Plunging oil prices and currencies, combined with tight credit markets, have formed a fiscal hurricane sweeping through Mexico, Venezuela, Brazil and Argentina.

Although oil prices rebounded 17% yesterday, a barrel of crude is down 45% from its record high of $147.27 in July.

Many Latin American countries prospered with rising oil prices. They are now in the throes of a crisis that obliterates any oil-premium safeguards for investors — at least for the near-term.

Petro-fascist Hugo Chavez of Venezuela lost some of his bluster.

Venezuela is one of the biggest oil exporters to the US. However, American consumption has been sliding along with the overall U.S economy. The January-April 2008 numbers show a 2.5% drop to 140,000 barrels from all of 2007.

Chavez has cut oil export deals with China and Russia. But it’s too soon to tell how much is flowing to those countries.

Still, if you were in Venezuela’s Caracas stock market you probably didn’t do too horrible compared with the rest of Latin America. It’s down 5.17% over the past three months.

Investors in Brazil’s Bovespa stock market, however, did much worse. It’s down nearly 41% during the past three months — perhaps one of the biggest surprises in Latin American economies.

Fitch Ratings forecast Brazil’s economy to grow by 3.3% next year, down from an earlier prediction of 5.1 percent.

With its rapid drop, the Bovespa certainly did some severe damage to investors caught in the downdraft. But the real question to ask is whether or not it’s time to get back in at today’s discounted prices.

Brazil is among the top energy independent countries in the world, both of fossil fuels and bio-fuels. This shields it from some of the inflationary pressures racking more import-dependent countries.

Also, Brazil’s banks haven’t been ravaged by the mortgage meltdown.

The Bovespa took a hit for two reasons: 1) an overall flight to safety and 2) a related loss of confidence in an oil-producing economy.

How much lower the Bovespa will drop is anyone’s guess. But if you have guts, it may be worth a look.

When it comes to Argentina, investors can still hear the screams from the massive default of 2001. Argentina needs about $12 billion in cash to make it through next year and no one is quite sure where that money will come from.

At least, until recently, Argentina could bank on rising oil prices.

The general lack of confidence in Argentina is clearly reflected it’s stock market, the Argmerv, which is down 37.2% in three months.

Meanwhile, Mexico is getting a double-whammy with big hits to the peso and oil. The Mexican IPC index slumped 28.6% during the last three months. It seems that many investors came up on the wrong side of currency trades.

Of all the Latin American oil producers, Mexico is in pretty good shape. It has low debt and big reserves. Given its trade status with the US, it could be one of the earliest beneficiaries of a US turnaround.

Since the beginning of 2008, six analysts have downgraded the Mexican cement giant, Cemex (NYSE: CX). Today, Citigroup (NYSE: C) became the latest to lower its outlook.

None of the downgrades were an outright sell. Instead, they went from buy or overweight to hold or neutral.

In this take-no-prisoners market, Cemex is an obvious target. As goes the worldwide housing sector, so goes Cemex. But is that any reason for the stock to plunge to a 52-week low of $7.90 from $33.40?

We don’t think so.

Cemex is a major player. The company has operations in more than 50 countries that produce 96 million metric tons of cement annually. Cemex is has become one of the largest cement companies in the world. Consider it the IBM of cement.

Now with some recent news, Cemex could be poised for a rebound.

For starters, Mexican president Felipe Calderón unveiled plans for $4.35 billion in emergency spending on infrastructure next year.

Unlike the Bush administration, whose trickle-down economics favors handouts to the wealthy, Calderón is following in the footsteps of President Franklin D. Roosevelt’s New Deal, which created public-works jobs for ordinary Americans.

Calderón’s $4.35 billion infrastructure build-out is slated to begin in 2009, pending approval by Mexico’s congress.

It would be used to build infrastructure projects such as bridges and highways that “will bring direct social benefits to millions of Mexicans and help keep our economy on track,” Calderón said.

In its 3Q guidance issued on September 11, Cemex noted that the “infrastructure sector continues to be affected by a delay in project starts, which are expected to pick up in the last quarter of 2008.”

Still, the company’s bread-and-butter is the residential market, which has also come to near stand-still in Mexico.

Cemex’s 3Q guidance also forecast domestic cement and ready-mix sales volumes in Mexico to decrease by about 3% and 1% respectively, versus the comparable period last year — a bad hit but far from crippling.

Overall, 3Q sales are expected to be about $5.9 billion flat on a like-to-like basis, versus the same period last year. Revenue should be approximately $17.6 billion, a 2% increase in the same period.

To put that guidance into perspective, let’s look back to 2Q and 1Q of this year.

For 2Q, net sales increased 29% to $6.3 billion, versus $4.9 billion in the comparable period in 2007.

1Q looked particularly good. Net sales rose 26% to $5.4 billion over the comparable period in 2007.

Watch Cemex. As soon as the stock creeps back up, it may be a great contrarian buy.

When it comes to energy, Mexico could benefit from growing tensions between the U.S. and the world’s biggest natural gas supplier, Russia. Overall, unrest in many oil-producing countries around the world makes Mexico a relatively stable provider of crude and natural gas.

