Dec. 11 (Bloomberg) -- Argentine government securities considered worthless by investors two years ago have almost tripled in value as the economy recovered from the biggest default in history.

The securities are warrants that expire in 2035 and entitle holders to payments when gross domestic product grows faster than government projections. Argentina distributed them in June 2005 to win approval for a $95 billion debt restructuring following the collapse of the economy four years earlier.

Investors were surprised because they expected the economy to struggle, leaving the warrants, which expire in 2035, with almost no value. Instead, Argentina's economy has grown by more than 8 percent for four straight years, spurred by record exports of soybeans, wheat, steel, oil and cattle. Prices of the warrants rose to 13.51 U.S. cents on Dec. 8 from 4.71 cents a year ago.

``We barely looked at them,'' said Jeffrey Kaufman, who manages about $2 billion in emerging-market debt at Putnam Investments in Boston. ``I would be shocked if anyone could have predicted Argentina would grow this strongly for this long.''

Argentina's economy slid into recession in 1999, dragged down in part by a currency peg to the U.S. dollar that hurt exports. The recession reduced tax revenue, eroded investor confidence, sparked street protests and led to the default in late 2001 and a currency devaluation weeks later. The economy contracted 10.9 percent in 2002.

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Dec. 15 (Bloomberg) -- Peruvian stocks surged as investors bought shares in companies most exposed to accelerating economic growth from high commodity prices.

Peru's Lima General Index rose 2.6 percent, the biggest move of markets included in global benchmarks. The index gained 7.6 percent this week. Morgan Stanley Capital International Index of Latin American shares rose 0.2 percent to a record 2942.70. The index climbed 1.6 percent this week, after gaining 4.2 percent last week.

The Peruvian index has almost tripled this year, the best performance of 81 primary stock indexes, on surging exports of copper, gold, fishmeal and natural gas. Gains continued today after the government said Peru's annual growth rate accelerated to an 11-year high in October, quickening to 7.7 percent from 7.5 in September. To enter the market, investors bought shares of Credicorp, the owner of the country's biggest bank and a widely traded stock.

``Investors are buying shares based on the exchange's performance this year rather than metals prices,'' said Jose Menor, a trader at Lima-based brokerage Magot & Asociados SAB. By purchasing Credicorp, they're ``betting the Lima index will keep rising.''

Latin American mining stocks rose as key Chinese stock indexes reached records, signaling a growing economy and increasing demand for Latin America's raw materials.

``China is strong and they are a major driving factor in the success of the mining industry,'' said Decio Pecequilo, a financial consultant with Geracao Corretora de Valores in Sao Paulo. The Shanghai and Shenzhen 300 Index, which tracks yuan- denominated A shares listed on China's two exchanges, gained 9.1 percent this week.
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December 15 - Bloomberg (Fabio Alves): “Brazilian retail sales rose in October after 12 straight consecutive cuts in the benchmark lending rate prompted consumers to buy more goods such as cars, furniture, and appliances. Retail, supermarket and grocery store sales, as measured by units sold, rose 7 percent in October from the year-ago month…”

December 14 - Bloomberg (Eliana Raszewski): “Argentina’s economic expansion
quickened in the third quarter… Gross domestic product…grew 8.7 percent from the same period a year earlier after expanding 7.7 percent in the second quarter…”

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Dec. 20 (Bloomberg) -- Brazil's central bank cut its economic growth forecast for this year and said inflation next year will be lower than expected as an appreciating currency drives down the cost of imported goods.

Latin America's largest economy will expand 3 percent this year, down from an earlier estimate of 3.5 percent, according to the central bank's quarterly report. The 2006 inflation forecast was cut to 3.1 percent from an earlier estimate of 3.4 percent.

Lower-than-expected inflation and gross domestic product growth signal policy makers will extend a series of twelve consecutive interest rate reductions into next year, said Silvio Campos Neto, an economist at Sao Paulo-based Banco Schahin bank.

``This very benign inflation outlook leaves the door open for policy makers to keep cutting interest rates more aggressively,'' Campos Neto said in a telephone interview.

For 2007, central bankers lowered their inflation estimate to 3.9 percent, compared with the previous estimate of 4.3 percent. That's less than the 4.06 percent increase expected according to the median estimate of about 100 economists in a central bank weekly survey published Dec. 18.

The Brazilian currency has gained 64 percent since President Luiz Inacio Lula da Silva took office in 2003, the best performance among the 16 most-traded currencies tracked by Bloomberg. The real traded at 2.1540 per U.S. dollar at 8:30 a.m. New York time.

``A stronger real prompted people to import goods that otherwise could be manufactured domestically,'' said Campos Neto. He expects policy makers to lower the benchmark lending rate to 11.5 percent by the end of 2007.

Central bank directors have slashed the benchmark rate 6.5 percentage points to 13.25 percent from a high of 19.75 percent in September 2005.
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Dec. 21 (Bloomberg) -- Brazil's unemployment rate fell to its lowest level in 10 months as lower lending rates boosted economic growth and companies hired more workers ahead of the holiday season.

The unemployment rate in Brazil's six largest metropolitan areas fell to 9.5 percent in November from 9.8 percent in October, the statistics agency said in a statement. The rate was less than the median forecast of 9.7 percent in a Bloomberg survey of 20 economists. The jobless rate was 9.6 percent in November 2005.

Brazilian central bankers have lowered the benchmark overnight rate 12 consecutive times to 13.25 percent from a high of 19.75 percent in September of last year. That's helping lift sales of cars, furniture and other goods. Growth next year is forecast to accelerate to 3.8 percent from 3 percent this year, the central bank said yesterday.

``The jobless rate should decline further by the end of the year as more people are hired for the holiday season, especially by retailers, and the economy continues to pick up,'' Mauricio Oreng, an economist at Itau Corretora, said in a phone interview from Sao Paulo.
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Dec. 22 (Bloomberg) -- Ecuador's bonds had their biggest- ever decline after the incoming finance minister said the government may restructure its $11 billion debt in a way similar to Argentina, which defaulted on $95 billion in 2001.

Ecuador's benchmark 10 percent bonds due 2030 tumbled after Ricardo Patino said yesterday president-elect Rafael Correa's administration will meet with bondholders next month to discuss a plan that ``may be more like what happened in Argentina.''

