Brazil's Bovespa Drops Below 30,000 for First Time in 3 Years

By Alexander Ragir and William Freebairn

Oct. 27 (Bloomberg) -- Brazil's Bovespa stock index fell below 30,000 for the first time in three years on concern tighter credit markets and the worst month for commodity prices in at least 38 years will hurt earnings growth.

All America Latina Logistica, the railroad operator that transports agricultural commodities, led the drop on the Bovespa index on speculation slowing demand for raw materials may cut profits. Usinas Siderurgicas de Minas Gerais SA, Brazil's second- biggest steelmaker, retreated for a fifth day as commodity prices extended declines on concern the global economic slowdown is deepening. Petroleo Brasileiro SA, the state-controlled oil company, lost 9.3 percent as crude futures plunged.

``The scarcity of credit and less demand for commodities will have to slow the economy,'' said Felipe Taylor, an equity portfolio manager at Rio de Janeiro-based Ciano Investimentos Gestao, the $142 million hedge fund run by former central bank chief economist Ilan Goldfajn.

The Bovespa index dropped 6.5 percent to 29,435.11, the lowest level since October 28, 2005. It plunged 14 percent last week. The MSCI Emerging Markets Index fell 4.3 percent. Mexico's Bolsa index slipped 0.5 percent.

In Brazil, the fastest economic expansion in more than a decade may end as commodity prices, the local currency and stocks plunge. JPMorgan Chase & Co and Banco BNP Paribas Brasil SA cut their growth forecast for Latin America's biggest economy to less than 3 percent in 2009, which would be the slowest since 2003.

ALL Declines

ALL led a decline in transportation stocks, falling 16 percent to 6.49 reais. The stock has lost 54 percent over the past five days as commodity prices plunged on concern the worst financial crisis since the Great Depression may send the world into a recession and lower demand for raw materials.

``With less demand for commodities these companies will transport less,'' said Januario Hostin Junior, who helps manage the equivalent of about $35 million at Leme Investimentos in Florianopolis, Brazil. ``They also are growth companies that need a lot of capital to grow, which is tougher to come by as credit markets tighten.''

Usiminas, as the steelmaker is known, dropped 4.8 percent to 22.75 reais. Latin American steelmakers are slowing output as the global financial crisis worsens, said Roberto De Andraca, chairman of the Latin American Steel and Iron Institute.

Cia. Vale do Rio Doce, the world's biggest iron ore miner, declined 8.2 percent to 20.24 reais. Copper demand in China, the world's biggest consumer, may grow at 5 percent this year, half the previous forecast, as the deepening global financial crisis curbs exports, said Duan Shaofu, copper division chief at the China Nonferrous Metal Industry Association.

Brazil Exports

The Standard & Poor's GSCI index of 24 raw materials lost 0.2 percent, extending its retreat this month to 32 percent, the most since at least 1970. Commodities account for two-thirds of Brazilian exports, according to the Brazilian Exporters Association in Rio de Janeiro. About half of the Bovespa is made up of raw-material producers.

Petrobras dropped 11 percent to 18.11 reais. Crude oil for December delivery touched $61.30, the lowest since May 9, 2007.

Elsewhere in Latin America, Argentina's Merval dropped 5.7 percent, Peru's Lima General fell 5.3 percent and Colombia's IGBC slid 3.2 percent.

To contact the reporters on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net; William Freebairn in Mexico City at wfreebairn@bloomberg.net.