Mexico is the world’s sixth largest oil producer and a major exporter to the U.S. Oil revenue is one of the country’s top sources of foreign currencies.

Of course, no oil provider is immune to the recent decline of a barrel of oil. When the hurricanes blow off into oblivion, chances are the reduced consumption of oil worldwide could keep prices in a slide.

Moreover, Mexico’s offshore oil production has been in decline this year, affecting its crucial export revenues.

At the same time, relatively high yields on Mexican debt compared to U.S. Treasuries are attractive to investors.

Mexico’s central bank continues to tighten borrowing costs, setting its key interest rate to 8.25% and pushing the spread between Mexican and U.S. benchmark overnight rates to 6.25 percentage points, the widest since late 2005.

The high interest rates and the U.S. shakeout of the banking sector have reinforced confidence in the peso. The thinking is that as Lehman Brothers (NYSE:LEH) and Merrill Lynch (NYSE:MER) get crushed, the silver lining here is that the world markets are actually taking a step closer to stability — at least that’s the bullish take on the catastrophes.

If that’s the case, U.S. interest rates could start to decline again, making the yield on Mexican bonds even more attractive.

Along with competitor Telefonica SA in Argentina, the iPhone 3G has amassed a backlog of 50,000 eager consumers. The Mexico City-based America Movil began selling the sizzling gizmo in Mexico on July 11 — contributing to this enormous backlog in a matter of days. Now the company is engaged in a regional rollout that may restore the stock its previous luster.

America Movil recently rolled out the iPhone 3G Argentina, Chile, Colombia, Peru and six other countries. The numbers have not come out yet, but we believe the potential is strong — making the company a potential long-term play.

America Movil has only risen 1.4% since the July 11th Latin debut of the iPhone 3G. But the company has outperformed the Mexican Stock Exchange’s IPC index of leading issues, which declined 5.58% during the same period. However, over the past five years the stock has skyrocketed 616%.

Currently, with stock trading just south of $50.00, the price remains on the low end of its 52-week range of $47.08 and $69.15. But that could easily change for the better.

“As from 2010…a possible reduction in the cost of handsets will provide the value added services (VAS) offering with a new dynamic in the region’s most developed markets: Argentina, Brazil, Mexico and Venezuela,” Argentina-based Signals Telecom Consulting told the Latin Business Chronicle on August 18th.

As a result, 3G service revenues should reach more than $5 billion in 2010 and jump to $36 billion in 2013, Signals forecasts. That compares with less than a $1 billion today.

Argentina, Uruguay and El Salvador have Latin America’s highest wireless penetration rates, so products like the iPhone will help operators get new business from existing clients, reported the Latin Business Chronicle.

America Movil is ideally positioned to cash in the market forces driving wireless communications in Latin America. As of As of December 31, 2007, the company had approximately 153.4 million subscribers in Mexico, Brazil, Argentina, Paraguay, Uruguay, Chile, Colombia, Ecuador, Peru, Guatemala, El Salvador, Nicaragua, Panama, the Caribbean, the United States, Puerto Rico, the U.S. Virgin Islands, and Jamaica.

The potential of America Movil follows the pattern of our so-called Cell Phone Index that we wrote about here on August 22, 2008.

As emerging economies come into their own, one of the first improvements you’ll see is a new communications system.

We reported that the biggest growth of emerging-market cell phones was seen in Latin America where sales increased 28.4% compared with Q1 2007.

Given the pent up demand for the iPhone 3G in Latin America, we have every reason to believe that America Movil could rebound to it’s previous 52-week high over the coming 12 months.

Unless you’re a Spanish speaker, you probably don’t realize how much Spanish programming dominates the American airwaves. If you did you’d probably be pretty well off by now. But it’s not too late…

Because if you don’t have Hispanic media in your portfolio, today’s depressed prices could make this the perfect time to tune in for a long upside potential.

The global economic malaise and some corporate infighting have made the two leading Hispance media companies undervalued opportunities. And based on the latest census numbers, you may want to capitalize on America’s shifting demographics.

The numbers clearly indicate a boom in America’s Hispanic population. The US population is projected to grow to 439 million by 2050. Most of that growth will come from Hispanics. By 2050, about 33% US residents will be Hispanic.

The growth comes from a combination of immigration and new births. Hispanics will lead the new mix of America’s population. In 2050, the share of the black population will have increased by one percentage point to 15%. The Asian populations will rise to about 9% from 5% today. The growth of whites will remain virtually flat.

More Hispanics means more eyeballs in front of the TV. Two Spanish-speaking media companies are now dominant in Hispanic programming. Univsion Communications (UVN.MX) and Grupo Televisa (NYSE:TV).

These rivals have been sparring for years in the court room and on the trading floor. Mergers, distribution deals and big egos have created a nasty sibling rivalry. Both stocks have suffered from this bloody brawl.

Checking in on Univision, the company’s Q2 numbers were not particularly impressive… but again you need to consider this for the long haul.