Correa, meeting yesterday in Caracas with Venezuelan President Hugo Chavez, said he ``won't hesitate'' to default on debt payments if he deems spending on social programs more important. Correa also has vowed to strengthen trade ties with countries such as Argentina and Brazil, governed by socialist politicians, rather than the U.S.

``Slowly the market is starting to realize that they mean what they say,'' said Alberto Ramos, a senior Latin America economist with Goldman Sachs Group Inc., of Ecuador's leadership. ``This is an ideological view. This is about a willingness to pay.''

The yield on the bonds today surged 184 basis points to 13.32 percent, according to JPMorgan Chase & Co. A basis point is 0.01 percentage point. The bond's price, which moves inversely to the yield, fell 11.75 cents on the dollar to 76.25 cents, its largest decline since the government issued the security in 2000.
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Dec. 22 (Bloomberg) -- Brazil's budget deficit widened in November as the government increased public spending and tax collection fell, the central bank said.

The deficit, including federal and local governments and state companies, widened to 6.52 billion reais ($3.03 billion) last month from 2.79 billion reais in October, according to a report distributed in Brasilia today.

The federal government transferred more cash to state governments in November to pay salaries and social benefits, said Altamir Lopes, head of the central bank's economic research department. The increase doesn't threaten the government's targets, he said.

``The higher costs won't stop us from reaching the fiscal targets for the year,'' Lopes told reporters in Brasilia.

The budget surplus before interest payments, known as the primary surplus, narrowed to 5.61 billion reais in November from 10.5 billion reais in October. That's more than the median forecast of 4.8 billion reais in a Bloomberg survey of 14 economists.

Brazil's President Luiz Inacio Lula da Silva has pledged to post a primary surplus -- the surplus before debt payments -- of 4.25 percent of gross domestic product this year.

The deficit also widened as the government collected fewer taxes compared with October, he said.
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Dec. 26 (Bloomberg) -- Mexico's main stock index rose, as homebuilders' shares climbed to record levels after President Felipe Calderon set a goal of building 6 million new housing units in his six-year term in office.

Mexico's Bolsa index rose 272.40, or 1.1 percent, to 25,705.04. The Bovespa index of the most-traded stocks on the Sao Paulo exchange rose 247.35, or 0.6 percent, to 43,603.08.

Builders' shares rose in reaction to Calderon's statement last week that he expects home construction to increase with the help of private and government subsidized mortgages that will exceed earlier government estimates, said analyst Gonzalo Fernandez, of Santander Investments in Mexico City.

``It's one of the sectors that seems most clearly set to gain in the coming year,'' Fernandez said in an interview.

Shares of Homex SA, the nation's second-largest homebuilder by market capitalization, rose 2.97 pesos, or 3 percent, to 103.50 pesos, a record closing price. Consorcio Ara SA, the fourth-largest homebuilder, also set a record, rising 1 percent to 70.49 pesos.

Shares of Urbi Desarrollos Urbanos SA, Mexico's largest homebuilder, rose 58 centavos, or 1.5 percent, to 39.80 pesos.

The government housing agency said last week its goal was to provide 500,000 mortgages in 2007. Reforma reported the agency would sell mortgage-backed securities in Europe and the United States next year for the first time.

The Bolsa index was led by America Movil SA, Latin America's largest mobile-phone company. America Movil's Brazilian wireless unit had new subscriber growth that was ``very strong'' in November, Pali Research analyst Walter Piecyk said in a report. Shares rose 46 centavos, or 2 percent, to 23.63 pesos.

Brazilian stocks rose, led by Petroleo Brasileiro SA, the state-controlled oil company, on confidence lower interest rates will spur profits.

Brazil's central bankers will reduce the benchmark overnight rate to 11.75 percent by the end of 2007, according to the median estimate of about 100 economists in a central bank survey published today. The economists lowered their forecast from 12 percent. The Bovespa will close the year near the Dec. 15 record of 43,754.56 as local interest rates fall and the world economy grows, said Helena Biasotto at Banrisul SA in Porto Alegre.

``Investors are holding their positions until yearend,'' said Biasotto, who manages 3.6 billion reais ($1.68 billion). ``The outlook is good for next year.''

Petrobras, as the oil company is known, rose 0.9 percent to 48.58 on the expectation that it may announce newly discovered oil reserves, as it usually does the last week of the year, said Alexandre Magalhaes, an analyst at ARX Capital Management in Rio de Janeiro.

Mining shares in the region gained as metal prices rebounded from a drop last week.
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Jan. 23 (Bloomberg) -- Pacific Investment Management Co., ING Groep NV and Axa SA, the three largest owners of Venezuelan dollar bonds, have faith in President Hugo Chavez.

The companies, which hold a combined $1.6 billion of the country's debt, say Venezuela will repay the bonds even after a drop in oil prices reduced revenue and Chavez pledged to seize assets from international investors. The country's securities are the second-worst performers among emerging markets this year.

``The ability to pay is tremendous,'' said James Barrineau, who helps manage $11 billion of emerging-market debt at New York-based Alliance Bernstein, a unit of Axa, Europe's second- biggest insurer. The country ``has always promised to pay the debt and that hasn't changed.''

The 31 percent decline in oil prices in the past six months and Chavez's announcement on Jan. 8 that he would take control of telephone, power and oil companies, have hurt stocks and bonds. Venezuelan debt has fallen 1.6 percent since then, according to figures compiled by JPMorgan & Co. The Caracas Stock Exchange Stock Market Index lost 29 percent.

Pimco, ING and Axa say the bonds are undervalued because Chavez, 52, vowed on Jan. 13 to pay down debt this year. Axa, based in Paris, owned about $808 million and Pimco, in Newport Beach, California, held $204 million of Venezuelan securities, according to filings with the U.S. Securities and Exchange Commission. Amsterdam-based ING said the firm holds $600 million of the notes.

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Jan. 29 (Bloomberg) -- Brazilian bank lending rose in December, led by higher demand from consumers and smaller companies that took advantage of the lowest interest rates in more than six years, the central bank said.

State and non-state bank loans increased 2.3 percent to 732.8 billion reais ($343.4 billion) from a revised 716.5 billion reais in November, the bank said in a report distributed in Brasilia today.

