Latin American stock markets roundup


NEW YORK, March 31 (UPI) -- Stocks across Latin America were mostly up this week, as Brazil's political woes seemed to settle and Mexico's local index hit record highs.

Brazil's Finance Minister Antonio Palocci gave a strong defense of the ruling Workers' Party government's austere economic line, which immediately cheered investors in that country.


Giving testimony on Tuesday before Brazil's Congress, Palocci said his main concerns were how to increase gross domestic product to produce sustainable growth.

"We need to eliminate a pattern of advances and retreats that interrupted private sector investment and weakened the government's capacity to spend on social programs," Palocci said.

The government of Brazilian President Luiz Inacio Lula da Silva has been reeling of late, coming off a campaign finance scandal and slower growth than had been promised.


All of which has prompted government critics to call for a quick about-face on Lula's economic policies, which are derided by his leftist base as being the embodiment of neo-liberal economic dogma.

Analysts say that the recent campaign finance scandal left Lula somewhat vulnerable, and investors have worried that the president may begin to backtrack on his orthodox economic path.

High interest rates in the country have been one of the critics' main targets, with voices on both the left and right complaining that the rates are choking off any chance of quick growth in the country.

But Palocci, who has consistently defended the high rates, rejected calls for quick cuts, citing worries of rising prices.

"There is no example of countries with chronic inflation that showed sustained growth," he said.

On Wednesday Brazil's Central Bank released its quarterly inflation report, forecasting the IPCA inflation index to his 5.2 percent this year and 4.2 percent in 2005.

Those forecasts are lower than market expectations, which are at 6 percent for this year and 5 percent for the next.

Despite that, the projections are higher than they were when the Central Bank released its last report, which means that it is unlikely to make cuts in the interest rate - now at 16.25 percent - anytime soon.


Brazil's Bovespa stock index ended Wednesday at 22,142, up 1,157 points for the week.

Argentine officials had a little cold water splashed on their debt restructuring efforts Wednesday when the International Monetary Fund's Anne Krueger said the country's leaders lacked the conviction for true reform.

Krueger, the IMF's acting managing director, said she wants to see the IMF's demanded reforms take hold and help Argentina regain economic stability. But she doubts this might take place unless more political will is discovered.

"I would be more confident about the outcome if Argentina showed greater conviction in the program to which it is committed," she said while speaking at a economic conference in Washington.

"I would, in all candor, be happier if the government had felt able to do more in order to reduce the program's vulnerability to shock."

On a brighter note, Argentina's trade surplus grew in February on the back of exports. The surplus hit $1.04 billion, as opposed to the market forecast of $758 million.

Argentine officials -- like many leaders in emerging markets -- are counting on increases in exports to spark economic turnaround. In 2003, the country's exports grew 14 percent.

Argentina's Merval index ended the week at 1,240, down 38 points.


In Mexico, officials said Wednesday they expect economic growth this year to hit 3.5 percent. Earlier forecasts by the central bank had growth pegged at 3 percent, and that was the figure used to estimate the federal budget.

"The outlook for this year is certainly better than last year, or the year before, but as we've said it's still not enough," said Bank of Mexico Governor Guillermo Ortiz.

Last year, GDP grew 1.3 percent, while the number was 0.9 percent in 2002.

Mexico's IPC index has hit record highs all week, and Wednesday was no exception, as the index closed at 10,518, up 356 points from last week.

Lower inflation readings and interest rates have sparked the buying in Mexican equities.

Also buoying investors was positive business activity data in the United States, as well as general optimism on the direction Mexico's economy is heading.

Chile's Economy Minister Jorge Rodriguez ruled out this week any chance of power rationing in the country, despite rationing of key Argentine supplies for the sector.

Chilean officials said that Argentina will start rationing its natural gas exports to the country beginning Thursday. That will quickly raise power costs for Chilean consumers.


Argentina is attempting to avoid a energy crisis in its own country as demand has picked up there with the economic revival. Argentina's hydroelectric energy plants are below capacity because of low rainfalls there.

"The Argentine government's decision to cut natural gas consumption ahead of the imminent crisis in that market ... has caused a natural and comprehensible worry in our country," Rodriguez said.

Chilean energy companies will use liquefied natural gas and diesel fuel to replace the lost Argentine gas exports, he said.

Industrial production in Chile rose 8 percent in February as compared to the same month the previous year, the government said this week.

Industrial sales were also up nicely, rising 6 percent.

Product groups leading the way were machinery, which rose 65 percent, rubber goods, up 37 percent and transportation materials, which climbed 26.5 percent.

The IPSA stock index in Chile ended Wednesday at 1,459, up 41 points for the week.

Venezuela's Oil Minister Rafael Ramirez said Wednesday that the country will investigate tax evasion by multinational firms.

Additionally, Ramirez told reporters that the government will begin to change tax laws dealing with oil companies to help boost collection.


"They almost don't pay taxes," said Ramirez. "The system was designed to avoid taxes ... we are going to reverse a series of laws that have been damaging the country."

In 2001, Venezuela changed its tax laws dealing with oil companies, lifting royalty taxes to 30 percent from 16.7 percent, but at the same time cutting income taxes for the companies to 50 percent from 67 percent.

The Venezuelan government has been sounding off of late on taxes, trying to ratchet up pressure on foreign oil firms to pay more.

For the week, Venezuela's IBC index gained 37 points to end at 26,580.

Colombia's stock market has been one of the best performers in the world this year, as President Alvaro Uribe's hardline stance with leftist rebels has cheered investors.

The Colombian stock exchange is up more than 45 percent in dollar terms this year. Gains in the index have been across the board.

In addition to Uribe's tough stance, falling inflation and interest rates are helping buoy the market and greatly increase trading activity. Volumes on the exchange are now hitting $7 million a day, as compared to just $500,000 a day one year ago.


While primarily a domestic concern, foreign investment in the country's stocks was up 7 percent at the beginning of the year, to $246 million.

Colombia's IGBC stock index gained 153 points this week to end at 3,321.

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