Skittish Latin Americans may retreat from buying stocks

MEXICO CITY -- Matias Zvetelman of Argentina started dabbling in the stock market three years ago, buying a few blue chips through an online broker whenever he had some extra money.

It was unfamiliar territory for him. In Latin America, stock markets are seen as a club for the rich, and most countries are just beginning to persuade middle-class investors to get in.

Those who did, such as Zvetelman, saw their modest holdings soar in value — until they all came crashing down this month. "It scared me," Zvetelman said, speaking by telephone from Buenos Aires. "I managed to get my money out before the worst of it hit. But with what I'm seeing now, I'm not going back in."

Across Latin America, economists and stockbrokers are afraid the economic chaos of recent weeks will thwart efforts to lure regular people to capital markets, an important step for countries trying to fire up their economies.

The drive for new investors has been intense: "The Stock Market Can Be Yours," says a 10-story-high sign on the side of the Mexican Stock Exchange. "Start earning!" says a TV ad for an investing contest sponsored by the Bank of Chile. A pink banner on InvertirOnline.com, an online brokerage in Argentina, courts female investors: "We know what they want," it says.

What investors want right now is safety, said Juan Carlos Gozzi, an economist and expert on Latin American stock markets at Brown University.

"For sure, this is going to be a setback for investor participation in these markets," Gozzi said.

Since Sept. 19, most Latin American stock indexes have suffered double-digit drops, including 46% in Argentina and 34% in Mexico.

And while smaller investors are not yet selling in droves, they're also not flocking to open accounts, said Carlos Ponce, director of analysis for Mexico's Ixe Financial Group, which owns a brokerage house.

"We have been working for several years to try to change the erroneous image that people have of stock investing," he said. "Now, with this crisis, we're going to have to go back … and try to convince people all over again."