``Credit to consumers, mainly auto loans, and to small companies will likely still lead credit growth in 2007,'' Rodrigo Magela, who helps manage about 3 billion reais at Rio de Janeiro- based ARX Capital Management Ltda., said in an interview. ``All the signs point to continued growth in credit this year.''

The increase was the indicator's 34th consecutive monthly climb. For the full year, credit expanded 21 percent. Bank lending in Brazil increased every year since 1994, when a new currency curbed the hyperinflation that had stifled borrowing.

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Feb. 5 (Bloomberg) -- Joao de Matos, whose travel agency has been a fixture in Manhattan's Little Brazil neighborhood since the 1970s, stared at a chart showing a surge in Brazil's currency against the dollar and fretted about his business.

``There's nothing I can do,'' said de Matos, punching numbers into a calculator to determine how much to raise prices on tour packages to Rio de Janeiro. ``Brazil used to be a cheap place. It isn't any more.''

As de Matos, 59, watched, the real strengthened as much as 1.1 percent on Feb. 1, its biggest rally since September. The gain is the latest spurt in a four-year, 71 percent advance that made it the world's best-performing currency against the dollar. This year, the real has risen against every one of 70 currencies tracked by Bloomberg except Iceland's krona and Thailand's baht.

A boom in exports of orange juice, sugar, coffee, soybeans and iron ore, as well as interest rates at 12.9 percent, are luring investors to the real. The currency gained 0.6 percent today to 2.0932 reais per dollar, its strongest since May.

The gains have hurt profits at manufacturers such as Volkswagen AG, which exports to 30 countries from its Brazilian plants, and made the country increasingly expensive for visitors. A taxi ride to Rio's Copacabana beach from the airport almost doubled to $34 from $18 four years ago.

A penthouse room overlooking the Atlantic Ocean at the Copacabana Palace, a hangout for jetsetters from Frank Sinatra to Mick Jagger, costs $2,480 a night. The rooms went for $1,840 in 2005.

Carry Trade

Demand for the currency has risen as international investors buy the country's debt. Yields on one-year benchmark government securities are 7.35 percentage points more than comparable U.S. Treasuries and 8.48 points higher than German bunds.

Brazil's benchmark local-currency, zero-coupon bond due January 2008 returned 18.2 percent during the past 12 months. Converted into dollars, the bonds returned 24.8 percent

The higher yields have made Brazil popular with investors borrowing in Japanese yen -- where the benchmark lending rate is 0.25 percent -- and reinvesting in real debt, the so-called carry trade. Foreign investors boosted holdings of real debt more than five-fold last year to 38.4 billion reais ($18 billion).

``The Brazil trade has been one of the best trades over the last two years,'' said Claudia Calich, who manages $900 million in emerging-market debt for Invesco Inc. in New York. ``The biggest gains are behind us, but I don't think it's over yet.''
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Feb. 6 (Bloomberg) -- Argentina's inflation-linked peso bond tumbled, pushing yields to their biggest two-day increase since July, after employees at the statistics institute said the government meddled in their consumer price calculations.

Workers at the institute, whose director was replaced last week by President Nestor Kirchner, said the successor prevented them from finishing the January consumer price index according to usual practices, according to Daniel Fazio, the representative of the largest employee union at the facility. He said the workers may go on strike to protest.

The accusations of meddling by the Kirchner administration are prompting concern that the data is tainted, understating actual inflation in the South American country and cutting into the value of the bonds' principal. The institute yesterday released its inflation data three hours late without an explanation.

``The way things were handled is very negative for the country,'' said Rodrigo Alvarez, an economist at Ecolatina, a research company in Buenos Aires. ``There was little transparency, and that gave room to plenty of justified suspicion.''

The yield on Argentina's 5.83 percent inflation-linked bonds due in 2033 rose 4 basis points, or 0.04 percentage point, at 5.41 percent at 1:38 p.m. in New York, according to Banco Mariva in Buenos Aires. The bonds closed at 5.31 percent on Feb. 2. Yields move in the opposite direction of prices
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Feb. 9 (Bloomberg) -- Latin America needs to attract more overseas investment to raise the pace of economic growth closer to Asian levels, said Anoop Singh, director of the International Monetary Fund's Western Hemisphere Department.

Growth will stay in the range of 3 percent to 5 percent unless Latin America opens itself to greater trade, which in turn would draw more investment to the continent's most competitive industries, Singh said. He forecast growth of as much as 4.75 percent this year as Latin America benefits from strong global demand for commodities such as oil and copper.

``Growth can be sustained at present rates, 3 to 4 percent, 4 to 5 percent, but there will be shocks and we need to prepare for them,'' Singh said in an interview today in Washington. ``Countries generally need to build greater resilience, and you will get that through the higher investment and productivity that is fundamentally needed to raise growth over the medium term.''

Singh pointed to Mexico as an example of a nation that had benefited from an increase in overseas investment and commerce that followed membership in the North American Free Trade Agreement. He said the rest of the region would gain from a breakthrough in the Doha round of world trade talks.

Trade talks stalled last summer as other nations balked at U.S. demands to lower tariffs in exchange for cuts in farm subsidies. Negotiating authority for the Bush administration is set to expire in July. The U.S. wants India, the European Union and Japan to agree to steep cuts in their farm duties.

Energy is one area of the Latin American economy that has suffered from what Singh called a shortage of ``efficient'' investment.
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Feb. 14 (Bloomberg) -- Brazilian stocks gained for a second day, sending the Bovespa index to a record, led by Cia. Vale do Rio Doce, the world's largest iron-ore producer.

The Bovespa index of the most-traded stocks on the Sao Paulo exchange rose 287.26, or 0.6 percent, to 45,484.71 as of 8:39 a.m. New York time, surpassing a Jan. 2 high.

The following are the stocks that are most active in the Brazilian market today. In Brazil, the preferred share is usually the company's most-traded class of stock.

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Feb. 15 (Bloomberg) -- Venezuela's President Hugo Chavez, who is struggling to contain the region's fastest inflation rate, said he'll cut three zeros from the country's exchange rate.

