Adamant: Hardest metal

Mexico's Telmex, Cemex and Brazil's Embraer Fall: Latin Stocks

June 23 (Bloomberg) -- Mexico's benchmark stock index is heading toward its largest one-day drop in a month, following equity markets in the U.S., the buyer of almost 90 percent of the Latin American country's exports. Telefonos de Mexico SA, the country's biggest phone company, led declines.

The Mexico City-based Bolsa index fell 77.59, or 1.1 percent, to 7003.10 by 1:43 p.m. New York time, its fourth day of declines. Brazil's Bovespa index of the most-traded stocks on the Sao Paulo stock exchange fell 1.3 percent to 12,966.94, a fourth day of decline.

``Telmex is linked to the U.S. markets,'' said Gerardo Lozoya who manages $80 million in Latin America stocks for Investra Consultores in Monterrey, Mexico.

The Standard & Poor's 500 Index fell 15.58, or 1.6 percent, to 980.12, the third drop in four days. The Dow Jones Industrial Average declined 1.5 percent to 9064.92 and the Nasdaq Composite Index shed 2.1 percent, to 1609.73.

In other markets, stocks in Argentina, Chile and Peru fell, while in Venezuela they rose. Markets in Colombia are closed for the Corpus Christi holiday.

The following stocks are having significant gains or losses in Latin American markets today. Symbols are in parentheses after the company name. In Brazil the preferred share is usually the company's most-traded class of stock.

Mexico

Telmex (TELMEXL MM) fell 42 centavos, or 2.5 percent, to 16.47 pesos, its lowest level in two weeks.

Cemex SA (CEMEXCP MM), the world's third-largest cement maker, fell 88 centavos, or 1.9 percent, to 46.21 pesos. The company said last week its global sales in the second quarter likely rose 6.3 percent compared with the same period of last year though sales in the U.S. fell.

Grupo Iusacell SA (CELV MM), Mexico's third-largest cellular phone provider, surged 8 centavos, or 30 percent, to 36 centavos. The stock has more than doubled in the last four days. Analysts say some minority shareholders expect Ricardo Salinas Pliego, who bought the controlling stake in Iusacell held by Verizon Communications Inc. and Vodafone Group Plc, may negotiate a reduction on the company's $800 million debt. ``Isuacell's stock is 100 percent speculative,'' said Lozoya.

Grupo Mexico SA (GMEXICOB MM), the world's third biggest copper producer, fell 25 centavos, or 1.6 percent, to 15.15 pesos as the price of copper for three-month delivery fell $15, or 0.9 percent, to $1,690 a metric ton on the London Metal Exchange. The price of copper lost 1.7 percent in the last three days.

Grupo Modelo SA (GMODELOC MM), Mexico's largest beer maker, fell 9 centavos, or 0.4 percent, to 24.01 pesos. Reforma newspaper reported the company plans to build a $1.5 billion plant in western Colima state, and to spend $350 million to boost capacity at two existing plants.

Brazil

Eletropaulo Metropolitana SA (ELPL4 BS), Latin America's largest power distributor, fell 62 centavos, or 2.3 percent, to 26.19 reais. Gustavo Gattass, an analyst with UBS Warburg SA, cut his recommendation on the shares to reduce'' frombuy'' and lowered his target price for the stock to 30 reais from 45 reais.

Empresa Brasileira de Aeronautica SA (EMBR4 BS), the world's fourth-largest aircraft maker, fell 29 centavos, or 2.1 percent, to 13.61 reais, on reports that one of its clients, Swiss International Air Lines Ltd., may cut 28 percent of its intercontinental fleet as part of a plan to reduce costs.

Petroleo Brasileiro SA (PETR4 BS), the state-controlled oil company known as Petrobras, fell 85 centavos, or 1.7 percent, to 50.25 reais. The Rio de Janeiro-based company said it agreed to pay $59 million of Houston-based Halliburton Co.'s claims over delays in building offshore oil production platforms. Halliburton, the world's second-largest oilfield-services company, said last week second-quarter profit will plunge because of the delays, and that it's seeking $375 million in claims from Petrobras.

