By Carla Mozee

Latin America equities were hit hard Wednesday, after a broker projected a double-digit pullback in the region, and were also tracking sharp declines on Wall Street after a surprisingly weak showing for monthly U.S. retail sales.

Brazil's Bovespa fell 3.2% to 48,697.27, with oil giant Petrobras (PBR) down 2.1%.

Mexico's IPC lost 2.1%, Argentina's Merval dropped 3.3% and Chile's IPSA fell 0.4%.

On Wall Street, investors sold off shares after the Commerce Department said retail sales fell seasonally adjusted 0.4% in April, the eighth decline in the past 10 months. Analysts had widely expected sales to have increased slightly. Consumer spending drives 70% of the U.S. economy, which is currently battling a recession.

The S&P 500 Index (SPX) tumbled 2.6% and the Dow Jones Industrial Average (DJI) fell 2.2%.

The news of weak U.S. retail sales hurts the prospects for Mexico's economy particularly hard as the country exports about 80% of its products to the U.S.

Stocks were mired in losses, with just one of the 35-listed stocks on the index trading higher. Electronics retailer Grupo Elektra edged up 0.4%.

Shares of market heavyweight America Movil (AMX) fell 2.5%.

Airport operators PAC (PAC) lost 2.5% and OMA (OMAB) slumped 2.1%. Baked-good producers Grupo Bimbo slipped 0.9% and brewer Grupo Modelo shares gave up 3.3%.

Also, shares of copper miner Grupo Mexico fell 3.4% as copper prices dropped nearly 3%. Prices for copper and other metals fell after China said industrial production grew less than expected in April. Production expanded by 7.3% from the year-ago period, missing the Dow Jones Newswire estimate for a rise of 8%.

The industrial production figure pressured Brazilian iron ore heavyweight Companhia Vale do Rio Doce (RIO), sending them down 3.8%. China recently surpassed the U.S. as Brazil's largest trading partner.

The majority of the 65-listed shares on Bovespa dropped after Deutsche Bank said it expected a 10% to 15% "correction" in Latin America equities over the summer.

Equity strategist Guilherme Paiva said in a note to clients that the MSCI Latin America Index is up more than 40% since March 13 after the broker "mentioned the appearance of some early but encouraging" fundamental signs.

Deutsche said the "hefty" returns in the short time span have created a valuation problem in Brazil, particularly for large-cap commodity producers. Petrobras and Vale, Paiva said, are trading at 20 and 25.8 times earnings in 2009, above historical levels.

It forecast the Bovespa at 45,000 and 22,000 for the IPC.

In exchange-traded fund trading, the iShares Latin America 40 Index (ILF) fell 4.6%, iShares MSCI Brazil Index Fund (EWZ) dropped 5.5% and the iShares MSCI Mexico Index Fund (EWW) fell 3.4%.