Venezuela's currency trades at an official rate of 2,150 bolivars per U.S. dollar, though exchanges hands at nearly twice that level in unofficial parallel markets. The change will be implemented by February 2008 and help simplify transactions, Chavez said during his daily ``Alo Presidente'' television show.

Chavez, who won a third term in December and was this month awarded decree powers, boosted spending last year by about 50 percent, spurring consumer demand and an increase in the annual inflation rate of 18.4 percent last month.

``The only economic indicator that has me a bit worried is inflation,'' Chavez said in a televised speech in Caracas. ``Cutting three zeros will have a positive psychological effect and lower inflation expectations.''

Chavez said he'll also seek to combat inflation by lowering value-added taxes by three percentage points on March 1 and by an additional two percentage points in July. The highest current value-added tax rate is 14 percent.

Under foreign exchange rules imposed by Chavez in February 2003, only the government can sell dollars to the public. Finance Minister Rodrigo Cabezas signaled in January those who purchase in other unregulated markets may be subject to prosecution.

Chavez also said that in ``coming hours'' he'll decree a law that allows the government to expropriate any business that sells food products higher than government-set prices. Those found guilty of ``hoarding'' and ``speculating'' may receive prison terms between two years and six years, Chavez said.
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Feb. 21 (Bloomberg) -- Argentine President Nestor Kirchner, who called the International Monetary Fund ``pathetic'' two years ago, may now follow the organization's advice to repay holders of the nation's defaulted bonds.

Morgan Stanley Investment Management and Aberdeen Asset Management Plc are betting Kirchner may reach a settlement with the holders of $20 billion of the unpaid debt. They anticipate Kirchner may offer new securities to investors who turned down Argentina's 2005 debt settlement to end lawsuits and gain access to international markets.

``We are big believers,'' said Edwin Gutierrez, who manages $2.7 billion of emerging-market securities at Aberdeen in London and bought some of the securities last month. ``At some point they have to access the broader market.''

Argentina's 15 1/2 percent notes due in 2008, one of 77 issues in default, have jumped 11.3 percent since Jan. 1 to 34.5 cents on the dollar. Only the 15.8 percent return on Ecuador's dollar bonds is higher among debt of developing countries, according to JPMorgan Chase & Co. data.

Argentina defaulted on $82 billion of bonds in 2001 after a three-year recession cut into tax revenue and foreign reserves.

Almost 25 percent of bondholders rejected the exchange in 2005, when the government offered to pay 30 cents on the dollar. The payout was the lowest in a government debt restructuring since at least World War II, said Arturo Porzecanski, who teaches international finance at American University in Washington.

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Feb. 23 (Bloomberg) -- Brazil had a better-than- expected current account surplus in January as units of Brazilian companies abroad sent profits home.

The current account, the broadest measure of trade in goods and services, had a surplus of $325 million last month, compared with a deficit of $308 million in the year- ago month, the central bank said. The surplus was more than the $124 million median estimate in a Bloomberg survey of 17 economists.

``The flow of dollars into the country remains strong,'' Roberto Padovani, chief economist at WestLB's Brazilian unit, said in a telephone interview from Sao Paulo.

The current account was also bolstered by interest on the country's record international reserves

The central bank bought $4.8 billion worth of U.S. dollars in the foreign exchange market in January, the highest since Jan. 2004, when the bank began its policy to build up foreign reserves. The Brazilian Treasury bought an additional $1.5 billion, compared with $72 million a month earlier.

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Feb. 26 (Bloomberg) -- Argentina's inflation-linked bonds fell on concern the government will tamper with this month's consumer price index after government statistics workers raised questions about the handling of January inflation data.

The government will change the methodology to measure the rise in consumer prices to reduce the reported increase in the cost of education as students prepare to return to class in March, newspaper Ambito Financiero reported today, without saying how it obtained the information.

``These new versions on more meddling with the inflation index are spooking investors,'' said Noelia Lucini, an economist in Buenos Aires at Capital Market Argentina Sociedad de Bolsa SA. ``It's more of what we saw earlier this month.''

The yield on Argentina's 5.83 percent bond maturing in December 2033 rose 5 basis points, or 0.05 percentage point, to 5.54 percent at 4 p.m. New York time, according to Banco Mariva SA. Yields move inversely to bond prices.

Reducing reported inflation would cut into the principal on inflation-linked debt. About 40 percent of Argentina's total debt is linked to inflation.

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SAO PAULO, Brazil (AP) -- Just an hour's drive outside this traffic-choked metropolis where President Bush kicks off a Latin American tour Thursday, sugar cane fields stretch for hundreds of miles, providing the ethanol that fuels eight out of every 10 new Brazilian cars.

In only a few years, Brazil has turned itself into the planet's undisputed renewable energy leader, and the highlight of Bush's visit is expected to be a new ethanol "alliance" he will forge with Brazilian President Luiz Inacio Lula da Silva.

The deal is still being negotiated, but the two leaders are expected to sign an accord Friday to develop standards to help turn ethanol into an internationally traded commodity, and to promote sugar cane-based ethanol production in Central America and the Caribbean to meet rising international demand.

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March 5 (Bloomberg) -- An increase in the cost of tortillas, a staple of the Mexican diet since the Maya ruled 1,000 years ago, has triggered a slump in the peso.

Tortilla prices jumped 5.9 percent in January, the most in eight years, after costs climbed for corn, the main ingredient. That increase fanned inflation and a bond market rout that curbed demand for the currency. The peso has fallen 2.4 percent in the past month, making it the world's third-worst performer against the dollar among the 70 currencies tracked by Bloomberg.

``There's a big risk that tortilla price increases will lead to higher wage demands and fuel inflation,'' said Eduardo Perez, head bond trader at Mexico City-based brokerage Valores Mexicanos SA, the country's largest independent brokerage. ``Foreign investors don't like this environment and are selling. This is directly linked to peso weakness.''

The currency's slide in the past month to 11.1820 pesos per dollar leaves it down 3.3 percent in 2007. Only the South African rand and the Turkish Lira have fallen against the dollar more in the past month, weakening 3.24 percent and 3.2 percent, respectively.

A slowdown in the U.S. economy has added to the peso's drop by curbing demand for exports and cutting into remittances immigrant workers send to their families. Mexicans living abroad sent an average of almost $2 billion a month home last year.