Tele Norte Leste Participacoes SA (TNLP4 BS), the country's largest telephone company, fell 53 centavos, or 1.6 percent, to 33.62 reais. The telecommunications regulator is to release this week rate increases for fixed-line phone calls.

Argentina

Grupo Financiero Galicia SA (GGAL AR), the country's second- largest banking group, fell 5 centavos, or 3.7 percent, to 1.29 pesos. Galicia fell after reaching last week its highest price since July 2001. ``This drop is a normal reaction after a big gain,'' said Santiago Caronni, a trader at Puente Hermanos Sociedad de Bolsa in Buenos Aires.

Solvay Indupa SAIC (INDU AR), a company that produces PVC, rose 15 centavos, or 6.9 percent, to 2.32 pesos, the biggest gain in five weeks. ``Solvay is related to the construction industry, which rose 36.3 percent in the first quarter from the same period last year,'' said Caronni.

Telecom Argentina Stet-France Telecom SA (TECO2 AR) fell 25 centavos, or 5.9 percent, to 4 pesos after gaining 4.2 percent on Friday.

Peru

Cia. de Minas Buenaventura SA (CMB/C PE), Peru's biggest gold and silver miner, fell 7 centimos, or 1.3 percent, to 52 soles. Shares fell as the price of gold for three-month delivery dropped 1.3 percent to $352.10 an ounce on the Comex division of the New York Mercantile Exchange.

Credicorp Ltd. (BAP PE), Peru's biggest financial holding company, rose 11 cents, or 1.1 percent, to $9.91, gaining for a second day. Credicorp owns Peru's biggest bank Banco de Credito del Peru SA.

Andean Leaders Under Siege --Popular Discontent Threatens Fragile Democracies

By Scott Wilson
Washington Post Foreign Service
Saturday, June 21, 2003; Page A12

VENTANILLA, Peru -- From impoverished Bolivia to politically fractured Venezuela, the countries of the Andean region are confronting a wave of popular discontent that is weakening their elected governments and challenging the U.S. strategy for fighting drugs and developing free trade in the region.

There have been violent protests here in Peru against President Alejandro Toledo and in Bolivia against President Gonzalo Sanchez de Lozada, each less than halfway through his term. In Venezuela, President Hugo Chavez, a populist leader, is facing the possibility of a midterm referendum that could remove him from office. And in Colombia, President Alvaro Uribe enjoys popular support, but faces a resilient armed conflict that threatens to spill across borders.

"In many cases, the only way for people in the region to contest the decisions made by the government is to take to the streets or pick up a gun," said Hernando de Soto, a development theorist who is president of the Institute for Liberty and Democracy in Lima. "They are excluded from the right to participate in the political and economic life of the country."

The common current running through the Andes is deepening poverty that has pitted an angry and disillusioned public against governments that have failed to deliver on promises of improvements in standards of living. Complicating matters, several deeply unpopular presidents have barely begun their terms, leaving frustrated voters with years to wait before the next elections.

A national poll released this week showed that only 11 percent of Peruvians support Toledo, who has hewed closely to Washington's favored economic policy of open trade, restrained public spending and public utility privatizations. He imposed the second state of emergency of his 23-month presidency last month in order to mobilize the military against teachers, farmers, doctors and judges demonstrating for better wages.

Peru is one of the few Latin American countries that has posted overall economic growth over the last year. But Toledo has been attacked fiercely by political opponents over a long string of gaffes. Last week, in the midst of the nationwide wage dispute, he lowered his presidential salary to $8,400 monthly. He started his term at $18,000 a month, the highest presidential salary in Latin America. He angered even his own supporters when he left the country in the middle of the crisis for a speaking engagement at Stanford University.

"There are no good reasons why we should be in this situation," said Alberto Adrianzen, a left-leaning political analyst in Lima. "We don't have the polarization of Venezuela, Colombia's guerrillas, Ecuador's fragile economy or Bolivia's ethnic radicalism. This is largely a matter of political management and Toledo's lack of capacity in that regard."

The Bush administration envisions the Andes as an important part of a free trade zone that it hopes to create by 2006 across the Western Hemisphere. But a thriving illegal drug industry, official corruption, high foreign debt and poverty are conspiring against the balanced economic growth and regional security necessary for such a system to succeed.

