As top Latin American economic officials started their second day of crucial talks with the IMF, the fund said it stood "ready to recommend the strengthening and broadening" of its existing support to the region if necessary.

But with little money to lend, the IMF limited itself to expressing confidence "that most countries in the region would continue to show positive output growth, and low or declining inflation."

A Sao Paulo trader gets more bad news

IMF officials say the lending agency will have just $10bn available for loans by the end of this year.

Its cash reserves have been drained by huge rescue deals for Russia and three Asian states, and the US House of Representatives has so far balked at providing the $18bn the Clinton administration is seeking to replenish IMF resources.

Gloom and despondency engulfed most of the region's financial markets on Thursday as Brazilian stocks closed at a two-year low, Argentine and Venezuelan shares nose-dived and the Mexican peso fell to a new record low against the dollar.

Rattled by global economic turmoil and a devaluation of the Colombian peso that could spark a currency crisis throughout the region, top officials from nine Latin American nations continued to discuss ways to defend their economies.

Moody over credit rating

Finance ministers attending the meeting were furious at US credit agencies who issued critical reports on several countries in the region, hitting already struggling financial markets hard.

Moody's Investors Service downgraded or put on review the foreign debt of Mexico, Brazil, Argentina and Venezuela while a director at Standard & Poor's said Brazil and Venezuela were the least credit-worthy countries in the region and would be hurt most by current market turmoil.

Brazil's Finance Minister Pedro Malan called Moody's downgrade of his country's foreign currency debt rating inexplicable.

He said: "It is something we can't understand. We have not been invited to comment on their underlying analysis. They have not been at the central bank. They have not been at the finance ministry."

Following Wednesday's devaluation of the Colombian peso, there was widespread speculation that Venezuela's bolivar would be next.

Finance Minister Maritza Izaguirre insisted Venezuela planned no big devaluation.

"We are not going to do some macro-devaluation, and we are not going to change our exchange controls. We are very clear on that message," she said.

The Latin American officials said they would maintain both open capital markets and their current exchange rate policies and regimes.

US Treasury Secretary Robert Rubin lent his support, and said developments in the region were "profoundly important" to the United States.

Mexico's Finance Minister Jose Angel Gurria complained that markets were overreacting to world financial problems and failing to discriminate between emerging economies.

"Everyone is thrown in the same basket, saying they are all emerging markets," he said.

Venezuela - next domino?

While Venezuela, which is Colombia's second largest trade partner, is considered most vulnerable to devaluation, investor attention has increasingly focused on Brazil, Latin America's economic powerhouse, whose gross domestic product of $800bn is nearly twice that of Mexico's.

President Fernando Henrique Cardoso, seeking re-election this year, has also vowed not to devalue.

Economists say a devaluation could plunge the entire region into a recession.