The peso may fall further in the next several months as corn prices continue to rise. Corn has soared 15 percent in the past eight weeks and 119 percent since late 2005 as demand for the grain grows from ethanol producers.
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March 8 (Bloomberg) -- Ecuadorean Finance Minister Ricardo Patino, retreating from a threatened default for a second time, said the country will probably make its next debt payment on schedule as the government faces no imminent financial crisis.

``I expect we'll make the payment,'' Patino, 52, told reporters today in Quito. ``Our creditors should know that we're very responsible. We're not going to ignore foreign debt obligations.''

Ecuador's bonds jumped as investors raised bets the threat of a default is receding. The government is still seeking to renegotiate the terms and conditions of loans from the World Bank and Inter-American Development Bank, Patino said. The dollar, adopted by the country in 2000, will remain the official currency in the ``short term,'' he said.

Patino's comments mark the second time the government has backed off from threats to default on $10 billion of foreign debt after President Rafael Correa said he might halt payments to free up funds for social programs. Correa, who took office on Jan. 15, said last month he could only fight one battle at a time, and his priority is to redraft the nation's constitution, a plan opposition lawmakers are resisting.

Correa's clash with congress intensified today as baton- wielding riot police blocked 57 of the 100 lawmakers from entering the legislature in Quito to enforce an order by the country's top electoral court suspending their ``political rights.''

The congress voted March 6 to replace Supreme Electoral Tribunal President Jorge Acosta after the court backed Correa's plan to hold a vote on the constitution. The court ruled the lawmakers' vote unconstitutional and ordered them suspended.

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March 9 (Bloomberg) -- Investors withdrew a record $8.9 billion from emerging-market equity funds last week during a worldwide stock sell-off, according to Emerging Portfolio Fund Research Inc.

The amount was the highest since the Cambridge, Massachusetts-based research company started tracking flows in 2000 and represented about 2.7 percent of the funds' total assets, Brad Durham, managing director of the firm, wrote in an e-mail. About $2 billion of the outflows were from China funds.

``A significant amount of investor exuberance was shaken out of global markets,'' Durham wrote. The declines ``have cleared the way for buyers to move in at better valuations. As ugly as these flows are, I see it as a positive development.''

The previous record for emerging-market outflows was $5 billion in the week ended June 14, 2006, as concern that higher borrowing costs would slow economic growth sparked a global equity slump.

Emerging Portfolio tracks 15,000 funds with $7 trillion in assets, according to its Web site. Investors withdrew $3.85 billion from European equity funds last week, the most since February 2003. U.S. funds had a smaller outflow, at $1.7 billion.

The Morgan Stanley Capital International Emerging Markets Index tumbled 10 percent in the five days ended March 5. The sell-off, triggered by a plunge in Chinese equities and disappointing U.S. economic data, wiped more than $3.3 trillion from stock market values worldwide.
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March 14 (Bloomberg) -- Ecuador bondholders have Argentina's Finance Secretary to thank for convincing President Rafael Correa to back away from his threat to default on $10 billion of debt.

Ecuador's dollar bonds have surged 19 percent this year, more than triple the increase for any other emerging market bond tracked by JPMorgan Chase & Co. The securities plunged 12.4 percent in 2006 as Correa said he would halt payments when he took office in January.

Argentine Finance Secretary Sergio Chodos warned Ecuadorean officials in a private meeting on Jan. 27 that a default would damage the economy, according to a person who attended the session, whose details haven't been disclosed by the government. Two days later, Ecuador's Finance Minister Ricardo Patino said he wanted a ``friendly negotiation'' with investors. Correa pledged during his campaign that the country would follow the example set by Argentina when it defaulted on $95 billion in 2001.

The Ecuadoreans ``were shocked when they didn't receive emotional support from Argentina,'' said Alberto Ramos, an economist at Goldman Sachs Group Inc. in New York. ``The debt load in Argentina was unsustainable. They needed relief. It's completely different in the case of Ecuador.''

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March 15 – Bloomberg (Katia Cortes): “Brazilian retail sales climbed in January as lower lending rates and rising wages spur consumer spending on cars, refrigerators and other goods. Retail, supermarket and grocery store sales, as measured by units sold, rose 8.5% in January…”

March 16 – Bloomberg (Alex Emery): “Peru’s economic growth accelerated in January, because of increased manufacturing and construction output… Gross domestic product expanded 9.2% from a year earlier compared with 8.9% growth in December…”
http://www.prudentbear.com/creditbubblebulletin.asp

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March 19 (Bloomberg) -- Mexico's Finance Minister Agustin Carstens said that a U.S. housing slowdown and losses incurred by subprime mortgage lenders won't damp growth in Latin America's second-biggest economy.

Carstens, attending the Inter-American Development Bank's annual meeting in Guatemala City, said the shock from a financial crisis in 1994 helped Mexico build a more resilient banking sector that has weathered concern about defaults among U.S. subprime-mortgage lenders this year.
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Cookin' the data:

March 26 (Bloomberg) -- Argentine inflation-linked peso bonds fell on speculation the government will delay changes needed to improve the credibility of the agency that gathers consumer price data.

Investors are ratcheting down their inflation forecasts for March on concern that President Nestor Kirchner is moving slowly to remove political appointees from the National Statistics Institute and restore the normal procedures to measure prices, said Francisco Prack, an economist at Grupo SBS Sociedad de Bolsa in Buenos Aires. Economy Ministry spokesman Silvio Robles didn't return telephone calls seeking comment.

``The market is again adjusting downward as it loses hope the government will actually do something about the data,'' Prack said. ``Inflation data directly affects local bonds.''

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March 30 (Bloomberg) -- Mexico may cut its foreign debt to less than the equivalent of 4 percent of gross domestic product this year, a record low, as the country replaces international bonds with peso-denominated securities, said Gerardo Rodriguez, head of public credit at the Finance Ministry.

The move is part of an effort to reduce lightly traded foreign-currency securities as Mexico extends the maturity and raises the amount of its peso-denominated debt sold.

``We want to have liquid external debt benchmarks that can be efficiently traded and adequately reflect the country's credit risk,'' Rodriguez said in an interview from Mexico City. ``We plan to keep raising the amount sold of longer-term peso debt. The market is absorbing this very well.''

