WRAP: Latin Amer Leaders Return Home
With Little In Hand
By CHRISTOPHER CHAZIN and MICHELLE WALLIN
Dow Jones Newswires
WASHINGTON -- If Friday's markets are a gauge, Moody's Investors
Service won the tug-of-war with Latin American policy makers for hold of
investor sentiment.
Stock markets regionwide plunged and currencies weakened after Moody's
on Thursday downgraded the credit ratings of Brazil and Venezuela and said
it would consider doing the same to Argentina and Mexico.
The news came just hours before Latin American officials urged markets to
take note of the economic reforms they have labored to put in place. They
pledged to do more if needed, even as they blasted irrational market behavior
and urged investors not to lump countries into the same bag.
"We are not going to nationalize already privatized companies, we aren't
going to repudiate debt, we're not going to do anything wrong," Argentine
Economy Minister Roque Fernandez said. "We are not Russia."
That, in effect, was the point of the two-day meeting convened by
International Monetary Fund chief Michel Camdessus.
In a closing news conference Friday, Camdessus declared Latin America "on
the right track" to weather the crisis and predicted a "strong" outlook for the
region going forward.
Despite such back slapping, Latin American finance ministers and central
bankers who attended the two days of talks returned home with little in hand.
Many economists had hoped the IMF would put up a reserve of funds to
scare away currency speculators, or take other like-minded - if less costly -
measures to soothe jittery investors.
"I would say I wasn't impressed" with the statement produced by the meeting
late Thursday, BT Alex Brown economist Christian Stracke said. "It didn't
blow me away by any means."
From the onset, analysts had questioned what the meeting could accomplish,
given that the broadening global financial crisis has left the IMF stretched thin.
But economists, particularly those at Wall Street investment banks, had
hoped to see the IMF put at least some money where its mouth was - if not
with some form of contingent fund, then perhaps by offering guarantees to
long-term debt offerings that would allow select Latin American countries
return to capital markets.
"I don't think they need to come up with $60 billion in new funds," Stracke
said, adding, "The benefits of a Latin bailout fund would outweigh the moral
hazard of perhaps encouraging fiscally imprudent governments."
Robert Fleming economist Omar Borla asked simply, "Where's the money?"
Finance ministers and central bankers, though, repeatedly played down the
notion that they had come to Washington with their palms open.
"No one came to ask for resources or loans," Brazilian Finance Minister
Pedro Malan insisted Friday.
In part, analysts said that's because they couldn't, given that a request for aid
from the IMF or other multilateral lenders would have undermined the
region's stance that it was well positioned to handle the current turmoil.
"A rescue package, after all, implies that there is something that needs to be
rescued," said Riordan Roett, director of Latin American studies at Johns
Hopkins University's School of Advanced International Studies.
Instead, they wanted to issue a wake-up call that Latin America, unlike Asia
or Russia, has adopted the reforms needed to survive the current crisis. Many
criticized the Moody's rating changes as poorly timed and, as Borla put it,
"too bold."
"The financial markets seem to think that the IMF or the World Bank or
someone has secret information from the countries that they can't get," said
Catherine Mann, a senior fellow at the Institute for International Economics.
"So they wait for a magic sign from the international institutions for them to
move in a certain direction."
On Friday, that direction was down, with Latin American stocks giving up
further ground and currencies also weakening. Adding to that trend was a
Dow Jones Industrial Average that fell nearly 42 points to end at 7640.25.
In Brazil, the real ended unchanged in the spot market, though traders
estimated the central bank spent about $2 billion to help keep it there. Sao
Paulo's Bovespa stock index fell as much as 14% before springing back on
the back of Camdessus's praise of Latin America to close 6.1% lower.
Santiago's IPSA index closed off 3.0%, while the peso weakened as well.
Mexico's IPC index closed down 1.8%, while its currency hit a new low of
10.22 pesos per dollar.
In Venezuela - which ironically shrugged off the Moody's downgrade
Wednesday - the General Index closed up 0.4%, due to a 6.8% jump in
bellwether Electricidad de Caracas. Its currency, the bolivar, ended
moderately weaker at 584.60 to the dollar.
Argentina's Merval Index fell 3.4% after falling as much as 6.3% earlier in the
session.
"The best thing is that this is a long holiday weekend," Roett said. "We'll see
what happens after Tuesday, when the communique (from the Washington
meetings) begins to peek through into the market."
-By Christopher Chazin and Michelle Wallin; 202-862-9291 |
