SAO PAULO, Brazil – Latin American stocks plunged Monday – led by a precipitous drop in Brazilian shares – on concerns that the world is descending into a severe economic slowdown that could devastate the region's commodities-based economies and set back hard-won gains for the poor.

Trading was halted twice on Sao Paulo's Ibovespa index after stocks sank 10 percent, and then fell another 5 percent – reaching their lowest level in two years. Brazil's currency, the real, slumped nearly 7 percent to a level not seen since early 2007.

After plummeting 15.1 percent in intraday trading, the Ibovespa recovered some lost ground but was still down 12.2 percent in the afternoon and stood at 39,101.

Argentina's Merval was off 9.7 percent at 1,366, while Mexico's IPC index fell 5.5 percent to 21,724. Chile's IPSA was down 7.1 percent to 2,423, and Colombia's IGBC fell 5.2 percent to 8,731.

The Bank of Mexico reported that the country's peso slid to 11.7667 against the U.S. dollar, a sharp drop from 11.1188 on Friday and the lowest since the government lopped three zeros off the end of currency denominations in 2003 to create a “new peso.”

Panicky traders had no idea when the market carnage in Latin America brought on by the U.S. mortgage default debacle could end.

“We didn't believe the volatility and uncertainty would so quickly reach the levels we've seen in the last few months,” said Ociel Hernandez, an economic analyst with the Bancomer bank in Mexico City. “In this moment, we're in the high part of a risky transition, the consequences of a global economic collapse.”

And that could squeeze the region's poor and emerging middle class, which have benefited from booming economies in recent years that allowed nations from Mexico to Brazil to spend lavishly on social programs and ease a long-standing deep divide between rich and poor.

“We're confronting an international economic crisis that's unprecedented for many years, and it's obviously going to make the management of economic policy much more complicated for all nations,” Colombian Finance Minister Oscar Ivan Zuluaga said.

Monday's losses come on top of steep market declines for Latin American markets during three sessions last week. It was the second time in a week that the Ibovespa has fallen more than 10 percent in intraday trading.

“The truth is that what we have today is a crisis of confidence,” analyst Marcelo Ogaze of Chile's Banco de Credito e Inversiones told El Mecurio newspaper. “I think we are living on panic.”

Brazilian equities have been the hardest hit since the U.S. financial crisis deepened last month, because its stocks had been pumped the highest for years with massive inflows of cash. Now big foreign investors, who gushed about Brazil's apparent immunity from the downturn only months ago, are dumping shares in favor of investments seen as less risky.

The Ibovespa is now down 37 percent for all of 2008. And it has lost 25 percent since Sept. 19, when Brazilian President Luiz Inacio Lula da Silva shrugged off questions about the impact of the U.S. financial crisis on Latin America's largest economy by telling reporters to “go ask Bush” about it.

Silva called an emergency economic meeting with his finance minister and the nation's central bank president, and the Bovespa stock exchange enacted a new rule calling for a trading halt lasting hours if Ibovespa losses hit 20 percent.

A worldwide economic slowdown would be extremely bad news for Latin America, where economies have registered strong gains for five years because of high global demand for commodities. Falling markets could stem demand.

It's hard to predict how much farther shares of big Brazilian companies may fall, said Alexandre Jorge Chaia, a finance professor at the Ibmec-SP university in Sao Paulo.

“It's difficult to specify a floor,” Chaia told Brazil's Globo TV. “It all depends on demand for commodities, and Brazil depends a lot on commodities.”

Many of Latin America's large companies are huge exporters of agricultural products such as soy and beef and of metals such as copper and iron ore.

The region has also benefited from huge foreign investment in recent years from U.S., European and Asian companies in sectors ranging from biofuel to manufacturing and real estate.

But companies are “going to relook at their investments plans, where they're investing, and they'll be more selective than ever in terms of choosing countries where they will invest,” U.S. Commerce Secretary Carlos M. Gutierrez told reporters ahead of a trip to Brazil this week.

Latin America must “realize that competition for capital is going to intensify,” he added.

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Associated Press writers Eduardo Gallardo in Santiago, Chile; John Rice in Mexico City; and Vivian Sequera in Bogota, Colombia, contributed to this report.