The government's foreign debt may fall by as much as 0.5 percentage point to 3.9 percent of GDP after an expected $2.7 billion swap of dollar and euro debt for peso bonds in the second half, Rodriguez said.

Mexico's yearly financing plan had called for a reduction of 0.2 percentage point in foreign debt this year and an equivalent increase in local-currency debt. The plan had excluded the sale of securities two weeks ago that gives investors the right to turn in foreign bonds for peso debt in September, October and November this year, Rodriguez said.

Mexico's external debt as a percentage of GDP was 4.4 percent in 2006, Rodriguez said. That's the lowest since Mexico began tracking federal government liabilities in 1982. Previous government estimates placed foreign debt at 4.9 percent of GDP for 2006.
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April 5 (Bloomberg) -- Brazil's real held near a six-year high as foreign investors moved money into the country to tap into a rally in the stock and bond markets.

The real rose 0.1 percent to 2.0314 to the dollar at 3:05 p.m. New York time. Yesterday, the currency touched 2.0276 per dollar, its strongest since reaching 2.0170 on March 6, 2001. The real has gained 5.1 percent against the dollar this year, making it the best performer of the 16 most active currencies.

``It won't take long for the real to breach the 2.0-per- dollar level,'' said Mario Battistel, foreign-exchange director at Sao Paulo-based brokerage Corretora Novacao. ``There is an excess of dollars in the market.''
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April 11 (Bloomberg) -- Argentina plans to sell as much as $750 million of 10-year dollar bonds in the local market tomorrow to refinance maturing debt.

The bonds, known as Bonars, will pay an interest rate of 7 percent and mature in April 2017, the Economy Ministry said in a statement. The government, which said the sale will be between $500 million and $750 million, has congressional approval to offer as much as $2.5 billion of this series of Bonar bonds.
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(If these bonds go bad, they'll have a name for them.)

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April 11 (Bloomberg) -- Economic growth in Latin American and Caribbean economies will slow this year and next, because of lower commodity prices and weaker global demand for the region's products, the International Monetary Fund said in a report.

Regional growth will slow to 4.9 percent this year and 4.2 percent in 2008, down from 5.5 percent in 2006, the group said in its World Economic Outlook report. Brazil and Chile are the only major economies whose growth rates this year will surpass 2006 levels, the report said.

``The external environment is expected to become somewhat less favorable as global growth moderates and oil and metals prices decline from record levels,'' the report said.
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April 14 (Bloomberg) -- Venezuela said it paid off $3 billion in loans owed to the International Monetary Fund and the World Bank this week, ending ties to two multilateral lenders it says curtailed its ``economic sovereignty'' for decades.
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April 13 (Bloomberg) -- Mexico's industrial output was unchanged in February from the same month a year earlier, dragged down by a drop in production of automobiles and fewer construction projects.

Industrial output slowed from the 1.4 percent expansion in January, the Finance Ministry said in a statement. Economists had forecast output to rise 1.6 percent, according to the median of 18 estimates in a Bloomberg survey.

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April 17 (Bloomberg) -- Brazilian retail sales rose more than expected in February as lower lending rates encouraged consumers to step up purchases of beverages and cigarettes.

Retail, supermarket and grocery store sales, as measured by units sold, rose 9.4 percent in February from the same month a year earlier, after rising 8.5 percent in January, the national statistics agency said. That was more than the 8 percent median forecast in a Bloomberg survey of 16 analysts.
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April 18 (Bloomberg) -- Argentine bonds fell as the government's $750 million debt sale last week drove up the supply of the securities in the market.

Argentina's 8.28 percent bonds due in 2033 dropped for an eighth day, declining 0.45 cent on the dollar to 109.2 cents at 5:25 p.m. in New York, according to JPMorgan Chase & Co. The bond's yield, which moves inversely to the price, rose 3 basis points, or 0.03 percentage point, to 7.52 percent.

The average spread, or extra yield, on Argentine dollar bonds over U.S. Treasuries widened 5 basis points to 2.55 percentage points, according to JPMorgan. Argentina sold $750 million of 10-year dollar bonds, known as Bonars, on April 12 to yield 8.46 percent.

``The sale of the new bonds put on supply pressure,'' said Cristina Panait, an emerging-market analyst in Los Angeles at Payden & Rygel. ``It made things worse as the market was already concerned about the government's creditability on inflation.''
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April 25 (Bloomberg) -- Argentine inflation-linked peso bonds rose after durable goods orders in the U.S. increased more than forecast, signaling strength in the world's largest economy that may extend imports of the South American nation's products.

``Argentina had been waiting for those figures for some days, and they came out all right,'' said economist Julian Manzolido at Deloitte & Touche in Buenos Aires.

The yield on Argentina's 5.83 percent, inflation-linked bonds maturing in December 2033 fell 2 basis points, or 0.02 percentage point, to 5.73 percent at 4:35 p.m. in New York, according to Buenos Aires-based Banco Mariva SA. Yields move inversely to price.

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April 25 (Bloomberg) -- Colombia's peso climbed to a six- year high as traders speculated the nation's central bank will lift interest rates later this month.

Policy makers probably will raise the overnight lending rate a quarter-percentage point to 8.5 percent on April 30 to stem inflation, according to 14 of 16 economists surveyed by Bloomberg News. The other two analysts predict an increase to 8.75 percent. The Federal Reserve's benchmark rate is 5.25 percent.

``With interest rates rising here and rates unchanged in the U.S., and even expectations the Fed may cut them, offshore funds will bring in dollars to make a quick buck,'' said Alvaro Camaro, head analyst at Stanford Financial Group's unit in Bogota.

The peso gained 0.4 percent to 2,113.4 per dollar, from 2,122 yesterday. Colombia's currency has strengthened 5.8 percent against the dollar so far this year, the sixth-most among 70 currencies tracked by Bloomberg.

Annual inflation probably quickened to 5.94 percent in April, above the central bank's target range of between 3.5 percent and 4.5 percent, according to the median forecast of 14 economists surveyed by Bloomberg. The government is scheduled to release the April consumer price report on May 1.
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April 25 (Bloomberg) -- Mexico's 10-year peso-denominated bond rose the most in three months and the currency rallied after an unexpected decline in consumer prices allayed concern central bankers will raise borrowing costs this year.

