Brazil’s Debt Breaks the 1 Trillion Reais Barrier

Latin American stocks witnessed another collectively strong session, led by Brazil on optimism for the Social Democrats market-friendly presidential candidate.

Mexico also moved higher, and Argentina surged. Also aiding the region was strength in U.S. shares on the back of a strong economic report in the form of the Beige Book.

Brazil’s Bovespa Index surged 702.50 points, or 1.87%. Mexico’s benchmark Bolsa Index advanced 58.60 points, or 0.31%, while Argentina’s Merval Index rallied 20.78 points, or 1.17%.

Brazilian issues continued to benefit from Tuesday’s, March 14, announcement of market-friendly São Paulo Governor Geraldo Alckmin as the presidential candidate representing the Social Democrats. Alckmin will run against incumbent President Luiz Inácio Lula da Silva, who is expected to seek a second term in October.

In economic news, the central bank and the treasury said that federal domestic debt widened 2.6% in February, surpassing 1 trillion reais for the first time ever. The most recent result follows January’s debt level of 984.9 billion reais.

On the corporate front, utility Tractebel said that its fourth-quarter profit declined, partly due to a substantial tax write-off a year ago that wasn’t repeated in the most recent quarter.

The firm’s net profit arrived at 220.1 million reais, down 8.8% from 241.3 million reais a year earlier. However, for the full year, the firm’s profit jumped 19% to 920 million reais from 775 million reais in 2004.

Mining titan CVRD said that continued global economic growth, particularly in China, will maintain a shortage of iron ore supply. Separately, the firm said that it will not give up its preferential right to excess iron ore from a mine owned by CSN without being compensated.

In brokerage news, a major investment bank removed power utility Energias from its Latin American equity model portfolio due to its "very strong performance" since October. The broker replaced the firm with telecom firm Telemar.

Mexican issues built on strength in the U.S. markets, which were aided by a strong Beige Book report that indicated steady economic growth and few inflationary pressures.

Meanwhile, Mexico’s Federal Competition Commission announced last night that it has fined Femsa 2.8 million pesos for not providing information regarding its investigation concerning possible anti-competitive practices in beer distribution.

Argentina managed solid gains today, amid relatively low volume and a light news flow. Among the day’s winners were Petrobras Energia Participaciones and Siderar.

Thomson Financial – www.thomsonfinancial.com

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