Stocks were down across Latin America this week, as profit taking after weeks of nice gains hit all the indexes.
Despite that, investment flows into Latin America have been gaining in the past weeks, as investors are moving away from dollar-based securities and heading to countries where the local currency is appreciating against the greenback.
But analysts warn that the rises seen in stock markets across the region may be over-inflated and that rising prices for stocks may soon begin to push out investors.
Still, the inflows are good news for most of the emerging-market economies, which had seen generally weak investment for the first ten months of the year.
According to a report this week from Boston-based EmergingPortfolio.com, emerging markets worldwide saw net inflows of $1.3 billion in November.
The report found that international and global funds had increased the weighting of their emerging-market holdings from 6 percent at the beginning of the year to 7.5 percent now.
"The falling dollar and out performance of foreign developed and emerging-markets equities this year is pulling a huge amount of investor capital into global international equity funds," Brad Durham, a managing director at EmergingPortfolio.com, said in the report.
Emerging markets, according to Morgan Stanley, are up 18 percent this year, far outpacing the 6.7 percent gain in U.S. equities.
The biggest reasons for those gains are lower interest rates and strong economic growth. - Latin America's GDP is on pace for a 5 percent increase this year. The region has especially been buoyed by high commodity prices.
In Brazil, there was some bad news despite the higher investment flows.
Inflation rose for a second month in a row in November, as fuel prices and utility rates were up.
The monthly inflation rose 0.69 percent as compared to the same month the previous year. Inflation for October was 0.44 percent and in September it was 0.33 percent.
The latest numbers bring Brazil's 12-month inflation up to 7.2 percent, the fastest yearly increase since January.
Analysts say all this means the central bank is likely to raise interest rates next week in an effort to slow consumer demand and halt the rise in prices. Raising the rates will limit consumer borrowing and corporate spending.
Interest rates -- now at 17.25 percent -- are expected to increase to 17.75 percent.
Despite the news on inflation, enthusiasm for equities was evident this week, as the Bovespa, the country's main stock index, hit all-time highs before giving back all its gains in profit taking.
On Wednesday, the index closed at 24,968, a loss of 267 points on the week.
In Argentina, officials say that they are not considering a delay in the planned date for the long-awaited debt swap on paper the country defaulted on in 2001.
Such a postponement "is not in consideration," Economy Ministry spokesman Armando Torres told reporters this week. "The Economy Ministry will not let the media set the agenda."
The government has set Jan. 17 as the date the debt will be swapped. But speculation that the swap will be delayed again has been rampant in the local media.
Reports say another delay will come because of the government's problems in working out the logistics of the swap.
Originally, the government had said it would swap the debt on Nov. 29, but that had to be delayed after its original contract with the Bank of New York to conduct the swap fell through.
Last week, there were rumors that the problems were going to force Economy Minister Roberto Lavagna to resign, but President Nestor Kirchner has in the past few days strongly stood by the minister.
The two leading candidates to conduct the swap are JP Morgan Chase and, again, the Bank of New York.
What appears to be causing the rumors of another delay are word that the Bank of New York is demanding more money than the government is willing to spend, and that JP Morgan Chase is demanding more time than the government wants to allow for the swap to be completed.
For the week, Argentina's Merval stock index lost 16 points to end at 1,205.
Morgan Stanley this week cut Mexican equities to underweight in its model portfolio for the region.
"We believe the Mexican market is approaching overdone territory, more so than other Latin American markets," Mario Epelbaum, the investment bank's Latin American equity strategist, wrote in the report.
The bank noted that the Mexican market is up 35 percent this year, but that a slowdown is on the way.
Mexico, more so than any other Latin American nation, is tied to the economy of the United States.
For that reason, the weakening dollar that is spurring investment in other parts of the region could hurt Mexico more than it helps, as it could signal a slowdown in the U.S. economy.
About 90 percent of Mexico's exports go to the United States.
In its report, Morgan Stanley lowered Mexico to a 32.2 percent weighting in its Latin American model, as opposed to 33.2 percent before.
That extra 1 percent went to Chile, while Brazil continues to be the bank's leader, with a 58.8 percent weighting.
For the week, Mexico's IPC stock index lost 120 points to close at 12,114.
Chile's central bank is expected to raise interest rates later Thursday, as inflation in the country has been creeping toward the bank's target of 3 percent.
The market forecast calls for a 0.25 percent increase, which would bring the rate to 2.5 percent.
Last week, Central Bank President Vittorio Corbo revised upward the country's GDP for this year to 6 percent from 5.5 percent. Because of that heating economy, he suggested that the bank will need to "continue normalizing, gradually, interest rates."
The Central Bank last increased rates in September, which was the first hike in more than four years.
In November, inflation was up 0.3 percent from the previous month, which gave it a 2.5 percent accumulation for the year.
Chile's IPSA stock index shed 22 points to end at 1,787.
Venezuelan President Hugo Chavez named a new Finance Minister this week, which analysts say should smooth out some political ruffles in the government.
Nelson Merentes is taking over the post from Tobias Nobrega, and it is likely the Finance Ministry will now be more supportive of Chavez's centralized, state-led planning of the economy.
No explanation was given for the replacement of Nobrega and it isn't clear if he is leaving the government entirely or not.
The move is sure to dampen spirits on Wall Street, as Nobrega was seen as a moderating voice in the Chavez government. Under his watch, Nobrega vastly improved the country's debt profile and soothed ties with the United States.
Regardless, analysts aren't expecting any major shifts in economic policy from Venezuela, as Chavez was calling the shots while Nobrega was at the ministry in any case.
For the week, Venezuela's IBC stock index lost 133 points to close at 29,480.
An International Monetary Fund team was in Colombia this week to study the economic policies of the nation.
The Finance Ministry said the IMF team will return again in January for a review of terms to a $2.1 billion two-year stand-by loan that expires in April, and to begin talks for a package that would cover the next two years.
Colombia is expected to see growth of 4 percent this year.
The country's IGBC stock index closed out the week at 4,126, down 174 points.
