Latin American Markets roundup

By BRADLEY BROOKS, UPI Correspondent  |  Oct. 25, 2001 at 9:57 AM
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SANTIAGO, Chile, Oct. 25 (UPI) -- Markets across Latin America have tiptoed through a mixed week as investors awaited news about political and economic reshuffling in beleaguered Argentina, changes expected to be announced by Friday at the latest.

But a long-rumored exit for Economy Minister Domingo Cavallo will not happen, according to a spokesman for Argentine President Fernando de la Rua.

Cavallo was on the second day of a surprise trip to New York Wednesday, meeting with bankers and investors, apparently in an attempt to drum up support for a planned debt swap that would give the country some breathing room on its payments. According to Argentine newspapers, he also met Tuesday with U.S. Federal Reserve officials, which fueled rumors of an announcement that the country will dollarize.

Government spokesman Juan Pablo Baylac said Wednesday that "dollarization is a topic that is not on the (government's) agenda." He also noted that Cavallo "has clearly said there won't be dollarization, and that we're sticking with our 'zero deficit' plan."

In the midst of this political storm, Argentina's MerVal index seems poised to respond positively to news -- it seems just about any news -- regarding economic policy changes. But with no word, the index has remained mostly flat the past five days.

The index closed down 0.21 percent last Thursday at 251.06, only to gain 2.11 points the next day as investors tried to read the tea leaves of scattered comments from government officials regarding slashes in the amount of federal tax transfers to provincial governments in an attempt to save capital.

Monday was flat for the MerVal, with a 0.45-point loss to 252.72 as investors held out for government words of encouragement that Argentina would avoid defaulting on its $132 billion public debt or having to devalue its currency.

Tuesday brought a loss of 5.72 points to 247 as investors' patience simply seemed to wear thin, not a hard task as Latin America's third-largest economy enters its fourth year of recession

Wednesday, the MerVal shed 0.16 percent to close at 246.61 after being up to 249.74 earlier in the day. The index was dragged down by the energy concern Perez Companc, which makes up nearly 30 percent of the MerVal Index, which closed 1.8 percent lower at 1.09 pesos.

Brazil, with its strong trade ties to Argentina, is arguably the foreign market affected by the country's potential meltdown, and the relative volatility of the Bovespa index reflects this.

An across the board rally for the Bovespa on Friday led to a close 3.1 percent higher at 11,331.5 points, that after a 2.45 percent drop Thursday to 10,994.96.

Gains on Wall Street and hopes of news from Argentina pushed the Bovespa to a late rally Monday, gaining 3.25 percent to 11,699.9. The country's biggest telephone company, Telemar, led the day gaining 3.4 percent to 28.01 reais.

The Bovespa shed .74 percent to 11,613 points Tuesday. Rumors circulated Tuesday about a privatization in the electricity sector, but after those rumors were denied by government officials, Sao Paulo state's power utility, Cesp, lost 20.16 percent to end at 11.8 reais.

The index fell Wednesday, dropping 145.7 points to 11,467.74 mostly on worries about Argentina and some profit taking following overall gains of about 15 percent in the last 20 days. The country's largest private bank, Banco Bradesco, fell 1.1 percent to 10.98 reais. The index has lost about 24 percent of its value this year.

Mexico's IPC index fell slightly last Thursday to 5,529.75 points, despite a good earnings report from Telefonos de Mexico.

A good report from Wal-mart de Mexico (Walmex) bolstered the index Friday, when it closed 1.05 percent higher at 5,588.23. Shares of Walmex gained 2.97 percent to close at 23.6 pesos after the retailer said its operating profits rose by 26 percent from the same time last year.

The IPC was firm Monday, closing at 5,571.27, a gain of .57 percent.

The IPC jumped Wednesday, gaining 2.5 percent to 5,708.28 as market leaders produced upbeat third-quarter results. Wireless company America Movil and the media group TV Azteca both released healthy results. Movil reported revenues up 51 percent from the same period last year.

The index, sheltered from the fallout in Argentina, is down about 1.5 percent since the beginning of the year, unlike the double-digit declines seen elsewhere in Latin America.

Chile's IPSA index rose 0.02 percent Thursday to 101.7. and dropped 0.25 percent last Friday to close at 101.45.

Monday saw gains on the IPSA of 1.28 percent to 102.75 points. The index was up after strong gains by companies with American Depository Receipts and hopes of good news from Argentina.

Tuesday, the IPSA again rose strongly, rising 1.21 percent to 103.96, mostly buoyed by gains on Wall Street and analysts' expectations that the second half of 2002 will bring economic relief.

The IPSA was again higher Wednesday, closing up 0.35 percent at 104.31. Government officials expressed optimism Wednesday that the country is prepared and planning, should Argentina default. Finance Minister Nicolas Eyzaguirre said that Chile "has a level of reserves, compared with its deficit and payments on foreign debt, which are extremely comfortable."

In Peru, the Lima General Index advanced 1.2 percent to 1,159.18. The index had been mostly flat over the past five days, with Tuesday bringing some gains to 1,145.63.

Venezuelan shares fell Wednesday, dropping 0.4 percent to 6,728.25 after a close of 6,757.24 on Tuesday. The index had two losing days last Thursday and Friday.

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