By Carla Mozee

A drop in commodity prices contributed to losses across Latin America's major equity benchmarks on Friday.

Brazil's Bovespa posted the biggest pullback, down 2.3% at 41,625.36.

A nearly 5% tumble in crude-oil prices to below $52 a barrel on the New York Mercantile Exchange put selling pressure on shares of Brazilian market heavyweight and oil producer Petroleo Brasileiro. They dropped 3.3%.

The oil giant was also weighed by a downgrade to hold from buy at Deutsche Bank as company's U.S.-listed shares (PBR) have reached the broker's price target of $35.

After the hitting the target "and with no certainty on the sustainability of the current oil price rally, we recommend investors to take a pause on adding positions," wrote research analyst Marcus Sequeira in a note Friday.

Argentina's Merval fell 1.1% to 1,136, with shares of Tenaris (TS) down 1.8%. The company produces steel tubes used by the oil industry.

Deutsche Bank, in its note about Petrobras, said Tenaris could see downside risks if weakness in North American natural gas prices intensify, which could result in rig count declines that are steeper than expected. North America represents about 40% of Tenaris' total net sales, said the broker.

Metals prices were also under pressure Friday, largely stemming from a climb in the U.S. dollar against its major competitors. Strength in the currency puts pressure on U.S.-denominated resource prices. The dollar index (DXY), a measure of the greenback against a trade-weighted basket of rival currencies, climbed 1.7%.

In Mexico, the IPC index shed 0.9%. Decliners included copper miner Grupo Mexico, down 4.1%. Market heavyweight America Movil (AMX) was also down, by 2.5%.

Back in Sao Paulo, shares of Companhia Vale do Rio Doce (RIO) slumped 2.5%. The world's largest producer of iron ore, a key component in the production of steel, said Friday it hasn't agreed to a 40% temporary discount on its supplies to China.

The denial came in the wake of a report that an official at China's Iron and Steel Association said iron ore producers have granted a price cut on their contract for 2008-2009.

Other Brazilian steel stocks slumped. Gerdau (GGB) fell 2.3%, CSN (SID) lost 1.6% and Usiminas slipped 0.1%.

Bradesco analyst Raphael Biderman on Friday noted that spot iron-ore prices in key steel producing regions in China have dropped this week, and that weakening of those prices has been confirmed by a 10-session loss streak on the Baltic Dry Index.

The negative outlook for metals "is to some extent already priced in," and for "investors wanting to play on a short-term recovery in natural resources stocks, Vale is an attractive option," said Biderman in a note to clients. Vale is trading in line with the steel sector, and "we believe Vale deserves a premium," as it has underperformed the Bovespa this month, he said.

Elsewhere in Brazil, shares of Embraer (ERJ) led decliners on the Bovespa, with a fall of 7.4%.

The aircraft maker said its fourth-quarter profit fell 44% to $111.7 million, or 72 cents per American depositary share, from $200.9 million, or $1.08 per ADS, in the year-ago period, based on U.S. accounting methods. The net income was hit by currency-hedging losses as Brazil's currency, the real, fell against the U.S. dollar, the company said.

Revenue fell 3% to $1.82 billion, with plane deliveries at 59 compared with 61 a year ago.

In Santiago, Chile's IPSA was off 0.2% at 2,545.

In exchange-traded fund action, the iShares MSCI Chile Investable Market Index Fund (ECH) was off 0.8%.

Bruce Zaro, chief technical analyst, in a telephone interview Friday, said that the ETF has been among its strongest performers on its international country matrix as it has shot up more than 30% since hitting its low on Oct. 24.

"It's consistent with Latin American markets being resource-dependent, and, specifically with Chile, copper being resurgent and demand picking up."

Chile is the world's biggest copper producer. On Tuesday, copper prices hit its highest level in four months, at $1.8790.