By Carla Mozee

Major Latin American stock markets dropped sharply Friday, with the sell-offs in line with a slide on Wall Street as investors remain shaken by the prospect that global economy recovery will be hurt by Europe's debt troubles.

Losses in the region ranged between 3.5% and 1% as the S&P 500 Index (SPX) measuring the broad U.S. equity market slumped 2% and the Dow Jones Industrial Average (DJI) stumbled more than 200 points during the session.

Brazil's Bovespa index fell 2.3%. Argentina's Merval lost 3.5% and Mexico's IPC gave up 1.5%.

Chile's IPSA fell 1% to 3,830.50. Late Thursday, Chile's central bank held its key interest rate at 0.5%, as expected, but policy makers indicated that it's considering a rate hike.

Among exchange-traded funds, the iShares Brazil Index Fund (EWZ) declined 3%. The iShares Mexico fund (EWW) fell 2.6% and the iShares Chile fund (ECH) gave up 2.4%.

As investors fled assets they perceive as risky, the currencies of Brazil, Mexico and Chile dropped against the U.S. dollar. Meanwhile, the euro hit its lowest level against the dollar since 2008. The euro's drop was sparked by a report -- that has since been denied -- that France's president had threatened to pull his nation out of the euro zone.

Earlier this week, the European Union and the International Monetary Fund created a nearly $1 trillion financial-aid package for vulnerable euro-zone nations. Greece last week approved austerity measures, followed by steps announced this week in Portugal and Spain.

"But, while Greece is the most profligate of EU members, it is not alone in its predicament as markets have punished Portugal, Italy, Ireland and Spain as well," wrote Sherry Cooper, chief economist at BMO Capital Markets, wrote in a note distributed Friday.

"The required fiscal contraction needed to reduce these longer-term structural deficits will bludgeon economic activity, exacerbating the deficit problem over the near term," she wrote.

In Sao Paulo, Petrobras (PBR) fell 1% as crude oil for June delivery tumbled more than 4% to below $72 a barrel on the New York Mercantile Exchange. The state-run oil giant is slated to release its results for the first quarter late Friday. Earnings are expected to climb 19% to 6.93 billion reals, according to a Dow Jones Newswires poll of analysts.

Other resource-related stocks were hit as dollar-denominated prices for commodities fell amid strengthening in the greenback. Brazilian steel maker Gerdau (GGB) lost 3.4% and Usiminas fell 4.5%.

In Buenos Aires, locally traded shares of Petrobras fell 3.6%. Petrobras Energia (PZE), the Argentina-based unit of Petrobras, dropped 2% and steel producer Siderar (ERAR.BA) fell 3.6%. In Mexico City, shares of copper miner Grupo Mexico lost 2%.

But shares of tortilla producer Gruma (GMK) was among the few advancers in Friday's session, up 1%. The shares recouped a portion of their 6.6% loss on Thursday when Venezuela took over Gruma's unit in the country.