Bolivia was shaken by deadly riots earlier this year over the new president's proposed tax increases while Ecuador has been plagued by public worker strikes over wages. Popular at home after 10 months in office, Colombia's Uribe is being hampered in his fight against a powerful guerrilla movement by weak judicial institutions and drug money that helps fund a four-decade civil war.

Venezuela's Chavez, who has survived a coup attempt and four national strikes called to force him from office, is overseeing an economy that is predicted to shrink by as much as 25 percent this year. He and his largely middle- and upper-class opponents agreed in principle last month to hold a constitutionally permitted midterm referendum on his administration sometime after Aug. 19.

In Peru, where Toledo's term ends in 2006, some of the president's supporters say privately that they worry about a potential impeachment effort in Congress. Unlike Chavez, who counts on nearly fanatical support from 30 percent of the population, Toledo has no similar core constituency to defend him, and calls for his resignation have come from some members of Congress.

The military, once the arbiter of political standoffs in this part of the world, has remained on the sidelines in Peru despite enduring budget cuts, an ongoing review of its role in the country's civil conflict in the 1980s and '90s, and internal reforms. But the country's leaders have bristled over the army's unpopular role in quelling the recent protests during which a student in the southern city of Puno was killed by troops.

"Sadly, everything points in one direction: This is about the president," said Carlos Basombrio, a political analyst who resigned as Toledo's vice interior minister in January. "His credibility is at absolute zero, and three years is a long time for people to wait."

The current troubles began last month when public school teachers, who make an average monthly salary of $200, staged a strike for better pay. They were joined by farmers across Peru, who blocked major highways to demand water rights and protective tariffs to make corn, sugar and rice more competitive in the national market. Military intervention cleared highways, but the farmers are threatening to take up demonstrations again next week.

The roots of the protests reach into Toledo's presidential campaign, which followed his leadership of a civil resistance movement that toppled former president Alberto Fujimori after he won an illegal third term in 2000. Fujimori fled Peru for Japan ahead of charges of corruption and human rights violations.

To beat his principal opponent, former president Alan Garcia, a populist who nearly bankrupted the country in the 1980s, Toledo promised to create 1 million jobs over his five-year term, double teacher salaries, and build vast irrigation systems and housing. He has failed to keep many of those promises, partly because of Peru's dire financial straits, including foreign debt payments that consume nearly a quarter of its national budget.

Much of Peru's economic growth is the result of an expanded mining industry, which bring benefits largely to the foreign companies that own the copper and gold concessions and a relatively small number of Peruvian employees.

Ventanilla is a shantytown of 1 million people, 25 miles north of Lima, built on sand dunes overlooking the Pacific Ocean. Toledo's support here has withered to nearly nothing along with the hope that his campaign promises of a new fishing port and a local university would ever materialize.

Two model homes, part of the government's "Own Roof" housing program, sit at the foot of a fog-shrouded hill covered with shacks of bamboo, wood planking and overlapping scraps of corrugated tin. Job seekers line up outside the houses, the first of 1,500 to be built on the sandy slope. Their $400 price tag, however, is out of reach for the slum residents who are among the majority of Peruvians who live on less than $2 a day. The obstetrics clinic is made of thatched walls and has no running water or sewer service.

"He doesn't see the children or the number of us living like this," said Margarita Seron, a 35-year-old Toledo voter and mother of six, the oldest of whom would go to college in December if she could afford it. "Will the president comply? Won't he? I don't know. I know he has never helped so far."

Although Toledo blames his poor image on an overly critical press, he continues to confound even his supporters by his choices, including his decision to deliver the commencement address this week at Stanford University, where the former shoeshine boy earned a PhD in education. He traveled to California by presidential plane over fierce objections from Congress that the trip was frivolous at a time when the country is still under a declared state of emergency. The 30-day decree expires June 27.

Meanwhile, drug production is increasing in the eastern jungles, worrying U.S. officials who believe it is partly the result of Toledo's failure to confront the small farmers who make up the bottom rung of the industry. The Shining Path, a radical Maoist insurgency dormant for a decade, is regrouping with the help of drug money and the alleged coordination of Colombian middlemen.

