Latin American stock markets roundup

By BRADLEY BROOKS  |  Nov. 4, 2004 at 11:33 AM
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Stocks across Latin America were mostly up this week, as investors seemed relieved at the speedy conclusion of the contentious U.S. presidential election.

The election of President Bush to a second term has a big impact on trade relations with Latin America.

Investors across the region watched the election closely, as its outcome has a decidedly strong effect on negotiations for the Free Trade Area of the Americas, the 34-nation free trade zone that was meant to be in place by January 2005.

Presidential contender John Kerry said during the campaign that he would shelve the FTAA, waiting to proceed on it until there were more studies undertaken on its effects.

John Danilovich, the U.S. Ambassador to Brazil, said Wednesday that the re-election of Bush means the trade talks have surpassed a big bottleneck, though it didn't necessarily mean the talks would be finalized any sooner than expected.

Instead, Democrats and Republicans will now be able to put more energy into closing the trade deal, though certainly not before the earlier self-imposed January deadline.

"We're not speeding up the process, but both parties will now be able to focus on outstanding items in the agenda," Danilovich told local Brazilian journalists Wednesday.

Brazil and the United States are currently serving as co-presidents of the FTAA talks. As Latin America's biggest economy, Brazil has tried to cast itself as a counterweight to U.S. economic hegemony, pushing to extract concessions from U.S. negotiators.

But with Bush firmly in place for the next four years, it is likely that all parties will simply try to reach an agreement -- albeit, a watered down one -- as soon as possible.

The main sticking points in the FTAA talks continue to be the heavy use of agricultural subsidies by the United States and the reticence by some Latin American nations to enact the intellectual property protection measures that the U.S. wants.

In local news, Brazilian officials reported Wednesday that October saw a $3.01 billion trade surplus, which brings the 12-month total surplus to $28.12 billion, a new record.

That 12-month figure represents a 38 percent jump in the year-on-year figures, as the orthodox economic policies of the government and strong world demand for commodities have buoyed exporters in the country.

Analysts are forecasting that Brazil's year-end surplus for 2004 should hit a record high of $33 billion, topping the last year's record high of $24.8 billion by 33 percent.

Imports during October also rose significantly, making the surplus smaller than it could have otherwise been. Imports during the month totaled $5.84 billion.

Brazil's Bovespa stock index closed Wednesday at 23,660, up 489 points on the week.

The Argentine government unveiled this week its latest debt restructuring plan, which analysts say is unlikely to get the 70 percent support from creditors that the International Monetary Fund is demanding.

But for now, officials are proceeding with the plan, in the hopes that enough investors will latch onto it to make it viable. The plan now must meet the approval of the U.S. Securities and Exchange Commission and after that with regulators in other countries where the debt-swap plan will be held.

Under the plan - which Argentina hopes to launch on Nov. 29 and conclude by mid-January - more than 150 different bonds issued in six currencies and under eight legal systems will be swapped into nine new bonds issued under four legal systems and currencies.

In terms of the bottom line, analysts pointed out that this latest offer hardly sweetens the last proposed deal made in June, which creditors loudly rejected.

Under the new plan, investors will get back about 25 cents on the dollar of their defaulted Argentine paper. The only new sweetener was Argentina agreeing to pay an additional $475 million in interest.

That could spell trouble for the country's relations with the IMF. Conventional wisdom is that there must be a creditor participation rate of at least 70 percent if the IMF is to consider the debt swap a success.

That would trigger the IMF to resume the lending it has withheld in its $13.3 billion loan agreement with Argentina.

For the week, Argentina's Merval stock index closed down 3 points at 1,286.

The head of the Mexico's government-run oil company resigned this week after a tumultuous four-year tenure.

Raul Munoz will be replaced as head of Pemex by Luis Ramirez, the company said earlier this week.

Munoz took the Pemex posting in 2000 after being named for the job by then newly elected President Vicente Fox. Munoz was one of several private sector businessmen tapped to head key government positions, which was seen as a good move after seven decades of rule by the PRI political party.

Local Mexican news reports point to scandals and a lack of support for Munoz among other government officials as his reasons for resigning.

In recent months, Munoz has come under fire for using his healthcare plan to pay for his wife's plastic surgery and for signing a contract with the oil-workers union that could cost Pemex $700 million in new benefits.

About 80 percent of Pemex's 1.9 million barrels a day in output heads to the United States.

Consumer confidence in Mexico dropped in October as compared to the same month the year previous. It was also down in comparison to September.

The national statistics agency said that confidence last month stood at 95.4, as compared to 95.8 in October 2003 and 96.8 in September.

That could mean trouble for makers of big-ticket items in Mexico, as consumers feel their personal economic situations are worsening despite being more optimistic on the general economic situation of Mexico.

Mexico's IPC stock index ended up 248 points on the week to close at 11,766.

Business confidence is down in Chile, according to a newly created index.

The IMCE business confidence index reported that there was a 2.46 percent drop in optimism in October, as compared to September.

Data from 586 companies in the industrial, mining, retail and construction sectors is used to compile the index.

The Central Bank said that the lower numbers in October could mostly be blamed on the industrial sector, which saw lower-than-expected demand for the month. Confidence was also down in the mining sector because of a dip in production.

For the week, Chile's IPSA index gained 31 points to end at 1,771.

Venezuela and Brazil signed an agreement this week to explore the possibilities of joint energy development programs.

It is the latest move for Venezuela as it tries to become South America's leader in energy development. The nation is the world's No. 5 exporter of oil. It also has the largest natural gas reserves in the Western Hemisphere.

Rafael Ramirez, Venezuela's oil minister, told reporters that the country is seeking a similar deal with Argentina.

Venezuelan President Hugo Chavez has often used his vast supply of oil to increase his political standing in the region and maintain sound diplomatic ties.

Paraguay, for instance, was told last week that Venezuela would sell it 18,000 barrels of oil a day under generous terms. Similar deals have been extended to the Dominican Republic and to Cuba.

The oil deals also help to prevent the political isolation of Chavez by the newly re-elected Bush administration, which has not had solid ties with the leftist leader.

Venezuela's IBC stock index ended at 30,057, up 850 points on the week.

Urban unemployment in Colombia fell to 14.9 percent in September, down from the 16.1 percent reading seen in the same month the year previous. September's number was also an improvement from the 15 percent reading in August.

The nationwide unemployment number was 12.5 percent in September, down 1.4 percent from the same month the year previous. Colombian officials, however, consider the urban unemployment rate as a better economic barometer.

Some analysts say that Colombia's unemployment rate is improving because many Colombians have simply given up on finding work, thus taking them out of the data pool from which the percentage is determined.

Despite this, employment in the industrial sector grew by 0.5 percent in the first eight months of 2004 as compared to numbers from the year earlier.

For the week, Colombia's IGBC stock index added 173 points to close at 3,878.

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