Bolivia’s Evo Morales Win Brings the Bears in Brazil

Latin American stocks including those from Brazil dropped as the election of a socialist candidate in Bolivia fueled concerns about the outcome of upcoming elections elsewhere in the region. Mexican and Brazilian shares were further pressured by profit taking.

Brazil’s Bovespa Index lost 286.55 points, or 0.86%. Mexico’s benchmark Bolsa Index fell 71.18 points, or 0.40%, while Argentina’s Merval Index tumbled 22.06 points, or 1.45%.

Brazilian stocks fell, as investors took profits following recent strong gains on optimism about local interest rates. Shares were also pressured by Bolivian presidential election results, in which socialist candidate Evo Morales appears to have won by a landslide.

Among individual shares, Petrobras was active following the Bolivian election news. President-elect Morales has said he wants to nationalize Bolivia’s energy sector. Meanwhile, Petrobras has invested US$ 1.5 billion in Bolivia since 1996.

Steel maker Gerdau slumped after the European Commission gave Gerdau, along with Grupo Santander Central Hispano and Bogey Inversiones, the green light to acquire Sidenor Steel Products Manufacturing.

Gerdau and Spanish bank Santander said in mid November that they would each buy 40% of Sidenor. Bogey Inversiones will acquire the remaining shares.

On the up side, electric power holding firm Eletrobrás climbed after the company took three concessions in a government auction Friday for rights to build and operate new hydroelectric projects.

Also, Brasil Telecom gained after the company announced plans to invest a total of 2.5 billion Brazilian reais in its operations in 2006.

Elsewhere, Mexican stocks dropped for a third straight session as investors continued to lock in recent strong gains on optimism about the local economy. Among individual shares, Homex sank. The home builder filed with the Mexican stock exchange for a second share offering.

Argentine issues retreated, as investors continued to react to the government’s surprise announcement last week that it plans to pay off its total US$ 9.8 billion debt to the International Monetary Fund before the end of the year. Some investors are concerned about a significant reduction in the country’s foreign currency reserves.

In corporate news, workers at Telecom Argentina and Telefonica de Argentina went on strike to demand shorter hours and a 40% pay increase. The union indicated that forcible occupations of the companies’ operational centers could be an option.

Thomson Financial Corporate Group – www.thomsonfinancial.com

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