Last week, guerrillas kidnapped 71 employees of an Argentine company building a section of a natural gas pipeline in Peru's eastern jungle. The guerrillas released the hostages a day later. Toledo's claim that the hostages were freed by "my military" was disputed by his own defense minister, prompting a new debate over his honesty.

Marciano Rengifo Ruiz, a congressman from Toledo's party, Peru Possible, said the protests should be seen as a sign of Peru's democratic health after the oppressive last years of Fujimori's administration.

"The social strife will continue, but not with the same force," Rengifo said. "It is bombardment right now. But I believe this will pass, and his support will begin rising again."

UPDATE 1-Bush, Lula agree to closer U.S.-Brazil ties

Fri June 20, 2003 05:29 PM ET
(updates with joint statement)
By Randall Mikkelsen

WASHINGTON, June 20 (Reuters) - U.S. President George W. Bush, who comes from the business world, and Brazilian President Luiz Inacio Lula da Silva, his country's first working-class president, agreed on Friday to seek closer ties despite differences over Iraq.

The commitment came in a joint statement issued after Bush and Lula held their first face-to-face talks since the Brazilian was sworn in as president on Jan. 1. The statement made no mention of the U.S.-led war on Iraq, which Lula strongly opposed.

"The United States and Brazil resolve to create a closer and qualitatively stronger relationship," it said.

The two men agreed their governments will have regular and high-level consultations on issues ranging from counter-terrorism to African poverty relief -- a pet issue for both.

The warming ties between the seemingly political odd couple has come as a surprise, and reflects U.S. hopes Brazil can be a stabilizing influence in Latin America at a time when the region's democracy movement has come under strain.

The countries announced joint initiatives including U.S. support for Lula's anti-hunger program in Brazil, cooperation on energy and fighting AIDS in Africa.

"Without any question, I believe that we can surprise the world in terms of the relationship between Brazil and the United States," Lula told reporters in the Oval Office with Bush at his side.

Lula brought 10 ministers with him. For the United States, Agriculture Secretary Ann Veneman, Special Trade Representative Robert Zoellick, and Energy Secretary Spencer Abraham were among those expected to take part an expanded meeting following the Bush-Lula meeting.

Brazil and the United States have clashed over trade in the past, particularly subsidies and tariff barriers slapped on key Brazilian exports like orange juice, textiles and steel.

The two countries also co-chair the Free Trade Area of the Americas talks to create a hemisphere-wide free trade zone by January 2005. The FTAA is central to Bush's policy of promoting trade and democracy in Latin America, and the joint statement reaffirmed the leader's aim to conclude negotiations on time.

Most of the region suffered a recession in 2002, with Venezuela and Argentin

Emerging debt-Market stumbles again, Brazil drops

Reuters, 06.20.03, 1:50 PM ET

NEW YORK, June 20 (Reuters) - Emerging sovereign debt stumbled for a fourth straight session on Friday as investors' push to lock in profits after a vibrant rally combined with a flimsy U.S. Treasury market to sink prices.

The benchmark J.P. Morgan Emerging Market Bond Index Plus <11EMJ> shed 1.14 percent, piling on to sharp losses from much of the week. Brazil, a heavyweight in the market with a one-fifth share of the index, slid 2.06 percent as the C bond <BRAZILC=RR> veered 1.0 point lower to 88.75.

Emerging debt took a turn into negative territory this week as U.S. Treasury prices, hit by conflicting messages about an expected U.S. Federal Reserve rate cut, ground lower. U.S. government debt is used as the base for gauging the risk premium of emerging bonds.

Investors have also sought to pare down holdings to take advantage of this year's 22 percent surge. Emerging debt has seen billions of dollars in new cash since the turn of the year, thanks to Wall Street's search for yields above the level of the paltry U.S. rates and optimism for Brazil's reform agenda.

"Overall it's been very quiet," said an emerging debt trader. "Generally it seems there's a fair amount of weakness, particularly Brazil."

"I think it's a little bit of the Treasury and some profit-taking," said the trader. "The sticker price on (emerging market) debt has gotten to levels where many of the old salts are absolutely astonished."

