MercoPress. South Atlantic News Agency

Brazil hardest hit by Monday's carnage in Latam markets

Sao Pablo operators stock market yesterday

Latin American stocks plunged Monday, led by a stunning 15% intraday drop in Brazilian shares, on concern about a world recession that could devastate the region's commodities-based economies.

Trading was halted twice on Sao Paulo's Ibovespa index as stocks reached their lowest level in more than two years before rebounding. Brazil's currency, the real, slumped nearly 7% in its biggest one-day percentage loss against the US dollar since 1999 and closed at a level not seen since September 25, 2006. The real finally closed at 2.17 to the US dollar from 2.04 on Friday. The Ibovespa later recovered, but still ended the day down 5.4% at 42,101, its lowest closing since November 28, 2006. Last May the Bovespa hit 73.000 points. Argentina's Merval fell 5.9% to close at 1,423, while Mexico's IPC index slid 5.4% to 21,749. Chile's IPSA dipped 6% to 2,450 (worst since September 1998), and Colombia's IGBC fell 4.9% to 8,761. The Chilean peso lost 4% to the lowest since June 2005 closing at 592 to the US dollar. Mexico's peso meanwhile dropped to 11.8 against the US dollar, a sharp decline from 11.1 on Friday and the lowest since the government lopped three zeros off the currency in 1993. Across the region, panicky traders said they had no idea when the market carnage triggered by the U.S. mortgage default debacle would end. Monday's losses follow a batch of steep market declines on Latin American markets during three sessions last week. They mark the second time in a week that the Ibovespa fell more than 10% in intraday trading, and Monday was the first time since 1997 that Brazilian trading was halted twice in a day. Brazilian equities, which have been pumped up with massive cash inflows for years, are now the hardest hit in the region. Foreign investors who only months ago gushed about Brazil's apparent immunity from the downturn are dumping shares in favor of investments they consider less risky. Latin America must "realize that competition for capital is going to intensify," US Commerce Secretary Carlos M. Gutierrez told reporters on Monday, ahead of a trip to Brazil this week. The Ibovespa has lost 34% of its value to date this year, including a 22% decline since September 19, when Brazilian President Lula da Silva shrugged off questions about the impact of the US financial crisis by telling reporters to "go ask Bush." Lula da Silva called an emergency economic meeting with the nation's finance minister and central bank president, and the Bovespa stock exchange put in place a new rule calling for a longer trading halt if Ibovespa losses hit 20 percent in one day. The Ibovespa is likely to bottom out around the 30,000 points, still 40% below Monday's close, said Ricardo Araujo, a finance professor at the Getulio Vargas Foundation University in Rio de Janeiro.