By Carla Mozee

Latin American stocks slid Tuesday as ratings cuts on the sovereign debt of Greece and Portugal heightened investor worries that those nations' economic troubles may unleash a worldwide impact.

A 3.2% day-session slide in Brazil's Bovespa to 66,511.10 left the index with a year-to-date loss of 3%. It's the first time since late March that the index tracking the region's largest stock market has been in the red for the year.

Mexico's IPC fell 3.2% to 32,679.36, its sharpest percentage drop since a 4% tumble in late-June 2009.

Argentina's Merval fell 2.4% to 2,412.33, the steepest loss since late February. Chile's IPSA logged a 0.6% fall to 3,803.07.

U.S. stocks tumbled, with the S&P 500 Index (SPX) down 2.3%. The Dow Jones Industrial Average (DJI) sank 213 points to 10,991.99.

At the same time, Wall Street's so-called fear gauge, the CBOE Market Volatility Index (VIX), jumped 31%, its steepest climb in more than 18 months.

The sell-offs accelerated following Standard & Poor's decision to cut Greece's debt to the "junk" rating of BB-plus. It also lowered Portugal's long-term ratings by two notches to A-minus. The outlooks on the ratings are negative.

The ratings downgrades "have set off another nasty bout of risk aversion. The worry is now that the fiscal/debt crisis in Greece is set to reach a cathartic climax much sooner than had been anticipated," wrote Citigroup Latin America strategists Geoffrey Dennis and Jason Press in a research note.

As individual stocks were hit, so were exchange-traded funds. The iShares Brazil Index Fund (EWZ) slid 4.7% and the iShares MSCI Mexico Index Fund (EWW) fell 5.4%. The iShares MSCI Chile Investable Index fund (ECH) lost 2.3%.

If Greece were to default on debt, Latin American equities would be affected by "a fair amount" in the short-term, but by "very little" in the long-term, wrote the Citigroup strategists.

"The region's sound fundamentals are intact. While we understand that investors may want to be more defensive near-term, we would still recommend buying this sell-off. Mexico is likely to remain more defensive than Brazil near-term."

The U.S. dollar rose against the currencies of Mexico and Brazil as well as the euro as investors sought shelter from the safe-haven status of the greenback. Mexico's peso traded at 12.387 per dollar, down from 12.153 on Monday. The real fell to 1.767 from 1.744 in the previous session.

The dollar index (DXY), which measures the U.S. unit against a weighed basket of six other currencies, rose 0.8% to 82.38.

The rise in the dollar pushed dollar-denominated commodities prices lower, and prompted selling in resources-related stocks. In Brazil, preferred shares of oil giant Petrobras (PBR) dropped 3.6% as crude oil for June delivery fell 2.1% to $82.44 a barrel, the lowest close for most-active contract in nearly a month.

Petrobras' preferred shares marked their steepest loss since Feb. 4.

Copper for July delivery slumped 4.6% to $3.3825 a pound as concerns that economic troubles in the euro-zone will lead to a pullback in demand for the industrial metal. Platinum fell 1.4%, and silver lost 1.2%.

Sao Paulo-traded shares of Vale (RIO), the world's largest iron-ore provider, slid 4.9%, also their worst performance since Feb. 4. Shares of sugar and ethanol producer Cosan (CZZ) fell 4.1%, and pulp and paper producer Fibria (FBR) gave up 5.9%.

In Mexico, copper producer Grupo Mexico shares fell 3.7%, and wireless services giant America Movil (AMX) fell 1.4%.

Also lower were shares of Cemex (CX), down 3.5% after the Mexican cement supplier posted a first-quarter loss from continuing operations of $341 million as sales fell 10% to $3 billion from the year-ago period.