In addition, many investors from Brazil, Latin America's largest country, were seen out of their offices on Friday as they extended Thursday's holiday into a long weekend.

Among the day's biggest losers were Ecuador, whose share of the EMBI-Plus careened 3.62 percent lower. Mexico lost a hefty 1.04 percent, Peru slid 1.02 percent and Venezuela shed 2.18 percent.

"It's trading pretty heavy -- there's lots of supply still. It's profit taking more than anything else and no one's buying yet," said another emerging debt trader.

Ecuador's debt has soared 62.5 percent this year, thanks to the flows to emerging markets and optimism for its International Monetary Fund loan deal. Mexico has gained 11.8 percent, Peru is up 16 percent and Venezuela has added 14.9 percent.

Toward a consolidation of the MERCOSUR bloc

Granma International

ASUNCION.- The 24th Southern Common Market (MERCOSUR) Summit held in the capital of Paraguay on Wednesday ended with a clear message for strengthening regional integration and particularly that of South America.

According to PL, Presidents Luis González Macchi (Paraguay), Néstor Kirchner (Argentina), Luiz Inacio Lula da Silva (Brazil) and Jorge Batlle (Uruguay) were present at the meeting, together with Gonzalo Sánchez de Lozada (Bolivia) and Ricardo Lagos (Chile) as associate members, and Hugo Chávez (Venezuela) as a special guest.

The AP news agency noted that the full members (Brazil, Argentina, Uruguay and Paraguay) signed a joint communiqué reaffirming their commitment to developing the bloc with the aim of assuring sustainable development for those countries and competitive insertion in the world economy.

The leaders also signed a second document of a general nature with Presidents Ricardo Lagos and Gonzalo Sánchez de Lozada.

Both documents ratify adherence to the United Nations and peaceful solutions to conflict, while the signatories committed themselves to combating terrorism within the framework of international law and respect for human rights, as well as to tackle the problem of drug trafficking.

At the same time ANSA reports that the bloc presidents agreed to meet again within 60 days for further discussions on issues linked to integration and to advance a medium-term program comprising an agenda known as Objective 2006, the creation of a parliament and a bloc monetary institution.

The statement indicates the need to “prioritize the bloc’s social dimension” so as to promote development and highlights the urgency of “eradicating child labor, facilitating the circulation of workers and including the theme of employment as an objective of the integration agenda. The heads of state also agreed to go more deeply into issues such as security, education, work, health and defense.

Reuters notes that it gives priority to integration and not to the Free Trade Area of the Americas (FTAA) being imposed by the United States. In that context, Kirchner informed the agency: “first of all we should consolidate MERCOSUR and then see what international prospects open up.”

Brazilian President Luiz Inacio Lula da Silva agreed with his Argentine colleague in giving top priority to the South America and announced that he is to meet with his U.S. counterpart George W. Bush in Washington this Friday with that premise in mind.

The EFE news agency reports that the bloc’s document emphasizes “the need for agricultural aspects, particularly those linked to subsidies that are distorting trade, to be included in FTAA discussions as well as within the World Trade Organization.”

The tone of the speeches made by those leaders at the session, which lasted three hours, was not uniform and varied according to speakers’ positions, but there was a general spirit to strengthen the bloc.

For Argentine Kirchner, for example, the basic issue for now is to continue defining a joint economic policy by creating a monetary institution and extending the number of bloc members.

Nicanor Duarte, the president-elect of Paraguay, who takes office on August 15, criticized the current globalization by defining it as a narcissistic neoliberal enclave scorning human values. The future Paraguayan president proposed a vindication of a culture of solidarity and called for a more political MERCOSUR rather than one that is confined to tariff activities.

Hugo Chávez, the Venezuelan president, was one of the last to speak at the meeting, where he reiterated that the key to the solution of the poverty and destitution of the Latin American and Caribbean peoples is in the endogenous model of growth and not in negotiations with the developed world.

In a speech highly critical of neoliberalism, the Venezuelan leader advised that it is not necessary to believe in the developed world and that the restrictive policies of the International Monetary Fund (IMF) had to be rejected. “We need to shake off the phantoms of neoliberalism,” he affirmed.

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