- The Washington Times - Thursday, March 20, 2003

SANTIAGO, Chile, March 20 (UPI) — Markets were mixed across the region this week as growing concerns of a Middle East conflict weighed on trading activity.

In Argentina, the authorities' announcement Wednesday that the economy had shrunk by 10.9 percent in 2002 — the country's largest GDP fall in half a century — further sank prospects of an economic recovery.

The International Monetary Fund, IMF, nonetheless approved that same day a $307 million loan installment. The money is part of a stand-by credit arrangement of $6.78 billion that the IMF pledged to Argentina in January.

The IMF said in a statement Wednesday that the "arrangement is designed to cover all payment obligations to the IMF through Aug. 2003."

Argentina's government is presently forecasting a 4.2 percent growth for 2003 as well as a 2 percent expansion during the year's first quarter.

In Brazil, the Central Bank broke Wednesday with a six-month trend of ever-tightening monetary policies as it left the benchmark interest rate unchanged at 26.5 percent. The bank based its decision on improving inflationary rates, although it did not rule out further interest rate increases in the near future.

The benchmark interest rate has already risen 8.5 percent since September.

According to the Central Bank, inflation in 2003 should reach 12.38 percent, a slight increase from the bank's initial forecast of an 11 percent annual inflation rate.

In Mexico, an optimistic outlook for the economy based on solid GDP growth seems to be progressively overshadowed by the negative prospects posed by the Iraqi crisis. Stock traders claimed Wednesday that even if the conflict in Iraq was resolved in the short term, its effects on the domestic economy could not be neglected.

Although Finance Minister Francisco Gil announced Tuesday that the Mexican economy grew 3 percent during the year's first quarter, he nonetheless stated that the country's performance was inextricably tied to the United States' recovery.

Given how more than 80 percent of Mexico's exports are shipped to the United States, the country's stated aim of a 3 percent GDP growth in 2003 is contingent on its northern neighbor's own economic prospects.

Mexico's peso nonetheless strengthened on Wednesday by 4.70 centavos against the dollar to 10.8370 following the U.S. currency's own improved performance against the euro.

As for the markets, Brazil's Bovespa stock index gained 1.9 percent to end up at 10,783 points last Thursday as the markets received news of a slowdown in domestic inflation. Telesp Cellular rose 7.2 percent and bellwether Telemar did so by 3.1 percent.

On Friday the index went up 0.3 percent to 10,817 as Brazil's IPCA consumer price indicator fell 1.75 percent in February. The paper and pulp industry spearheaded gains as Aracruz Cellulose's stocks rose 6.3 percent and those of the Votorantim Group did so by 5.6 percent.

Monday brought a 0.6 percent rise to 10,877 amid heavy trading. Aircraft company Embraer gained 4.8 percent while power giant Electrobras rose 3.8 percent.

The Bovespa gained 2.5 percent Tuesday to 11,150 as the country's sovereign bond continued on the trend of other emerging market bonds from Latin America and kept strengthening abroad. Embraer gained 2.7 percent as it was announced that the World Trade Organization ruled in favor of Brazil imposing a $248 million sanction against Canadian rival Bombardier Inc. Oil giant Petrobras gained 3.7 percent and bellwether Telmar rose 3.8 percent.

Wednesday registered a 1.3 percent drop in the Bovespa to 11,006 due to fears over the Iraqi crisis and the Central Bank's statement that it could still raise interest rates in the future given the uncertain inflationary outlook. Telephone company Telenorte Leste Participacoes fell 1.1 percent and state-owned energy company Cesp experienced a 3.2 percent drop.

Argentina's Merval index enjoyed a brief respite last Thursday after three consecutive days of losses, gaining 1.6 percent to close at 563.9. Bank stocks were spurred by news that the Central Bank would ease controls for Argentine firms to engage in dollar transactions. The Spanish banks Banco Frances gained 6.7 percent and Banco Galicia's stocks rose 3 percent.

