Lula Boosts Brazil Market by Giving Finance Minister Unreserved Backing

Latin American stocks gained ground, with Mexican shares posting some of the region’s biggest gains amid optimism about the local economy. Gains in Brazil’s market were limited by profit taking following robust gains in recent sessions.

Brazil’s Bovespa Index added 15.37 points, or 0.05%. Mexico’s benchmark Bolsa Index rose 90.05 points, or 0.55%, while Argentina’s Merval Index added 2.91 points, or 0.18%.

Brazilian stocks edged up slightly, as a move to take some profits following recent strong gains offset the positive impact of indications that Finance Minister Antonio Palocci will remain in office.

President Luiz Inácio Lula da Silva said today in a nationally broadcast press conference that Palocci will continue in his role as finance minister regardless of recent press reports suggesting that he would step down.

"I want to reaffirm here that Minister Antonio Palocci has my full confidence. Palocci is and will continue to be my finance minister," he said.

Rumors had mounted in recent weeks that Palocci would resign amid allegations of corruption in his formal mayoral administration and attacks from fellow Workers’ Party members over his austere fiscal policy. In testimony before congress earlier this week, Palocci defended his policies and denied the corruption allegations.

In other political news, President Lula said he would wait until March or April to decide whether to seek a second term in next year’s general election. A long-running corruption scandal has cast doubt on whether Lula would be successful in a second election.

In economic reports, São Paulo’s Fipe research institute said that its consumer price index rose 0.53% in the four weeks ended November 15, compared with a 0.59% jump in the four weeks ended November 7.

On the corporate front, Petrobras announced that the Brazilian government plans to launch a US$ 99 million program to train 70,000 new employees in the energy sector through the end of 2007.

Meanwhile, Embraer announced that it will deliver 145 aircraft in 2006 and 150 craft in 2007. The company added that the percentage of sales from the ERJ-170 and ERJ-190 series will top 70% from 2006, due in part to growing demand and order cancellations for smaller jets.

Sugar and ethanol company Cosan SA said it will use the money raised from its initial public offering to expand production capacity and acquire other plants. Cosan raised 770.2 million reais through the sale of 16.04 million shares on the Bovespa.

Elsewhere, Mexican shares climbed, hitting a third straight record closing high, amid declining local interest rates and continued optimism about the overall health of the economy.

Investors were cheered by some positive economic news on Wednesday, when Mexico’s Finance Ministry reported that the economy grew 3.3% in the third quarter, slightly above market forecasts. The news was well received following Mexico’s disappointing economic growth in the first half of the year.

Meanwhile, Argentine issues posted modest gains amid continued hopes for a sustained economic recovery following upbeat economic data earlier this week. Reports this week on September economic growth, October industrial production and third-quarter unemployment were all better than expected.

Bank stocks largely ignored a new measure announced by the central bank late yesterday that conditionally allows financial institutions to defer losses related to court rulings that order them to return savers’ deposits in original dollars rather than devalued pesos.

Thomson Financial Corporate Group – www.thomsonfinancial.com

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