Net revenue declined 4.3% to $533.1 million from $557.3 million in 2007. Operating income before depreciation and amortization1 decreased 10.9% to $219.9 million in 2008 from $246.8 million in 2007.

For the six months ended June 30 net revenue increased 0.1% to $991.9 million in 2008 from $990.9 million in 2007. Operating income before depreciation and amortization decreased 5.8% to $370.8 million in 2008 from $393.5 million in 2007.

Despite the poor showing, Univision ranked as the number-three network in primetime with a young adult audience (18-34), according to the company.

That’s bigger than NBC, CBS and the CW for the entire quarter.

Grupo Televisa didn’t do much better…

Its Q2 numbers, which came out on July 17, showed an 8.6% decrease in net majority profit. The company attributed the poor earnings to expenses related to one of the company’s television stations in San Diego, California.

Basically, GrupoTV chalked it off a goodwill writeoff, which often means that at one point management overpaid for an asset that lost considerable value.

However, net sales rose 17% to 11.504 billion pesos. They got a big boost from its pay television units.

Earnings for Univision and Grupo Televisa may not have impressed. But thanks to the clear demographic trend in favor of Hispanics, the upside potential is huge.

I won’t regurgitate the bad news on Wall Street, since I don’t want to rub it in. All I can say is that while most investors are crying in their beer, readers of the Taipan Emerging Market Blog are raising a glass of champagne. (Oops, did I just rub it in?)

Once again the best news comes out of Asia. Our biggest winner this week is India’s Sensex Index (Bombay: BSESN) at +3.99%. It barely beat out our long-term gainer, the Shanghai SSE Composite Index (Shanghai: 000001.SS), which rose 3.49%.

The Times of India credits the boost to expectations on inflation.

Data released after market closed on Thursday showed annual inflation at 11.91% in early July, slightly higher than the previous week’s 11.89%, but below market expectations for more than 12%, according to the Times of India.

It also reported that lower crude prices helped interest-sensitive sectors like banks and real estate.

If this trend can continue in India, it’s likely to spread to other emerging markets. Inflation has been hurting just about all of these markets – undermining otherwise thriving economies. Although it’s too soon to tell if this is a long-term trend, I’d suggest you put your broker on speed dial.

ALL ORDINARIES IDX (ASX: AORD) Australia
BSE SENSEX (Bombay: BSESN) India
IBOVESPA SAO PAULO (BVSP) Brazil
EGYPT CMA GENL INDX (Cairo: CCSI) Egypt
HANG SENG INDEX (HKSE: HSI) Hong Kong
COMPOSITE INDEX (Jakarta: JKSE) Jakarta
COMPOSITE INDEX (Kuala Lumpur: KLSE) Kuala Lumpar
KOSPI Composite Index (KSE: KS11) South Korea
MERVAL BUENOS AIRES (Buenos Aires: MERV) Argentina
IPC (Mexico: MXX) Mexico
NZX 50 INDEX GROSS (NZSE: NZ50) New Zealand
IGBM (Madrid: SMSI) Spain
TEL-AV TASE-100 IND (TA100) Israel
TSEC weighted index (Taiwan: TWII) Taiwan
SSE Composite Index (Shanghai: 000001.SS) Shanghai
iShares MSCI South Africa Index (EZA) South Africa
RTSI INDEX (RUS: RTS.RS) Russia
ISHARES MSCI THAILAN (NYSEArca: THD) Thailand
iShares MSCI Turkey Invest Mkt Index (TUR) Turkey

Source: Taipan Emerging Market Index Gains 9.3%

Mexico’s Cantarell oil field is entering a period of catastrophic decline.

The country’s energy ministry has just fessed up that Cantarell’s output has plunged by one-third in just the last year — from 1.6 million barrels a day to just over 1 million. That annual decline rate is more than double the previous figure of 14%. Soon it will no longer be possible to label Cantarell of the “Big Four” world oil fields. (The others are Saudi Arabia’s Ghawar, Kuwait’s Burgan, and China’s Daqing.)

To try to boost production from other Mexican reserves, President Felipe Calderon is trying to convince lawmakers to loosen the limits on the role of foreign oil-services companies. It’s a tough sell — state control of the oil sector via the national oil company Pemex is tantamount to a secular faith in Mexico — but something’s gotta give, and soon.

Based on the account of the Financial Times, there seems to be a strange debate going on in Mexico that sort of parallels the one in this country. Here, it’s the question of more drilling versus alternative energy. (How about both? We’re gonna need whatever we can get.) While in Mexico…

Many opposition leaders argue the problems stem mainly from the government’s rising dependence on oil income, which has starved Pemex of cash it could use for exploration.

But the government maintains the vast bulk of the country’s [remaining] reserves lie in deep waters and require technology and knowhow to develop that Pemex does not possess.

There is nothing about these two arguments that’s mutually exclusive. Both of them are true. Pemex is starved of cash for exploration, but even with that cash it’s going to need outside help. And the new head of Pemex recognizes that reality.

In the latest issue of Outstanding Investments, Byron King clues his subscribers in to a company uniquely positioned to provide that help.

Source: Dying Giant