The Merval nonetheless returned to its downward trend on Friday, falling 0.7 percent to 560.1 following a sharp drop in energy company Perez Companc's stock, which lost 3.1 percent.

Argentine stocks closed higher on Monday even as the Merval's 0.6 percent gain took place amid very light trade. Steel company Acindar rose 3.9 percent whereas Perez Companc remained in its downward trend as its stocks fell 1.4 percent

On Tuesday, the Merval closed a modest 0.5 percent higher at 566.5 amid anxiety over both the domestic scenario where no clear winner appears before the April presidential elections and foreign upheavals due to the Iraqi situation. Acindar climbed 6.5 percent whereas Banco Frances registered a 2.7 percent fall.

Wednesday saw a new 0.3 percent fall for the Merval to 564.5 points. Construction company Polledo gained 5.4 percent and Acindar rose 3.5 percent.

In Mexico, the IPC index ended up 2.1 percent to 5,931 points last Thursday, following gains in the U.S. market. Construction company ICA's shares rose 8.3 percent, closing up 36 percent from a week ago. Bellwether and wireless communications firm America Movil rose 0.8 percent in trade representing nearly a third of activity during the day.

On Friday, the index rose 1 percent to 5,993 points in spite of the volatile movements of the Dow Jones Industrial Average. ICA continued its positive streak as its shares went up 8.3 percent, while America Movil did so by 1.5 percent.

The IPC closed up 0.3 percent to 6,009 on Monday as Mexican stocks followed a U.S. equities rally. Gains were nonetheless slowed down as the peso rebounded by 1.4 percent against the dollar. The shares of media networks Televisa and its rival TV Azteca rose 1.6 percent and 0.6 percent, respectively.

Tuesday saw the IPC close up 0.6 percent to 6,042 spurred by gains from beverage companies. Brewer Grupo Modelo's stocks rose 2 percent, whereas beverage company Femsa's did so by 3.7 percent.

Wednesday brought a 0.4 percent slip to 6,017 for the IPC, as investors considered stocks to be expensive given the impact that an imminent conflict in Iraq will likely have on the economy. ICA experienced a 4 percent fall whereas America Movil stocks dropped by 1 percent.

Chile's IPSA index ended flat last Thursday at 1,019 amid unrest due to a financial scandal over the illegal endorsement of $100 million in deposit certificates from the government agency Corfo to the highly-questioned Inverlink brokerage firm, all of whose top executives are presently in jail. Power company Endesa fell 0.8 percent whereas Banco Santander rose 0.7 percent.

The IPSA experienced a slight 0.2 percent fall to 1,017 on Friday as doubts over the health of the financial system persisted thanks to the Corfo-Inverlink scandal. Electricity holding Enersis fell 2.6 percent while telecommunications company Entel gained 1.9 percent.

On Monday, the IPSA fell 0.3 percent to 1,014. Endesa ended down 0.3 percent and Entel stocks fell 1.6 percent. Tuesday saw a slight 0.1 percent recovery to 1,015 as gains in brewer CCU could not assuage investors' concerns over the deposit certificates scandal. CCU gained 2.6 percent and Enersis rose 0.9 percent. Wednesday brought a modest 0.2 percent rise for the IPSA to 1,017 as gains were lead by the Minera Valparaiso holding with 3.85 percent and the steel tube and pipe producer Cintac with 1.75 percent.

Venezuela's IBC index gained 0.6 percent to 8,229 last Thursday thanks to a 2 percent rise in the stocks of telephone giant CA Nacional Telefonos de Venezuela (CANTV), which accounts for 40 percent of the index. A similar trend was seen Friday as the IBC rose 3.3 percent to 8,505 thanks to CANTV's 6.4 percent gain.

The index climbed 0.7 percent to 8,571 on Monday but fell 1.3 percent the next day, closing at 8,463. Markets were closed on Wednesday for a holiday.

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