina's President Nestor Kirchner dampened hopes for more liberalized trade among South American nations this week.

Kirchner told reporters Wednesday that his country won't free up the auto trade with neighboring Brazil in 2006, the year an earlier agreement had set to do so. Nestor said there were too many imbalances between the two country's auto industries.

"We're not here to watch absolutely negative asymmetries continue to deepen," Kirchner said while visiting a Volkswagen plant in Argentina.

The member countries of Mercosur, the South American trade bloc comprised of Brazil, Argentina, Uruguay and Paraguay, had agreed in 2000 for full free trade in automobiles by 2006.

But, at that time, it was expected that Argentina's auto production would be closer to that of Brazil's, which at present it is not.

Brazilian automakers have about a 60 percent share of Argentina's own domestic market. Argentine producers have just a 3 percent slice of Brazil's.

Kirchner said that while he wants to see the auto industry develop in "our dear sister country Brazil," he first wanted to see Argentine producers make some advances. Opening up the country to a flood of Brazilian cars wouldn't help with that, he said.

For the week, Argentina's Merval stock index ended up 24 points at 987.

Mexican President Vicente Fox said this week that his 2005 budget will seek to lower the deficit and cut administrative costs.

Fox, who has been trying to push through economic reforms with little success since he took office in 2000, said the budget seeks to lower the fiscal deficit to 0.1 percent of the GDP, down from 0.3 percent this year.

Fox is looking to have the budget balanced by 2006.

The budget - working under the assumption of oil prices between $22 and $23 a barrel -- also targeted inflation at 3 percent.

Fox's plan has already seen its share of critics in Congress. Many opposition leaders are calling for a larger budget deficit so that spending can be increased.

Critics also point out that the government's estimated price for a barrel of oil -- Mexico's main revenue maker is the state-run oil company Pemex -- is too low. A higher estimate would allow for more spending, they say.

Mexican law dictates that nearly 40 percent of excess profits at Pemex go back to the company for investment. Another large portion goes directly to state governments for the building of infrastructure, though governors complain they aren't seeing the money.

Mexico's IPC index ended the week at 10,538, up 208 points.

Chile's central bank surprised the market this week by increasing the country's key interest rate to 2 percent from its historic low of 1.75 percent.

Bank officials said a recent increase in inflation -- blamed on high oil prices -- was the key determinant in making the decision to raise the rate.

The bank said in a statement that it "has considered it appropriate to moderately reduce the prevalent, marked monetary stimulus, which is less necessary thanks to the favorable development shown by economic activity and spending."

In other news, Chile said it had a trade surplus of $802 million in August, far outpacing the $170.5 million seen in the same month the year previous.

Chile's IPSA stock index lost 21 points this week to close at 1,615.

The Moody's rating agency upgraded Venezuela's country ceiling for foreign currency bonds this week. That reflects increasing confidence in the government's ability to service its debt on time.

The bonds -- previously rated at Caa1 -- have been upgraded to B2 by Moody's.

On the political front, Venezuela's main group of former oil workers who strongly oppose the rule of President Hugo Chavez said they are going to reorganize their leadership and renew their campaign against him.

It was in August that Chavez won an unprecedented nationwide referendum on his rule.

The group -- called Petroleum People -- was created in 2002 during a country-wide strike to protest Chavez's rule.

During that strike, Chavez fired 19,000 members of the state-run oil company's staff.

It isn't clear what direction the opposition group of oil workers will take, or exactly what it is they can do to protest Chavez at this point.

PdVSA -- the state-run oil company -- claims that it is back at its pre-strike production level of more than 3 million barrels a day. Outside analysts say the company more likely producing about 2.6 million barrels a day. The country is the world's fifth-largest oil producer.

For the week, Venezuela's IBC stock index added 1,779 points to close at 29,138.

Colombian officials received a boost from a World Bank report this week that stated the country made some of the world's greatest improvements in improving its business climate last year.

The country made strides in "starting new businesses, in enforcing contracts through the courts, and in increasing the flexibility of employment regulation," the report stated.

The World Bank report indicated that Colombia had seen new business registrations increase 16 percent from 2003 to 2004. The time it took to start a new business averaged 43 days in 2004, down from the 60 days it took the previous year.

The accolades reflect well on the extremely popular President Alvaro Uribe, whose biggest economic achievement could well be increasing the pressure on the country's leftist rebels and their four-decade civil war.

The perceived victories against the rebels has sparked more investments in the country, analysts said.

The country's IGBC stock index gained 236 points this week to end at 3,374.