July 3 (Bloomberg) -- Brazilian stocks tumbled for a third day after the nation's second-biggest airline forecast larger- than-expected losses and Citigroup Inc. strategists cut their estimates for equities on concern about slumping commodities.

Gol Linhas Aereas Inteligentes SA led the decline in the Bovespa after Goldman Sachs Group Inc. said the airline's loss forecast exceeded estimates. Gerdau SA, the biggest steelmaker, plunged on speculation slowing growth will reduce demand for metals. Losses for raw-material producers sent the Bovespa to its biggest three-day decline since January after Citigroup said a ``collapse'' in commodity prices is a major risk for stocks.

``With rising rates around the world it's a bad time for equities,'' said Francisco Meirelles de Andrade, whose helps manage 220 million reais in assets at Nest Investimentos in Sao Paulo and is betting on a fall in Brazilian metal and oil stocks.

The Bovespa index of most-traded shares on the Sao Paulo exchange slid 1,391.76, or 2.3 percent, to 59,714.46 at 2:58 p.m. New York time. Mexico's Bolsa fell 0.4 percent. Chile's Ipsa dropped 2 percent.

Gol, the second-biggest airline, fell 8.2 percent to 14.75 reais, while TAM SA, the largest, plunged 5.9 percent to 25.41. Rising costs may lead Gol to report second-quarter operating losses of 300 million reais, compared with the 30 million real loss estimated by Goldman Sachs analyst Daniela Bretthauer.

Citigroup strategists said the Bovespa may drop to 60,000 on further declines in commodity prices. That represents a 7.7 percent cut from its previous estimate of 65,000 and a 1.8 percent decline from yesterday's close.

Bovespa Cut

``By far the biggest long-term risk for Latin American equities is a collapse in commodity prices,'' strategist Geoffrey Dennis wrote in a note. ``Brazil -- with over 60 percent of the index being cyclicals -- would be badly hit and, under such circumstances would likely fall well below the 60,000 level.''

The Bovespa has fallen 5.1 percent this year, hurt by slumping commodity prices and surging consumer prices. In June, the exchange suffered its biggest monthly foreign investment outflow on record as the fastest inflation in five years worsened the outlook for economic growth. Raymond James & Associates today cut their forecast for Brazil gross domestic product growth to 3.3 percent from 4.3 percent on concern the central bank will keep raising borrowing costs.

Gerdau paced declines for steelmakers, falling 6.6 percent to 33.50 Usinas Siderurgicas de Minas Gerais SA, Brazil's second- largest steelmaker, dropped 5.4 percent to 68.02 reais.

MPX Falls

MPX Energia SA, the mining and coal generation company controlled by Brazilian Billionaire Eike Batista, fell 7.1 percent to 785 reais. JPMorgan & Chase Co. began coverage of MPX with an ``underweight'' rating, writing that Brazil's energy policy may focus more on hydroelectric and nuclear energy or gas- fired plants rather than coal.

Cia. de Transmissao de Energia Eletrica Paulista led a gain in utilities after UBS AG said the company offers protection against inflation. CTEEP, as the electric distributor is known, gained for the first time in three days, adding 1 percent to 50.90 reais. UBS AG analysts Rafael Espirito Santo and Pedro Batista raised their share price estimate for the electricity distributor to Brazil's richest state by 19 percent to 62 reais.

In Chile, the main stock index fell, capping the steepest six-day decline since January, as investors bet the central bank will keep raising interest rates at a time of slowing growth.

Steelmaker Cap SA tumbled 7.8 percent to 20,501 pesos. Sociedad Quimica y Minera de Chile SA, the nation's biggest fertilizer and lithium producer, lost 4.7 percent 19,700 pesos. U.S. employers cut jobs in June for a sixth consecutive month as soaring fuel prices and a slowing economy forced companies to reduce costs.

Banco de Chile led a decline in interest-rate sensitive stocks after a government agency reported today that annual inflation rose to 9.5 percent in June, the quickest since 1994 and faster than the 9.1 percent median estimate of 14 economists in a Bloomberg survey.

Chile Banks

Banco de Chile dropped 3.3 percent to 35.59 pesos.

``The underlying pressure is anticipation of the central bank potentially raising rates by 50 basis points at the next meeting,'' Cesar Perez-Novoa, a managing director at Celfin Capital SA, said in a phone interview from Santiago.

In Mexico, the Bolsa declined for a third day.

Alfa SAB, the largest publicly traded chemical company, fell the most since April after Merrill Lynch & Co. slashed its forecast for 2008 earnings by 14 percent on the prospect of lower sales.

Elsewhere in Latin America, Argentina's Merval slid 2.1 percent, Peru's Lima General fell 3.7 percent and Colombia's IGBC index gained 1.9 percent.

To contact the reporters on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net; James Attwood in Santiago at jattwood3@bloomberg.net

Last Updated: July 3, 2008 15:18 EDT