Foreign Capital Jumps Ship in Brazil

Latin American equities witnessed a heavy sell-off, strongly led by Brazilian shares, as foreign money rotated out of the local markets. A disappointing retail sales report contributed to the region’s decline.

Also, weakness in commodities was in focus, as traders brace for a potential slowdown in global economies. Further declines in U.S. markets also inspired selling. Mexican and Argentine shares sharply receded.


Brazil’s benchmark Bovespa Index slumped 1,082.11 points, or 4.15%, while Mexico’s benchmark Bolsa Index declined 191.16 points, or 1.54%. Argentina’s Merval Index receded 18.72 points, or 1.39%.


Brazilian shares tumbled on the session, pressured by a disappointing domestic economic report and continued net foreign investment outflows. Steelmakers also pressured the market, as investors fear that demand is starting to slow.


The government’s IBGE statistics unit reported that retail sales advanced 1.32% in February from a year ago, compared to January’s 6.25% leap. February’s slowdown was primarily due to lower sales of consumer non-durable goods, fuels and clothing.


Turning to corporate reports, mining giant Vale do Rio Doce, or CVRD, may have violated anti-trust norms in acquisitions made since 2000, according to the Brazilian Anti-trust Authority, or Cade.


CVRD said it is waiting for the final outcome of the process, and that it is confident that no anti-trust violations were committed.


Elsewhere, Brazil’s largest grocer, Companhia Brasileira de Distribuição SA, said that its same-store sales surged 17.4% in March, in nominal terms, and 9.2% in real terms. Strong Easter sales were partly cited for March’s robust advance.


Mexican issues also moved lower on the session, amid mixed reports regarding a presidential pardon for the impeached Mexico City Mayor. President Vicente Fox’s director for international media, Agustin Gutierrez, said the President may pardon impeached Mexico City Mayor Andres Manuel Lopez Obrador if he is convicted of defying a court order.


A pardon would allow Lopez Obrador to run for president in 2006. Lopez Obrador said he would accept the pardon. However, the President’s chief spokesman subsequently said that Gutierrez was not authorized to issue such a statement, leading to some confusion as to what the President’s official position is.


Wireless phone company Unefon SA intends to delist its shares from the Mexican Stock Exchange due to the low liquidity of the stock. If the plan is approved at its April 29 shareholders meeting, the firm will launch an offer to buy back the shares held by the public.


Argentine issues posted further declines on the session, as consumer confidence waned on rising inflation concerns. Torcuato Di Tella University said that consumer confidence fell 10.5% in April to 52.27 from March, marking the largest sequential decline in a year. Still, April’s figure is still 4.6% above year-ago levels.


Meanwhile, in the latest legal wrangling regarding the nation’s debt restructuring, France’s Thales SA registered an international arbitration suit against Argentina with the International Center for the Settlement of Investment Disputes, which is sponsored by the World Bank.


The case marks the 36th suit registered at ICSID, with claims reaching US$ 17 billion. Also, investors are sure to focus their attention on meetings later this week between Economy Minister Roberto Lavagna and the International Monetary Fund regarding debt payments.


Thomson Financial Corporate Group
www.thomsonfinancial.com


PRnewswire

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