RIO DE JANEIRO, Jan. 8 (UPI) -- Stocks were up across Latin America this week, with Brazil continuing to surge and Argentina again hitting record highs in a holiday-shortened week of trading.
Brazilian equities started the new year off with a few sharp jumps, as investors continued to ride the wave of optimism engulfing the country.
The steel sector drove the country's leading stock index upward, as demand in China leads investors to believe Brazilian companies will benefit handily in the coming year. Also coming into play is a general feeling of economic turnaround worldwide - and thus physical expansion that will require Brazilian steel.
On the trade front, Brazil said this week that its trade surplus for 2003 stood at $24.8 billion, its largest surplus since record taking began in 1980. According to the government, exports totaled just over $73 billion while imports came in at $48.25 billion.
Those numbers - while distorted somewhat because of paltry consumer demand within Brazil for imports - further bolstered investor confidence that Brazil is gaining in macroeconomic stability everyday.
For 2004, economists are forecasting that Brazil's trade surplus will be smaller, somewhere around the $20 billion mark, as better economic times should mean an increase in demand for imports within the country.
Looking to keep the export-driven recovery rolling, Brazil's central bank this week unveiled an ambitious plan to buy dollars and eventually free itself from some of the constraints of multilateral lending organizations such as the International Monetary Fund.
The initial step involves the central bank's aggressively buying dollars in a bid to stem a rebound in its own currency, the real.
Central Bank President Henrique Meirelles said that purchases will be made daily on the spot market and that the dollars will be deposited into international reserves, bolstering the country in the event of future economic shock.
Brazil's central bank hasn't bought dollars in a regular manner since 1999.
In maintaining its own currency around the 3-to-1 mark with the dollar, the policy will also keep Brazilian exports cheap and competitive.
Some analysts say they foresee speculators attacking Brazil's currency once there is a sense of the level where the central bank is trying to keep the real steady. But central bank officials repeatedly said there was no upper or lower limit to the real - words that will likely be tested soon.
In 2003, Brazil's currency jumped 22 percent in value after shedding 35 percent in 2002. While that reversal was needed, exporters in the country have begun to warn that any further valuation of the currency is going to hurt them.
As for the bolstering of federal reserves, many analysts say it is good form for Brazil to begin socking away dollars while times are good - a behavior that has historically been absent in Latin American countries.
Reserves now total $17.3 billion, down from the early-1998 level of $55.4 billion, before the country devalued its currency.
Central bank officials are additionally hoping that by keeping the boon in exports going and strengthening international reserves, it will win looser fiscal targets from the IMF in connection with its loan program, and eventually get off the IMF dole all together.
For the week, Brazil's Bovespa stock index gained 89 points to end Wednesday at 22,320.
Meanwhile, in Argentina, record highs for the local stock market continued this week - though equities gave back late in the week - with investors continuing to be surprised by the speed at which the country's economy appears to be recovering. While there are plenty of challenges ahead - such as sorting out the country's debt restructuring - little, it seems, is stopping the equity rally.
On Wednesday, the chief of the president's cabinet told reporters that the government is confident it will pass an IMF review on the country's most recent loan accord, tentatively scheduled to take place later this month.
"We're confident that Argentina has already over-complied with the goals set," cabinet chief Alberto Fernandez told the local newspaper La Nacion.
The issue has been a tense one for Argentine officials, after the IMF abruptly cancelled its review of Argentina last month, along with a $330 million loan payment that was to follow. At the time, IMF officials cited a number of "open issues" that had to be taken care of, namely debt restructuring.
Economy Minister Roberto Lavagna wrote on the opinion page of La Nacion Wednesday that the country's debt restructuring talks were going along smoothly.
Lavagna brushed off criticism that Argentina should've started negotiating with private creditors earlier in the wake of its December 2001 default, saying that the country had to straighten out its relationship with multilateral organizations first.
For the week, Argentina's Merval stock index gained 91 points to end at 1,163.
Turning to Mexico, stocks were mostly up on the potential of further economic rebound in the United States, where Mexico sends some 85 percent of its exports.
But the big news for Mexico - and its president - came this week as President Bush proposed sweeping changes to U.S. immigration laws, which could give legal status to millions of Mexican workers in the United States.
If the U.S. Congress passes even a portion of the Bush proposals, it would be the first big policy win for Mexican President Vicente Fox since he took office in 2000.
Fox came to office riding high on hopes that his close personal relationship with President Bush would usher in the immigration changes earlier. But the terrorist attacks of Sept. 11 crushed any hopes Fox had at getting the immigration changes he wanted, which opened him up to serious criticism on the home front.
Since then, Fox's major proposals - namely a package of economic reforms - have stalled in an opposition-led congress. But Fox and his top cabinet officials are hoping that a win on immigration could give them more support on domestic issues.
For the week, Mexico's IPC index added 303 points to close at 9,098.
There was more political scuffling in Venezuela this week, as President Hugo Chavez threatened to take over the central bank after the institution declined to make some $1 billion available for agriculture loans.
"If the central bank has to be taken over, it will be taken over," Chavez said during a televised speech this week. Later, government officials sought to downplay the statement.
Chavez remains in political trouble, as opposition groups continue to seek a referendum vote on his rule this year.
The country's IBC index ended up 1,439 points at 23,643.
It was a quiet week of trading in Chile.
The government said consumer prices continued to fall at the end of 2003, as the country's inflation hit its lowest level in nearly 70 years.
Annual inflation for the year on December hit 1.1 percent, with consumer prices falling 0.3 percent in December. All of which has led Chile's interest rate to hit a record low of 2.25 percent.
For the week, Chile's IPSA index lost 23 points to close Wednesday at 1,462.
Colombian officials said this week that their trade deficit hit $65.3 million after the first 10 months of 2003. That compared to a trade surplus of $126 million for the first 10 months of 2002.
Imports for the 10-month period of 2003 rose 9.6 percent, officials said.
For the week, Colombia's IGBC index climbed 121 points to close at 2,455.