Yields on Mexican bonds of all maturities fell. A drop in consumer prices in the first 15 days of April pushed the annual inflation rate within Banco de Mexico's target for the first time in three months, a central bank report yesterday showed.

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CARACAS, Venezuela (AP) -- Venezuelan President Hugo Chavez on Thursday warned he would nationalize the country's banks and largest steel producer if they persist with what he described as unscrupulous practices.

Chavez's threat did not seem to signal an imminent takeover but rather appeared aimed at strong-arming the businesses to contribute more to local industry as he made a wide-ranging speech promising that Venezuela was headed for a classless society. Coming alongside recent moves to nationalize telecommunications, electricity companies and the oil sector, the warning was yet another sign that Chavez is serious about deepening his socialist revolution.

"Private banks have to give priority to financing the industrial sectors of Venezuela at low cost," Chavez said. "If banks don't agree with this, it's better that they go, that they turn over the banks to me, that we nationalize them and get all the banks to work for the development of the country and not to speculate and produce huge profits."

http://biz.yahoo.com/ap/070503/venezuela_chavez.html?.v=18

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CARACAS, Venezuela (AP) -- President Hugo Chavez said Saturday that Venezuela's largest steel maker, Sidor, will not be allowed to make any more exports until it meets domestic needs, and threatened to expropriate the Argentine-controlled company if it resists.

Chavez has criticized Sidor for selling the bulk of its production overseas and forcing local producers to import from elsewhere, saying Venezuelan industry should be given priority.

Sidor's parent company, Luxembourg-based Ternium SA, is controlled by conglomerate Techint Group of Argentina. Chavez said he has summoned Ternium chairman Paolo Rocca from Buenos Aires for talks.

"We're going to pass a law, Rocca. We're going to force you to supply, first and foremost, the Venezuelan domestic market before you take (the steel) to other countries," the Venezuelan leader said at a news conference.
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May 14 (Bloomberg) -- Bolivia hopes to see as much as $3 billion in foreign investment in its oil and gas industry over the next three years, including a potential petrochemical development, Bolivia's Energy Minister Carlos Villegas said.

State energy company YPF Bolivianos plans to spend $10 million to upgrade two crude oil refineries, Villegas said in a televised interview on May 11 from La Paz. The Bolivia government agreed last week to buy the refineries from Brazil's state- controlled oil company Petroleo Brasileiro SA for $112 million, ending a dispute over control of Bolivia's fuels market.

In 2006, President Evo Morales seized fields and refineries, imposed higher taxes on oil companies such as Brazil's Petrobras and Madrid-based Repsol YPF SA and took a larger stake in the country's resources. The Andean country has South America's second-largest natural gas reserves after Venezuela.

``Petrobras and Brazil have a great deal of expectation to carry out new projects in the future,'' Villegas said. ``Foreign oil investment has fallen in recent years. We need additional amounts of oil and gas to be able to comply with commitments to Argentina.''

President Morales today issued a decree authorizing YPFB to manage all exploration and development of oil and gas fields, according to state news agency ABI. YPFB can add partners as long as it holds the majority stake, it said.

Bolivia last month raised taxes in 44 oil and gas contracts with oil producers and increased natural gas prices in supply contracts to neighboring Brazil and Argentina. The move will earn YPFB about $2 billion this year, which will help spur 4 percent growth, Bolivia's Finance Minister Luis Arce said last month.
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May 25 (Bloomberg) -- Venezuelan President Hugo Chavez's pledge to withdraw from the International Monetary Fund may violate terms of the country's foreign bonds, allowing investors to demand their money back.

Pacific Investment Management Co. and Alliance Capital Management are the biggest among dozens of investors who would get a $404 million windfall if the securities are redeemed because they own bonds that trade below face value, according to data compiled by Bloomberg. The country has $6.5 billion of notes that trade at a discount among its $20 billion in foreign bonds.

Chavez's decision to take over telecommunications and energy companies this year has made Venezuelan bonds the second- worst performers in emerging markets. The South American country promised when it issued the bonds to remain in the IMF, so exiting the Washington-based organization would trigger a so- called technical default.

Venezuela's leader ``continues to implement a radical agenda,'' said Matthew Ryan, who oversees $2.6 billion in emerging-markets debt, including $30 million of the bonds that trade below face value, at MFS Investment Management in Boston.

Chavez may back down because a default would curb Venezuela's ability to borrow in international markets and eliminate the IMF as a potential source of funds.

``It makes perfect sense for Chavez to back down, but it's difficult for me to picture him saying he screwed up,'' said Alberto Bernal, an emerging-markets fixed-income analyst at Bear Stearns Cos. in New York.
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June 4 (Bloomberg) -- Brazil's stock market became the first in Latin America to top $1 trillion after surging metals prices helped double corporate profits.

The overall value of Brazilian equities rose to $1.02 trillion on June 1 after the Bovespa index rallied 2.2 percent. The gauge has climbed 45 percent in the past year and more than quadrupled since 2002, helped by a stronger currency.

Profits have risen 108 percent during the four-year rally, according to research company Economatica, buoyed by rising prices of nickel and iron-ore. Foreigners also have increased investment on speculation economic growth will accelerate. International investors accounted for 34 percent of shares traded this year, up from 22 percent in 2000, according to the Sao Paulo Stock Exchange.
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June 6 (Bloomberg) -- Brazil's central bank today may carry out its biggest interest-rate cut of 2007 as a rally by the country's currency holds inflation at an eight-year low.

The seven-member board may cut the overnight lending rate by a half point to a record low 12 percent at its almost monthly meeting in Brasilia, according to 18 of 25 economists surveyed by Bloomberg. The other seven estimate the board will make its fourth quarter-point reduction of 2007.

The Brazilian real's climb this year to its strongest level since 2000 has cut the cost of imported goods and kept prices of domestic products in check as lower borrowing costs help fuel a rebound in Latin America's biggest economy. Annual inflation remains below the central bank's target for this year and 2008 even as retail sales and bank lending expand.

``The economy is in a much better shape now than at the last rate meeting,'' said Francisco Carvalho, head of currency trading at Liquidez Corretora in Rio de Janeiro, Brazil's second-biggest foreign exchange brokerage. ``The real is stronger, inflation is lower and the external scenario is more positive, so rates can drop faster.''

