Latin American stocks were down this week dragged by the losing streak of the Dow Jones Industrial Average and concerns about the future of interest rates in the United States.
In spite of Argentina's economic rebound, the administration of President Nestor Kirchner remains concerned about inflation and the still-depressed purchasing power of Argentineans.
The country's national statistics institute stated Wednesday that annual inflation in 2004 reached 6.1 percent, below the 7 percent to 10.5 percent target set by the central bank. Nonetheless, consumer prices rose by .8 percent in December compared to the previous month, marking the largest monthly increase since April.
This prompted Kirchner to issue a call to business leaders to keep prices stable in 2005, adding that the government would do what it needs to do so that prices don't climb."
Argentina's economic and financial stability has granted the authorities more ease to concentrate on its protracted debt swap process. The ministry of economy confirmed Wednesday that it would officially present its offer to pay some 25 cents per defaulted dollar on January 12. The formal process will start, however, two days later.
The debt swap operation, which was already approved by the SEC last week, was likewise given the go-ahead on Monday by Italian stock-market regulator Consob. Italy is one of the largest owners of Argentina's approximate $100 billion in defaulted debt bonds. Nearly 450,000 Italian investors claim ownership of some 15 percent of Argentina's debt.
After peaking at an all-time historical high of 1,389 points on December 29, Argentina's Merval stock index lost 84 points in five sessions of consecutive losses, closing on Wednesday at 1,305.
Although the Brazilian stock exchange opened the year on a downward trend, the country's economy remains on solid footing, having posted an all-time record trade surplus of $33.6 billion in 2004. Brazilian exports reached $96 billion last year while imports amounted to $62.8 billion, the ministry of development and foreign trade announced Monday. Only in December, Brazil had a trade surplus of $3.5 billion.
The Brazilian economy grew 5 percent last year after an expansion of less than 1 percent in 2003. According to a central bank survey among financial institutions in the country, Brazil's gross domestic product (GDP) should grow by 3.5 percent this year.
Brazilian exports are expected to grow between 10 percent and 15 percent in 2005, spearheaded as in the previous year by domestically produced commodities such as soy and sugar. The exports growth, however, will be significantly smaller that the 32 percent increase registered in 2004 in comparison to the previous year.
"This is all possible because the Brazilian people in 2002 had the courage to bet on change for Brazil," the country's President Luiz Inacio Lula da Silva said in a televised speech on Sunday.
On the corporate front, the Minneapolis-based Bemis Co., the largest producer of plastic packaging for food in the Americas, acquired on Wednesday Brazil's packaging company Dixie Toga for $250 million. Bemis purchased a 64.4 percent stake of Dixie Toga in what marks its second acquisition of a Latin American company in nine months. Only in may, Bemis had bought the packaging assets of Monterrey-based Cyda.
After a previous week of record-breaking highs, Brazil's Bovespa stock index lost 1,470 points this week to end at 24,691.
TV Azteca, Mexico's second-largest broadcaster, is in the middle of an imbroglio as the Securities and Exchange Commission (SEC) filed a civil lawsuit Tuesday charging the company of not informing shareholders of an operation that pocketed its chairman Ricardo Salinas Plieno some $109 million in 2003.
The SEC can claim jurisdiction over the case given the fact that company shares are listed on the New York Stock Exhange. In addition, TV Azteca's controller Azteca Holdings has U.S. debt that is publicly traded.
Salinas has vehemently fired back claiming that is its "absurd" to "try to impose U.S. regulations in an extraterritorial manner."
The SEC is seeking to bar Salinas from managing companies in the U.S. For nearly a year, the SEC had been monitoring a series of transactions between Canadian company Nortel Networks Corp., Azteca Holdings' telephone unit Unefon, and Mexican company Codisco, which was jointly controlled by Salinas and Unefon chairman Moises Saba.
According to the lawsuit, Codisco acquired in 2003 some $325 million in debt owed by Unefon at a discounted price of $107 million. Unefon later paid the debt in full, netting Salinas and business partner Saba a $218 million profit.
For the week, Mexico's IPC stock index lost 440 points this week to end at 12,591.
Chile's central bank announced Wednesday that the country's index of economic activity (Imacec) grew by an impressive 7.5 percent in November compared to the same month last year.
The Imacec covers nearly 90 percent of economic activity in the country, surveying 25 of its mayor industries.
Finance Minister Nicolas Eyzaguirre stated that the Chilean economy boasted a 5.7 percent GDP growth in the first eleven months of the year and that it would likely surpass the 6 percent mark. Chile's GDP grew 6.8 percent during the third quarter compared to the same period last year.
Exports likewise reached $28.7 billion during the first eleven months of 2004, a 50 percent growth from last year.
Chile's IPSA stock index lost 17 points to close at 1,780.
Venezuela's slow economic recovery remains on solid footing as inflation in 2004 reached a three year low due to stringent government price controls. Inflation reached 19.2 percent in 2004 compared to 27.1 percent the previous year.
The administration of President Hugo Chavez implemented price controls as well as placed restrictions on currency trading in early 2003. The measure sought to redress the economic damage sustained by the country after a two-month national strike.
Dollar sales in Venezuela reached $14.8 billion at the official exchange rate in 2004 compared to a mere $4.6 billion last year. The increased trading helped strengthen Venezuela's national currency, the Bolivar and likewise reinvigorate the economy.
For the week, Venezuela's IBC stock index gained 269 points to close at 29,997.
In Colombia, inflation rose 0.3 percent in December, reaching an annual 5.5 percent rate. The figure fell right in the middle of the central bank's targeted range of 5 percent to 6 percent and likewise signaled a slowdown from the 6.5 percent inflationary rate registered in 2003.
Colombia's present inflation rates are expected to put an end to speculation about the central bank raising its lending rate from its present 6.5 percent. Only in December, the bank had cut the overnight lending rate by a quarter percentage point.
Colombia's IGBC stock index lost 75 points to close at 4,288.
