Latin Markets Unscathed by Turmoil in Argentina

Latin American stock markets surged Friday despite Argentina’s quickening slide toward the largest debt default in history or a possible currency devaluation.

As legislators in Buenos Aires accepted Argentine President Fernando de la Rua’s resignation, stock markets in Brazil, Mexico and Chile all rose while the region’s most important currencies held steady or followed shares higher.

Argentine markets were closed after De la Rua announced his resignation Thursday following riots against his government’s austere and largely ineffective economic policies. Senate chief Ramon Puerta of the opposition Peronist party is now the provisional president, although Congress is expected to call early elections.

“We’ve been pretty positive on the whole region. Argentina is another story,” said Aryam Vazquez, a Latin American market analyst at IDEAglobal in New York.

The nation’s troubles also appeared to have little effect outside the region Friday as markets in North America and Europe were mostly higher.

For more than a year, Latin American markets have been hammered by chronic financial instability in Argentina. But even though analysts say the prospect of an Argentine debt default or the devaluation of its peso is increasingly likely, investors said the region’s markets were taking the latest turmoil in stride.

In Brazil, the country seen as most at risk from turmoil in Argentina because of its close trade and political ties, investors said the prospect of an improving domestic economy next year was helping override Argentine jitters.

“Given the gravity of the situation, the reaction hasn’t been so bad,” said Reginaldo Alexandre, head of research at Itau brokerage in Sao Paulo, Brazil.

The Sao Paulo Stock Exchange’s benchmark Bovespa index closed up 3.5% on Friday while Brazil’s currency, the real, finished only slightly weaker against the dollar. The index has climbed 26% in the fourth quarter even as the Argentine crisis unfolded.

In Chile, the IPSA index of leading stocks finished 1% higher. The Chilean peso ended flat against the dollar after a slight weakening Thursday.

“Inevitably, certain traders took advantage of the situation and bought pesos to make profits as they believe Chile’s market has become increasingly distanced from the Argentine situation,” said Patricio Mella, a trader with J.C. Tour.

Argentina’s own stock market, which was closed Friday, surged more than 26% on Wednesday and Thursday as investors bought shares to hedge against a possible devaluation of the peso.

In Mexico, meanwhile, investors preferred to focus on a key tax reform rather than dwell on Argentina’s problems. Investors have long divorced Mexican markets from events in Argentina because of the country’s close trade ties to the United States.

Mexico’s benchmark IPC stock index closed 1.9% higher, and the peso firmed.

Markets in Peru and Venezuela also were relatively unscathed by Argentine worries Friday.

Peru’s benchmark index rose 0.7%, and Venezuela’s market dipped 0.3%.

Among North American markets, the benchmark U.S. index, the Standard & Poor’s 500, gained 0.4% on Friday, and Canada’s TSE 300 index gained 1%.

In Europe, German stocks rose 1.7%, French stocks gained 1.6%, and shares in London closed up 1.6%.