- The Washington Times - Thursday, February 6, 2003

RIO DE JANEIRO, Brazil, Feb. 6 (UPI) — The threat of war in Iraq dominated Latin American markets again this week, as a spat of positive domestic news was outweighed by looming military action in the Middle East to send stocks mostly down.

"Right now, this potential war between the United States and Iraq is the big news," said Gustavo Alcantara, a fund manager at Banco Prosper in Rio de Janeiro, on Wednesday.

"Ninety-nine percent of the movement in the market today is following the possibility of war between the U.S. and Iraq, and it is hurting confidence."

Analysts say there isn't much the markets across the region can do about external shocks from the threat of military action in the Middle East.

The best investors can hope for, it seems, is that local governments make smart and pragmatic policy decisions in the coming months as the economies across the region try to recover from a pitiful 2002.

Brazil's new government is putting its most optimistic face forward, saying on Wednesday it plans to sell some $4 billion in international bonds in 2003.

Most analysts think this number is too sunny, that investor appetite for Brazilian paper isn't recovered just yet after a tumultuous election year that saw the country's risk index rating rise above that of Nigeria.

Some good news in the corporate sector in Brazil — Latin America's largest economy — came Wednesday as long-distance carrier Embratel — the Brazilian subsidiary of WorldCom — was back in the black for the first time in seven quarters.

Embratel posted a net profit of $32 million in the fourth quarter, though investors remain worried about the company's debt-refinancing plan. Embratel holds $1.4 billion in debt, about half of which is due in the short-term. Its stock ended up 2.56 percent Wednesday on the earnings news.

As for the larger economic picture, Brazil and Argentina pushed harder this week for more collaboration among countries of the Mercosur trade bloc, as negotiations of the proposed Free Trade Area of the Americas, or FTAA, progress.

"It's much better for Mercosur if we are together," Brazil's Foreign Minister Celso Amorim said Tuesday after meeting in Buenos Aires with his Argentine counterpart.

Amorim is hoping to get Uruguay and Paraguay — the other two members of Mercosur — on board so that the group can present common positions on themes such as industrial tariffs and the agriculture sector by Feb. 15, when all 34 FTAA countries are meant to submit specific offers to reduce trade barriers.

As for the markets, Brazil's Bovespa stock index finished last Thursday down 1 percent at 10,750, mostly on profit taking after the previous session's sharp rise. Utility Eletrobras dropped 2.7 percent, while long-distance provider Embratel went the other way to gain 3.8 percent. On Friday, the index gained 1.8 percent to 10,941. Utilities gained on news the government may allow price increases soon. Eletropaulo added 0.6 percent.

Monday saw the index tick down 0.28 percent to 10,910 as investors remained cautious. Some companies bucked the trend, as the bank Bradesco climbed 2.12 percent after posting solid fourth-quarter results. Steelmaker Acesita rose 5.68 percent after word that it unloaded its 20 percent stake in a rival steel company.

On Tuesday, the Bovespa ended down 3.05 percent at 10,577 as Iraq worries weighed ahead of a presentation U.S. Secretary of State Colin Powell would make the next day to present evidence against Saddam Hussein. Telemar fell more than 4 percent.

On Wednesday the index rose slightly to 10,592. Aside from Embratel's 2.56 percent gain, Acesita added 1.1 percent, while cellular company Telesp gained 1.4 percent.

In Mexico, the IPC index finished last Thursday down 1.1 percent at 5,870.5, as traders took cues from Wall Street, which fell 2 percent. Fixed-line phone company Telmex dropped 1.8 percent. Friday brought a gain of 1.4 percent to 5,954 as investors followed New York up. Cement maker Cemex gained 2.8 percent, while mining company Grupo Mexico added 3.4 percent.

Monday brought a gain of 1.3 percent to end the day at 6,032 as investors cheered a drop in interest rates. Telmex added 2.33 percent, while brewer Grupo Modelo gained 4.44 percent after hard falls in the past week.

Tuesday saw the index down 1.05 percent to close at 5,968 ahead of Powell's presentation at the UN. Financial services company Inbursa dropped nearly 3 percent after saying net profits fell 24 percent in the fourth quarter.

The IPC was closed Wednesday for a holiday.

The IPSA index in Chile ticked up 0.5 percent to 989.6 Thursday. Telecom Entel gained 3.4 percent to lead the day. Friday brought a gain of 1.3 percent to 1,002 in thin trade. Energy company Enersis added 3.5 percent.

Monday brought a gain to 1,004 for the index in sluggish trade. Enersis gained 1.65 percent. Tuesday saw anemic trade and an a flat close at 1,005.

The IPSA rose 0.85 percent to 1,013 Wednesday, despite the focus on Powell's presentation of evidence against Iraq at the UN. Chile imports about 80 percent of its oil and would suffer a stiff external shock in energy prices should war come.

Argentina's Merval index saw extremely thin activity this week. Last Thursday, the index lost 1.86 percent to 547. The index then gained 0.5 percent Friday to 550. Monday saw the Merval down slightly at 549.7 in light trade.

Tuesday brought some relief to the drought of investor activity, as the Merval added 3.65 percent to end at 569.8. On Wednesday, the index lost 1.32 percent to 562. Steelmaker Siderca lost 2.8 percent, while energy company Perez Companc shed 3.85 percent.

In Venezuela, the IBC index lost 0.7 percent to 8,628 in thin trade Thursday. National phone company CANTV — which accounts for about 40 percent of the index — lost more than 3 percent. Friday saw the index down 4 percent at 8,286. CANTV lost 10 percent.

On Monday, the IBC gained 0.28 percent to 8,309. CANTV lost 1.9 percent. Tuesday brought a loss of 1.4 percent to 8,192. The index gained 3.2 percent to 8,451 Wednesday as CANTV added 9.5 percent in light trade.

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