Latin American economic overview - September 8, 2006

Argentina: GDP: + 8.2% in June (compared with June 2005) Unemployment: 10.4% in Q2 compared with 11.4% in Q1 Industrial Output: + 8.8% in July (compared with July 2005) Consumer Prices: + 10.7% in August (compared with August 2005) Inflation Rate: 0.6% in August compared with July, 6.1% for the first 8 months Construction: rose 3% in July compared with June and 27.9% compared with June 2005 Automobile output: + 26.4% July and + 33.9% for the first seven months compared with year before Trade Balance: + $11.5 billion in July for the previous twelve months Currency: 3.10 Pesos to US$1 as of September 6 (2.91 Pesos to US$1 a year ago) Steel Production: 482K mt in July, 3.303 million mt in first seven months, or 5.3% ahead of last year Brazil: GDP: + 1.2% in Q2 (compared with Q2 2005), the smallest gain in nine months. Principal reasons are the strong currency (appreciated by 54% to the US dollar since May 2004) and subsequent lower exports Unemployment: 10.7% in July, a 15 month high Consumer Prices: + 3.8% in August (compared with August 2005) Industrial Output: + 3.2% in July (compared with July 2005), reversing a 0.6% year-on-year decline in June Trade Balance: narrowed to +$ 4.52 billion in August from $5.64 billion in July, surplus for the past twelve months to August: $46.1 billion Current Account Balance: + $12.5 billion for the latest twelve months as of July Budget Deficit: Government Budget Deficit rose to real 7.84 billion in July ($3.65 billion), a five month high, Brazil's net debt is 50.3% of GDP Automobile Sales: + 7.7% in August (compared with July) to 178,500 vehicles; however vehicle exports were down in August by 9.8% to 70,130 units Short Term Interest Rate: 14.18%, the lowest rate in 20 years Currency: Real 2.14 to US$1 September 6 (Real 2.33 to US$1 a year ago) Steel Production: 2,724K mt in July. In the first seven months of 2006 Brazil produced 6.6% less steel than in 2005 (17,203K mt vs. 18,417K mt). For the year, it is expected that Brazil's steel production will be around 31.04 million mt, a decline of 1.8% compared with 2005. The outage of CSN's major No. 3 blast furnace is the principal reason for the decline. Chile: GDP: + 4.5% annual rate in Q2 (change on year ago), slowest pace since end of 2003 Industrial Production: + 1.9% in July (change on year ago) – lowest since April Consumer Prices: + 3.8% August (change on year ago) Unemployment: 8.8% in period May – June (8.6% last year) Short Term Interest Rate: 5.25% (steady) Annual Inflation: 3.9% through August Trade Balance: + $17.0 billion in July Current Account Balance: + $2.2 billion in Q2 Copper Production: 458,214 tons in July up 9.1% compared with July 2005, first seven months, 3,063,296 tons, up 4.2% from same period last year Copper Price: $3.6197 per lb September 7 on the London Metal Exchange Currency: Pesos 540 to US$1 September 6 (Pesos 541 to US$1 a year ago) Steel Production: 140K mt July, 940K mt first seven months. Unchanged from a year ago. Special Focus – Union Settlement for Copper Miners: the strike at the world's largest copper mine, Escondida, was settled September 2. Now they will receive a 5% wage increase, an end-of-strike bonus of $4,600 (after tax), a bonus of $12,000 because of the high copper prices and generous new education, health care and housing benefits. The average annual income in Chile is $7,000. Venezuela: GDP: 9.2% in Q2 (change on year ago) Industrial Production: + 13.7% in May (change on year ago) Consumer Prices: + 2.2% in August, pushing the annual rate to 14.9%; cost of basic food items increased 14.79% in July for the latest twelve months Trade Balance: + $37.2 billion in Q2 (latest twelve months) Current Account Balance: +$29.5 billion in Q2 (latest twelve months) Currency: Bolivars 2,700 to US$1 September 6 (2,575 a year ago) Steel Production: 380K mt (estimated) a drop of 14% to July 2005 Special Concern - Declining Oil Production: Under the direction of President Chavez, more and more of PDVSA's (Petroleos de Venezuela S.A.) revenue is directed to social spending. A laudable effort, but PDVSA is lacking adequate investment into its core business of oil exploration. Output has fallen to an estimated 1.6 million barrels a day from 3.0 million in 1998. Spending for exploration has dropped to $60 million in 2004, the latest official figure (it is estimated to be less now) in comparison to $174 million in 2001. Current wells in Venezuela are so old that their current output falls by about 23% a year.