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Brazil Sighs Deep and Darts Up After Finance Minister Says He Did No Wrong

Latin American markets were strong across the board, particularly in Brazil, as investors were assured by Finance Minister Antonio Palocci that he was not involved in a kickback scheme in the 1990’s. Argentina also rallied on the day, while Mexico’s gains were more muted.

Brazil’s benchmark Bovespa Index rallied 616.91 points, or 2.32%, while Mexico’s benchmark Bolsa Index rose 92.11 points, or 0.63%. Argentina’s Merval Index surged 37.22 points, or 2.49%.


Brazil made a strong comeback today, following two consecutive sessions of losses. Investors sold off Brazilian equities on Friday amid allegations made by a former aide to Finance Minister Antonio Palocci that the minister received kickbacks while mayor of Ribeirão Preto, in the interior of São Paulo state, in the 1990s.


Sunday, August 21, Palocci again denied the allegations and said Brazil’s economic policy will not change.


On the economic front, the Trade and Development Ministry said that Brazil posted a trade surplus of US$ 738 million in the week of August 15 to August 21, boosting the surplus to US$ 27.16 billion so far this year.


Separately, the central bank’s weekly survey of economists forecast that consumer inflation would total 5.34% for 2005, down from last week’s prediction of 5.40%.


Turning to corporate news, state-run oil firm Petrobras increased its planned investment from 2006 through 2010 by 63% to US$ 56.4 billion, up from its prior investment plan of US$ 34.5 billion.


Petrobras cited rising costs in the productive chain of the oil industry as part of the reason for the increased investment plans.


In research news, a major investment bank upgraded Gerdau to “outperform” from “peer perform,” partly due to the steel maker’s diversification and high and steady free cash flow.


Mexican shares also powered higher alongside more modest gains in the U.S., which is a key trading partner of Mexico. There were few corporate or economic reports to direct trading today.


Colombia’s press agency SNE announced that the country chose Telmex to take over the operations and administration of Colombia Telecomunicaciones. Details of the deal will be released sometime this week.


Argentina’s stocks followed the broader regional shares into the black. In corporate reports, Techint created a new steel firm named Ternium, which will be incorporated in Luxembourg. The industrial conglomerate also announced that it completed its tender offer for shares of Mexico’s Hylsamex.


Elsewhere in the region, Ecuador’s state-oil firm Petroecuador raised its oil output to approximately 90,000 barrels a day. The firm usually produces about 201,000 b/d, but last week’s attacks on oil infrastructure by local protestors had halted production.


Thomson Financial Corporate Group – www.thomsonfinancial.com

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