This past week brought Brazil and Latin America an economic tsunami with the region's markets accumulating massive losses as risk aversion and recession fears contagion from major markets spread to the rest of the world.
Brazil's Bovespa, LatAm's largest market plummeted on Friday 6.9% to 31.481 points, accumulating 13, 5% in the week and 51% so far this year. At the end of last year the Bovespa index stood at 63.886. Country risk closed at 688 points.
The Mexican BMV market plunged 16.41% in the week, 31.78% during October and 42.52% since the beginning of the year. On Friday the main IPC index of LatAm's second largest economy was down 4.61% to 6.978 points, the lowest since June 2006. The country risk reached 604.
Argentina's Merval crashed 26.78% this week, (7.6% on Friday) closing at 890 points the most depressing since 2004.Described as the "blackest" week of trading, the Argentine government's decision to take over private pension funds (an estimated 30 billion US dollars) proved to be the kiss of death for a market already battered by global circumstances.
The worst blow was for banks and financial institutions down 27% in the month and 40% below their book's value. Pension funds manage retirement savings of 9.5 million active Argentines with the 30 billion US dollars funds invested 55% in Argentine bonds and 14% in Merval traded shares from local and foreign banks, mainly Spanish, which also had a negative repercussion on trading in Madrid's stock exchange.
Santander Bank, BBVA and Repsol suffered major impacts in the Madrid market because of their close links with South America. The Madrid market lost 5% on Friday and Santander shares were selling at 6.6 Euros a record low.
Argentina's country risk remains above 1.870 points and the Peso lost 1.85% to the US dollar closing the week at 3.29. Inflation is an additional recurrent factor: official statistics insist the index is one digit; however the private sector and trade unions work on an estimate of 25%.
Meantime in Santiago the local IPSA index was down 2.22% to 2.342 points, having lost in the week 3.7% and 15% during October. In spite of the fact the international price of copper has crashed, (Chile's main export), the country is managing the global panic, although the US dollars closed at 660 pesos a significant leap for one day trading. The country risk of Chile stands at 374 points, 223 above the closing of 2007.
In Peru, the Lima stock exchange market was closed a few minutes after trading begun given the "cut losses and get out" spirit among traders. Although insignificant compared to the rest of the economy the Peruvian budding market has lost 39% in October and 71% since the beginning of 2008. Peru's country risk reached 653 points.
Other regional country risks: Uruguay jumped to 876 on Friday; Colombia, 741; Ecuador 2.819 and Venezuela 1.850 points.