ADRs in Focus: Latin American Paper Up

The Bank of New York Latin America ADR index added 5.57 points to close at 434.96 on Wednesday. ADRs are American Depository Receipts, and represent shares of foreign companies traded in U.S. markets.

Tereza Mello said in a note to investors that she expected eucalyptus pulp prices to increase 12 percent in 2008. Prices will likely remain flat in 2009, but could add 10 percent in 2010, she said.

Mello added that pulp prices would likely peak in 2010, and said some of the benefits of higher pulp prices would be offset by the declining value of the U.S. dollar and stronger currencies in Brazil and Chile.

But she added demand in other markets would spur growth in the industry.

"While paper demand in developed markets could slow with lower global economic activity, demand in emerging markets should remain strong and further substitution should favor eucalyptus producers," Mello wrote.

Mello maintained a rating of "Buy" on Brazilian pulp and paper makers Aracruz Celulose SA and Votorantim Celulose Papel SA. She said while all the companies were expected to gain ground, Aracruz was her top pick because of higher liquidity.

Mello boosted her per-ADR earnings estimate for Aracruz to $4.97 from $3.54 for 2008. Her target is $92.

For Votorantim, she boosted per-ADR earnings estimates to $1.74 to 77 cents for the year and raised her price target to $39 from $37.

Aracruz ADRs gained 88 cents to end at $73.29.