Latin Day Ahead: Brazil Is Poised to Close Rating Gap on Mexico

Rating companies are reassessing Brazil and Mexico’s credit ratings, according to Goldman Sachs Group Inc.; Saab AB is ready to make Brazil the manufacturing center for its Gripen jet fighter; Honduras’s deposed President Manuel Zelaya arrives in Washington today in an attempt to maintain international support; The world’s most affluent nations will take decades to work off the biggest buildup in debt since World War II.

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Saab AB, the Swedish maker of the Gripen jet fighter, is ready to make Brazil the manufacturing center for the aircraft to increase its chances of winning a $1.8 billion order and safeguard the model’s future.

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Honduras’s deposed President Manuel Zelaya arrives in Washington today to seek a meeting with Secretary of State Hillary Clinton and maintain international support for his reinstatement.

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The world’s most affluent nations will take decades to work off the biggest buildup in debt since World War II. The political costs may be permanent, laid bare a this week’s Group of Eight summit of leading industrial powers.

MAIN COMPANIES:

Brazil

JBS SA (JBSS3) (JBSS3 BS): The world’s biggest beef producer is expanding its slaughtering capacity in Brazil to more than 26,000 by adding five new units with total capacity to slaughter and debone 5,150 head of cattle a day, the company said yesterday. JBS rose 4.7 percent to 7.19 reais.

Cia. de Bebidas das Americas (AMBV4 BS): Latin America’s biggest brewer may have its Baa3 credit rating, the lowest investment grade rating, raised by Moody’s Investors Service, the ratings company said. Ambev, as the Brazilian unit of Anheuser-Busch InBev NV is known, rose 1.6 percent to 127.10 reais.

Vale SA (VALE5) (VALE5 BS): The world’s biggest iron-ore producer said it plans to offer 65.7 million convertible notes split into two series due 2012 on global capital markets for general corporate purposes. The stock fell 1.8 percent to 29.38 reais.

Chile

Banco Santander Chile (BSAN CC): Chilean consumer prices increased 0.2 percent in June, according to the median estimate of 16 economists in a Bloomberg Survey. The country’s National Statistics Institute will announce monthly and yearly inflation on the institute’s Web site today. Banco Santander Chile, the country’s largest lender, fell 2.1 percent to 23.35 pesos.

Mexico

Wal-Mart de Mexico SAB (WALMEXV MM): Mexico’s consumer confidence rose in June, the national statistics agency said on its Web site. The index increased to 81 from 78.3 in May, the agency said. Economists had estimated confidence would fall to 77.4, according to the median of six forecasts compiled by Bloomberg. Walmex, the country’s largest retailer, fell 1.7 percent to 38.08 pesos.

LATIN AMERICAN MARKETS:

Argentina: The nation needs to cut spending to avoid running a budget deficit for the first time in seven years as a slumping economy hurts tax revenue, Sebastian Briozzo, a Standard & Poor’s economist in Buenos Aires, said in an interview yesterday. Spending grew almost 11 times as fast as revenue in May as President Cristina Fernandez de Kirchner increased expenditures on roads and schools before June 28 mid- term elections in which her coalition lost its majorities in congress. That mismatch can’t be sustained, said Briozzo, and other economists.

The peso was little changed at 3.8024 per dollar.

The yield on the country’s inflation-linked peso bonds due in December 2033 rose 10 basis points, or 0.1 percentage point, to 13.96 percent, according to Citigroup Inc.’s local unit.

Chile: Annual inflation slowed to 1.7 percent in June from 3 percent the previous month, according to the median forecast of 11 economists in a Bloomberg survey. The central bank targets inflation between 2 percent and 4 percent. The national statistics agency is expected to release its consumer price index report at 8 a.m. New York time.

Chile’s trade surplus narrowed to $950 million last month from $956.4 million a month earlier, according to the median estimate in a Bloomberg survey of 11 analysts. The central bank is slated to release the trade report at 8:30 a.m. New York time.

The peso declined 0.4 percent to 540.75 per dollar.

The yield for a basket of Chile’s 10-year fixed-rate peso bonds dropped two basis points to 2.74 percent, according to Bloomberg composite prices.

Mexico: The country will need “a lot of negotiation” to pass legislation through a divided congress to buoy government revenue and narrow a budget gap, Lisa Schineller, an analyst at Standard & Poor’s, said in a telephone interview in New York. President Felipe Calderon’s National Action Party, or PAN, lost its place as the biggest party in the lower house to the opposition Institutional Revolutionary Party, or PRI, in July 5 midterm elections.

The peso fell 0.1 percent to 13.2407 per dollar.

The yield on Mexico’s 10 percent bond due December 2024 fell six basis points to 8.37 percent, according to Banco Santander SA.

Brazil: The nation’s credit ratings were put on review for an increase to investment grade by Moody’s Investors Service, which cited the country’s “demonstrated resilience to shocks” in the global economy.

The real was little changed at 1.9530 per dollar.

The yield on the zero-coupon, real-denominated bond due in January 2010 fell two basis points to 8.83 percent, according to Banco Votorantim.

Other prices in Latin American markets:

Colombia: The peso weakened 0.7 percent to 2,104.50 per dollar.

The yield on Colombia’s benchmark 11 percent bonds due July 2020 fell seven basis points to 9.02 percent, according to Colombia’s stock exchange.

Peru: The sol was little changed at 3.0155 per dollar.

The yield on Peru’s 8.6 percent bond maturing August 2017 fell two basis points to 5.48 percent, according to Citigroup Inc.’s unit in Lima.

ECONOMIES: Brazil will publish FGV inflation figures and May CNI capacity utilization; Chile will report June consumer prices and its trade balance.

-- With assistance from Hugh Collins in Mexico City and Andrea Jaramillo in Bogota. Editor: James Cone.

To contact the reporter on this story: Laura Price in London at lprice3@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos in New York at papadopoulos@bloomberg.net

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