SAO PAULO, April 4 (UPI) -- Stocks were mixed across Latin America in abbreviated holiday trading this week as Argentina continued to drag while its economy gasps for life. Meanwhile, the soap opera that is the country's political and economic reality plays on.
Wednesday saw the arrest of Former Economy Minister Domingo Cavallo, who was deified when he was credited with turning the country's fortunes around in the early 1990s, then demonized when he was forced to resign with then-President Fernando de la Rua in December as bloody riots reigned.
Cavallo was arrested after being questioned for an hour by a local judge as part of an investigation into illegal arms sales to Croatia and Ecuador in the early 1990s. Last year, ex-president Carlos Menem, under whom Cavallo served as economy minister, was placed under house arrest for about six months for the same scandal. Menem later was freed upon Supreme Court order.
Cavallo's supporters and his lawyer say the arrest lacks merit and came about for political reasons.
While the news, perhaps, has no direct bearing on the markets, it simply adds more instability to a nation that has teetered on the edge of oblivion since chaos reigned in December. For more than three years before that, Argentina simply was scampering about the edges of economic destruction, wallowing about in recession.
Through it all, Latin American investors, despite reassurances on many fronts there will be no contagion if Argentina tumbles, have been and remain understandably edgy that each new development will spook foreign cash out of the region's emerging economies.
Spreading even more sunshine on the continent, Tuesday brought the news that Telecom Argentina, one of the country's largest companies and its No. 2 phone company, would suspend principal payments on its $3.2 billion debt. The company's downfall marks the largest corporate victim yet as the plummeting peso, floated in January, continues to pummel firms.
Markets, meanwhile, tried to chug along through the glut of Argentine news, with most enjoying the needed rest over the long holiday weekend. In Brazil, the Bovespa index was mixed as state-run oil giant Petrobras first benefited from rising oil prices in the face of Mideast strife, then fell a bit as worries about inflation spread. Also dragging is the delay in renewing the CPMF financial transactions tax, as the government stands to lose significant tax income with the law's delay.
Last Thursday, the Bovespa closed at 13,254.5, a drop of 1.3 percent as Argentina's woes worried many. The market was closed for Good Friday. On Monday, the index jumped 1.6 percent to 13,467.3 as investors snapped up bargain issues. Petrobras gained 2.2 percent, buoyed by rising crude prices. On Tuesday, the Bovespa softened 1.65 percent, closing at 13,245 as the rising oil prices fueled concern of inflation and how, among other things, that will affect future interest rate cuts. Wednesday brought a loss of 1.21 percent to 13,084.81 as long-distance phone company Embratel fell 4.49 percent.
In Buenos Aires, where the circus always remains in town, though as from Monday so does a negotiating team from the IMF, Argentine investors are searching for any signs of life for an aid package from the Fund. The MerVal stock index was closed Thursday, Friday and Monday for the Easter holiday, with officials using any excuse to halt trading, particularly on the foreign exchange, where the peso dipped dangerously before recovering somewhat last week.
On Tuesday, the MerVal finished 0.23 percent lower at 435. The index continued its trend of rising or falling inversely to the peso, with investors sinking cash into blue chips when the currency slides. The peso firmed on the day. Wednesday saw the MerVal fall 0.9 percent to 431.4 as investors sold off Telecom Argentina after news of its default. The company's stock lost nearly 8 percent.
In Mexico, the IPC was mixed as it tracked Wall Street and Nasdaq. The index was shuttered on Thursday and Friday for the holidays, then rose 0.14 percent to 7,371.89 on Monday. Heavyweight phone company Telmex rose 0.4 percent while Wal-Mart de Mexico finished 0.8 percent up. Tuesday brought a 0.75 percent drop to 7,316.69 as telecom and media issues were hurt by a nasty day for the Nasdaq. Broadcaster Televisa lost 2.36 percent and cellular company America Movil shed 0.91 percent. On Wednesday the index had its biggest one-day loss in six months, as the IPC closed 1.7 percent down at 7,191.94. The market was spooked as the government said it was cutting spending by $1.1 billion because of low tax revenue and lower earnings from oil sales.
In Chile, the IPSA index was mixed as Argentina weighed. Last Thursday, the IPSA creeped up 0.39 percent to 98.35 as some bargain hunting was seen in utility companies hurt recently by exposure in Argentina. The market was closed on Friday. Monday saw a drop to 97.31 as industrial group Empresas Copec fell 2.61 percent. On Tuesday, the IPSA ended down at 96.35 as Argentina hurt the index, with Telefonica CTC Chile losing 1.4 percent. Wednesday saw a close of 96.89 for the index.
In Venezuela, the IBC index was closed last Thursday and Friday. On Monday, the index ended at 6,875.19, a jump of about 45 points. On Tuesday, the index rose again, gaining to 6,926.34 as rising crude prices helped. On Wednesday, the index dropped to 6,900.5 as Nacional Telefonos de Venezuela lost 1.4 percent.
