Brazilian Finance Minister Resigns. BNDES President Takes Over.

Latin American stocks were mixed, with Brazilian stocks edging higher amid news that Brazil’s embattled finance minister has submitted his resignation. Gains may have been limited somewhat by caution ahead of the U.S. Federal Reserve’s interest-rate decision tomorrow.

Brazil’s Bovespa Index added 64.01 points, or 0.17%. Mexico’s benchmark Bolsa Index slipped 112.98 points, or 0.58%, while Argentina’s Merval Index climbed 22.32 points, or 1.24%.

Brazilian stocks posted modest gains, as investors digested news that Finance Minister Antonio Palocci submitted a letter of resignation to President Luiz Inácio Lula da Silva today following weeks of allegations tying to him to campaign finance scandals and corruption.

"Minister Antonio Palocci decided to ask the President of the Republic for leave from his post. The minister is delivering President Lula a letter explaining his reasons," the Finance Ministry said.

The ministry added, however, that Lula could reject Palocci’s resignation or grant him a temporary leave from his post. Lula has said in recent weeks that he would not accept a resignation from Palocci.

In other news however, BNDES National Development Bank President Guido Mantega was presented as having accepted Lula’s invitation to replace Palocci.

In corporate news, a British newspaper reported over the weekend that Mittal Steel and Arcelor were both trying to acquire Brazilian steel maker CSN, which is said to be worth up to US$ 10 billion. Shares of CSN soared today on the take-over speculation.

Mining giant CVRD announced late Friday that it has completed an expansion of its alumina refinery in northern Brazil’s Para state. As such, the company’s alumina production will rise to 4.4 million metric tons per year from 2.5 million.

Supermarket chain CBD said it will make capital investments of 935 million reais in 2006. That is up from last year’s capital investments of 842.3 million reais.

Mexican shares pulled back today, alongside declines in the U.S., as all eyes are focused on the U.S. Federal Reserve’s decision on interest rates and policy statement, due out tomorrow. Last week, the Bank of Mexico cut interest rates for the eighth time in eight months.

In corporate news, a strike at Grupo Mexico’s La Caridad copper mine in northern Mexico entered its fourth day today. Approximately 1,000 employees stopped working today, after negotiations over a contract revision failed.

Elsewhere, Pemex predicts it will earn more than US$ 9 billion from oil exports in the first quarter of this year, which is 60% above that earned in the corresponding quarter a year ago.

Late last Friday, banking firm Grupo Bimbo SA said that it will purchase the Chinese unit of Spain’s Panrico SA for 9.2 million euros. The deal is expected to close within three months.

Argentine issues rallied on the day, bolstered by Banco Macro Bansud. The firm’s underlying shares received support from the strong debut of its American Depositary Receipts on the New York Stock Exchange. Investors gave a strong showing today, after Argentine markets were closed Friday to commemorate the 30th anniversary of the country’s military coup.

Thomson Financial – www.thomsonfinancial.com

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