Latin American markets roundup

www.upi.com By Bradley Brooks UPI Business Correspondent From the Business & Economics Desk Published 3/6/2003 8:08 AM

RIO DE JANEIRO, Brazil, March 6 (UPI) -- Markets were mixed across Latin America this week as bargain hunters moved in to buy up cheap shares but external worries of war in the Mideast weighed on investors.

In Mexico, the Latin American country most integrated with the U.S. economy, the peso hit a record low on Wednesday.

Analysts say that fear over potential military action in Iraq is punishing Mexico's market the most in the region.

Mexico's peso lost nearly 1 percent Wednesday to end at 11.23 to the dollar. The currency has shed more than 7 percent this year, and one-fifth of its value since last April.

Markets across the region were spooked Wednesday by diplomatic fireworks as France, Russia and Germany vowed to block a United Nations resolution authorizing use of force in Iraq, and the United States responded that it was determined to disarm Saddam Hussein.

The main concerns, as they are around the globe, are how far a war in Iraq would pump up oil prices, and whether the risk aversion of investors in a time of war will drain foreign cash out of Latin America's emerging markets.

A domestic storm hit Argentina on Wednesday as the supreme court there ruled against the government in its conversion of dollar-denominated banking accounts into pesos.

The San Luis province brought a lawsuit against state-run Banco de la Nacion after the province's accounts -- like every other account in Argentina -- were converted from dollars to pesos.

Depositors have been seeking reversal of the decree, as accounts were converted at 1.4 pesos per dollar. The market price of the peso is hovering around 3.2 to the dollar.

Analysts expect the banking sector to suffer mightily if Wednesday's ruling sparks more such lawsuits. Most analysts estimate lawsuits seeking a combined total of $10 billion or more from banks.

It's not clear how the bank ruling may affect Argentina's hard-fought debt-rollover agreement with the International Monetary Fund.

Fund officials are known to be in opposition to a ruling that would force banks to reconvert accounts.

The IMF didn't return inquiries from United Press International on Wednesday, and a fund spokesman refused comment on the matter at a news conference in Washington on Tuesday.

However, an IMF delegation visiting Argentina this week released a statement saying that Argentina's economic plans were "on track" and that it is likely to push ahead completion of the first review of the country's $6.78 billion debt-rollover agreement.

"The financial program supported by the fund is on track, and all end-January quantitative performance criteria were observed with comfortable margins," the IMF statement said.

In Brazil, where markets were shuttered for most of the trading week because of the raucous Carnival holiday, some modestly good news came in the form of a debt upgrade on Wednesday.

J.P. Morgan Chase & Co. said it was upping Brazilian debt to neutral from underweight. The investment bank said it was impressed with the commitment of President Luiz Inacio Lula da Silva to economic austerity.

As for the markets, Brazil's Bovespa stock index rose 1.3 percent last Thursday to 10,126, as investors took cues from Wall Street. Long-distance carrier Embratel rose 4.4 percent. Private bank Unibanco climbed 4.7 percent.

Investors sent the Bovespa up 1.3 percent to 10,280 ahead of the Carnival holiday. Optimism ruled the day, as Morgan Stanley upgraded the country's debt and the government announced a large primary budget surplus for January. Phone giant Telemar rose 2.1 percent.

Brazil's markets were closed Monday and Tuesday for Carnival.

The Bovespa, in a half-day of trading Wednesday, rose 0.24 percent to 10,305.5. The Bradesco bank gained nearly 2 percent, power company Eletrobras added 3.6 percent, while oil giant Petrobras fell 2.5 percent.

In Mexico, the IPC index ended last Thursday up 0.5 percent at 5,900 in light trade. Fixed-line phone company Telmex rose nearly 1 percent, while cement maker Cemex jumped more than 3 percent. On Friday, the index rose to 5,927, as mobile phone operator America Movil lifted the market by gaining 3.5 percent.

The IPC closed flat Monday at 5,926.7. Broadcaster Televisa gained 1.1 percent, while retailer Wal-Mart de Mexico lost 1.7 percent.

Heavy losses in New York on Tuesday drove the IPC down 0.3 percent to 5,911. America Movil lost 0.8 percent, while brewer Modelo lost nearly 1 percent.

Wednesday brought a slight gain to 5,914 for the IPC as investors were sidelined by Iraq woes. Modelo gained 1.26 percent, while the country's No. 2 mobile phone company Iusacell added 2.7 percent.

Argentina's Merval index dropped 1.2 percent to 578.9 on Thursday. Banking shares were hit, as a row grew between the sector and the government over reimbursement for last year's banking freeze. Grupo Financiero Galicia, which controls the nation's largest bank, shed 3.7 percent.

On Friday the index rose 2.57 percent to 593.8. Chemical company Indupa gained 12.5 percent after posting a healthy profit for 2002, sending the market up.

The Merval was flat Monday, ending at 593.9 in thin and rocky trade. Banco Frances lost 2.7 percent. Tuesday saw a gain of 0.44 percent to 596.6. Banco Galicia gained 2.8 percent as investors gained some confidence in the sector.

On Wednesday, the index fell 0.23 percent to 595.1. Galicia fell 3.35 percent, hit hard with the supreme court ruling on banking account conversions. Food group Molinos lost 2.85 percent.

Chile's IPSA index rose 0.9 percent to 1,007 Thursday. Brewer CCU gained 2 percent. On Friday, the index gained 0.8 percent to 1,015. Power generator Endesa gained 2 percent.

Monday brought a slight loss to 1,014 for the IPSA. CCU gained 1.4 percent, while telecom CTC Chile shed nearly 1 percent. On Tuesday, the index ended flat at 1,013. Electricity company Enersis -- which controls Endesa -- shed 2.5 percent.

Wednesday brought a flat close of 1,013 in uneventful trade.

The IBC index in Venezuela ticked up 0.1 percent to 8,157 Thursday. Friday brought a gain of 4.3 percent to 8,509 in light trading.

The market was closed Monday and Tuesday for the holiday, then lost 4.16 percent to 8,156 on Wednesday as Nacional Telefonos de Venezuela -- which represents 40 percent of the index -- lost 2.7 percent.