Policy makers are scheduled to announce their decision after 5 p.m. New York time.

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June 8 (Bloomberg) -- Peru's economy will expand more than previously expected this year, led by growth in manufacturing and retailing, central bank President Julio Velarde said.

Gross domestic product will expand 7.2 percent, up from a previous forecast of 6.8 percent, Velarde said at a Lima news conference. Peru's GDP in 2006 grew 7.9 percent, with inflation of 1.14 percent.

Construction, manufacturing and retail sales will all grow at least 8 percent this year, offsetting slowing export growth as metals prices decline, Velarde said. Peru, the world's third- largest copper producer and fifth in gold, will see exports rise 11 percent to $26.4 billion this year, compared with 36 percent growth in 2006, according to the central bank.
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June 12 (Bloomberg) -- Holders of Venezuelan, Ecuadorean and Lebanese bonds may only recoup as little as 30 percent of their investment in the event of default, according to Standard & Poor's new debt recovery ratings.

The ratings measure the ability and willingness of countries to repay their foreign-currency debt obligations if a default occurs. S&P said in statement today that it assigned the ratings to countries whose debt is rated below investment grade. The 25 countries that received a recovery rating also have issued ``significant amounts of foreign-currency denominated debt.''

Countries such as Colombia, Uruguay and Costa Rica offer investors the highest chance of repayment, as much as 90 percent, in the aftermath of a default on foreign debt, S&P said. These countries have a recovery rating of 2, indicating a ``substantial recovery.'' The change in methodology led S&P to raise its rating on Colombia's foreign debt to investment grade.

``The expansion of our recovery ratings to sovereign issues reflects the market's increasing focus on post-default recovery prospects,'' said David Beers, U.K.-based head of sovereign and international ratings at S&P, said in a statement. ``It also meets the demand for greater clarity and specificity with respect to recovery prospects on different debt instruments of all types of issuers worldwide.''

S&P increased the long-term debt ratings on Colombia's foreign currency senior unsecured debt to BBB-, the lowest level of investment grade, while maintaining the rating on the Colombian government at BB+, one level below investment grade.
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June 19 (Bloomberg) -- Argentina's industrial output climbed 6.4 percent in May from a year earlier, the National Statistics Institute reported.

Industrial production last month rose a seasonally adjusted 0.4 percent from April, the institute said today in a report issued in Buenos Aires. The annual increase was lower than the 7 percent median estimate of eight economists in a Bloomberg survey.
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June 21 (Bloomberg) -- Shares of Gafisa SA, Brazil's second- biggest homebuilder, gained 34 percent last year after an initial public offering in February. This year, the stock stalled.

Gafisa has fallen 1.5 percent in 2007, as 11 more developers started trading shares in Sao Paulo, diluting investor demand for real estate stocks. ``There are a lot of companies that have to prove themselves,'' Gafisa Chief Executive Wilson Amaral said in an interview in New York, where he was trying to convince investors that his company is still a buy.

In all, 21 Brazilian developers have raised $7.84 billion in initial and secondary Brazilian stock offerings since September 2005, bidding to take part in a housing boom fueled by tax cuts and government subsidies in Latin America's biggest economy. The stock market is suffering from ``indigestion'' after the spate of IPOs, Citigroup Global Markets Inc. said a report earlier this year.

``There've just been too many deals,'' said Urban Larson, who helps manage $2 billion in emerging market stocks at F&C Investments in Boston and participated in ``some'' of last year's share offerings. ``There already is an oversupply. Investors have been selling the previous deal to buy the next one.''
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June 25 (Bloomberg) -- Never have Gucci, Porsche, Jaguar, Prada and Tiffany been so in love with Brazil, home of the world's best-performing currency over the past three years.

The waiting list for Prada SpA's new spring-summer line of leather bags has swelled to 120 people at Dona Santa, a luxury goods store in the Brazilian coastal city of Recife. The most expensive bag in the collection costs $3,600, equal to about half the annual income of the average Brazilian household.

Porsche AG has sold more sports cars and SUVs in the South American country this year than it did in all of 2002 and 2003 combined. Grand Cru, the country's second-largest importer of premium wines, forecasts a doubling of sales this year.

The Brazilian real's three-year, 59 percent rally has pared the cost of imports, fueling a surge in luxury goods sales. That boom is part of a doubling of imports in the past three years that is curbing growth in Brazil's trade surplus and leaving the currency vulnerable to a decline in commodity exports.

``This definitely suggests things have come too far too fast,'' said Christian Stracke, an emerging-market analyst with CreditSights Inc. in London. The jump in luxury good imports ``is indicative of a massive boom in consumption.''

The real has gained 9.6 percent this year to 1.9505 per dollar, buoyed by record exports of commodities such as iron ore, orange juice and soybeans and by foreign investment in the country's stock and bond markets.
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June 28 (Bloomberg) -- China Petrochemical Corp., the nation's second-largest oil producer, is in talks to drill in Venezuela, where ConocoPhillips and Exxon Mobil Corp. pulled out after President Hugo Chavez seized their assets.

The company is seeking ``heavy oil'' projects, said Tong Peixin, a spokesman for unit Sinopec International Petroleum Exploration & Production Corp., a reference to tarry deposits in an Orinoco River basin area known as the Faja and to fields lying off the Caribbean coast that may hold 316 billion barrels. China Petrochemical is known as Sinopec Group.

China has strengthened links with Venezuela as part of efforts to secure energy supplies for the world's fastest-growing major economy. The countries signed $11 billion of energy and transportation accords last August when Chavez visited China.

``This shows China is really eager to develop projects in countries like Venezuela, even though there are potential risks, given unstable social conditions,'' Rachel Tsang, head of oil and gas research at Nomura International (Hong Kong) Ltd., said today.

Weeks of street demonstrations followed Chavez's May 27 decision not to renew Radio Caracas Television's broadcast license, silencing newscasts long critical of his government and prompting international criticism.

Beijing-based China Petrochemical was among seven foreign oil companies to sign agreements with Petroleos de Venezuela SA on June 26, the state-owned Shanghai Securities News reported.
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