Latin American markets roundup

<a href=www.upi.com>URL By Bradley Brooks UPI Business Correspondent From the Business & Economics Desk Published 3/27/2003 7:00 AM

RIO DE JANEIRO, Brazil, March 27 (UPI) -- Latin American stock markets fared reasonably well during this volatile week that saw military action begin in Iraq.

Indexes across the region, like those around the globe, tracked the daily news out of the Middle East.

But signs of vulnerability to a prolonged war in Iraq did emerge in markets across Latin America, with analysts saying that the short- and medium-term scenario will very much depend upon how quickly the allied forces get a grip on Iraq.

"Right now they're just trading on par with other stock exchanges, based on the flow of the news of the war," said Roger Oey, an analyst with BBV Corretora in Sao Paulo, about Brazilian equities.

"But, certainly, let's say we have a conclusion to this conflict soon, the stocks, like those around the world, would react positively."

Brazil -- Latin America's largest economy -- is looking to make strong gains not only should war end soon in Iraq, but because of stocks that analysts say are still highly discounted from fears of the country defaulting.

"Brazil is a unique case. All the stocks were pricing in not only the risk of a war, but also that the government would introduce policies that would lead to inflation, high interest rates, and more a social-benefits driven policy," Oey said.

"But now the government ... is promising to push through strong (economic and legal) reforms. In terms of economics, Brazil is too discounted for the present scenario."

Currencies across the region are faring quite well, fueling further investor optimism.

Argentina's peso rose to an 11-month high Wednesday, as analysts said exporters earning in dollars bought up the local currency.

The peso rose 1.36 percent to 2.89 to the dollar. The peso has gained more than 15 percent since the beginning of the year.

Brazil's currency -- the real -- has shone of late, despite a drop of 0.42 percent Wednesday to 3.38 to the dollar.

But the decline in Brazil is somewhat worrying for investors, as analysts blamed it on the notion of a longer war in Iraq, which would send oil prices up and spur inflation in the country.

Additionally, all the countries in the region are extremely vulnerable to dampened emerging-market investors' appetite for pumping cash into Latin America.

One soft spot for Brazil this week has been labor relations.

On Wednesday, metalworkers began a planned strike in Sao Paulo, the biggest labor walkout since President Luiz Inacio Lula da Silva took office on Jan. 1.

The workers are seeking higher pay and are organized by one of Brazil's biggest unions, Forca Sindical. Wednesday's action affected 40 factories and included some 23,000 workers.

Union organizers say 280,000 workers might eventually strike. They are demanding pay raises of 10 percent, saying inflation has risen too fast for wages to keep up.

As for the markets, Brazil's Bovespa stock index climbed 1.4 percent to 11,158 last Thursday, as investors looking for the war in Iraq to quickly end pushed the index to its highest level in two months. Aircraft manufacturer Embraer gained 3.8 percent, while state-run oil company Petrobras added 1.9 percent.

On Friday the index rose 2 percent to 11,377, as investors were bullish on the progress of the war in Iraq. Long-distance company Embratel gained 6.6 percent, while Embraer added another 6.1 percent.

Monday brought a steep loss on Wall Street, which sent Latin America down with it.

The Bovespsa lost 2.8 percent to 11,052. Investors were suddenly faced with a war in Iraq that might drag on longer than hoped. Embraer plunged 7.2 percent, while Embratel lost 5.4 percent.

The Bovespa gained 1.6 percent to 11,232 Tuesday as investors gained confidence that allied troops were making solid progress. Telemar gained 1.8 percent while Petrobras added 1.9 percent. Embraer, however, dropped 4 percent after revising down its forecast on jet deliveries. Swiss International Airlines told Embraer early Tuesday that it was halving an order for 60 jets.

Wednesday brought a loss of 0.23 percent to 11,206. Utility Eletropaulo lost 2.24 percent, Telesp Celular shed 3.39 percent in heavy trade, and Petrobras lost 1.15 percent. Investors were weighed by President George W. Bush's reiteration that the war in Iraq was going to be a protracted affair.

In Mexico, the IPC index finished last Thursday up 0.5 percent to 6,048 in thin trade. Investors held out hopes for a short war in Iraq. Wal-Mart de Mexico, or Walmex, rose 3.3 percent, while cellphone giant America Movil lost 1.2 percent.

Markets were closed on Friday for a holiday.

Monday brought a loss of 2.1 percent to 5,924 as the index followed Wall Street down. Worries on Iraq weighed. Fixed-line phone company Telmex lost 1.7 percent, while America Movil shed 2.7 percent. Walmex lost 1.2 percent.

The IPC rose 0.2 percent Tuesday to 5,938 as trade was quiet and all eyes were on Iraq. Walmex gained 1.6 percent.

On Wednesday the IPC gained 0.24 percent to 5,952. Mobile phone operator Iusacell gained 14.9 percent, Walmex rose 2.49 percent, and industrial group Alfa added 1.17 percent.

In Argentina, the Merval stock index gained 1.7 percent to end at 574.2. Grupo Financiero Galicia -- which controls the country's largest private bank -- added 3.3 percent.

Friday brought a gain of 1.9 percent to 585.4. The banking sector fared well as the government appeared open to helping bail out banks hit hard by the one-year banking freeze. Banco Frances added 6.3 percent and Grupo Galicia was up another 5.5 percent.

Monday saw the Merval following the region down, with the index falling 2.55 percent to 569.7. Banco Galicia lost 3.78 percent and Banco Frances dropped 1.63 percent as the government backed off slightly from its bail-out talk.

The Merval gained 0.81 percent to 574.2 Tuesday as banks rose. Banco Frances added 2.9 percent while Grupo Galicia gained 3.9 percent. Steelmaker Acindar added 3.4 percent.

On Wednesday the Merval lost 1.02 percent to 568.4. Acindar lost 3.28 percent, Banco Santander fell 4.76 percent, and Banco Frances lost 1 percent.

Chile's IPSA index added 0.6 percent to 1,023 on Thursday. Banco Santander gained 3 percent. The index closed absolutely flat on Friday, with investors sidelined by the action in Iraq.

Monday saw a loss of 1.1 percent to 1,012 for the IPSA. Telecom CTC Chile lost 1.7 percent. Tuesday brought a loss to 1,011 in quiet trade. Banco Santander lost 2.3 percent.

The IPSA lost 0.33 percent to 1,008 Wednesday as investors worried about the outcome of the war in Iraq.

The IBC index in Venezuela ended Thursday down 0.2 percent at 8,442. On Friday the index gained 0.7 percent to 8,504. Nacional Telefonos de Venezuela, or CANTV, which comprises 40 percent of the index, added 0.4 percent.

On Monday the IBC lost 0.7 percent to 8,446 as CANTV lost 2 percent. Tuesday saw a loss of 0.2 percent to 8,423 for the index. On Wednesday the index rose slightly to 8,429.