EMERGING MARKETS – Brazil collapses on tax issues, Petrobras slips
Band Ambar Warrick and Susan Mathew
October 19 (Reuters) – The Brazilian real hit its lowest level in six months and stocks fell 3.4% on Tuesday as government plans for more welfare raised concerns over stretched budget spending, while most others Latin American currencies have recovered some recent losses with the dollar decline.
The truth BRBY, BRL = fell 1.7% to 5.6049 per dollar, before the central bank’s first intervention in the spot currency market since March, helped the currency move away slightly from the lows reached in April.
The stumble followed the speaker of the lower house of Congress signaling that he might be open to discussing the introduction of a social assistance program, which could break the country’s spending ceiling. These measures take place before the elections next year.
A higher budget deficit and more debt issuance are likely to damage Brazil’s financial credibility. Rising inflation is also expected to erode growth in Latin America’s largest economy.
“The real is expected to continue to underperform – higher fiscal uncertainty is likely to contain the impact of (central bank) foreign exchange interventions,” Citi strategists said.
Brazilian stocks .BVSP seemed to mark their worst session in six weeks, with Petrobras PETR4.SA, PETR3.SA slipping around 4% after the oil company confirmed it would not be able to meet “atypical demand” from fuel distributors in November which exceeded production capacity, raising fears of supply shortages in the country.
Meanwhile, a 16% increase in its business debut for Brazilian payments company Getnet Brasil GTT4.SA, owned by the Spanish bank Santander SAN.MC, helped to cap the losses of the main Bovespa index.
Other Latam currencies performed better, recovering from recent losses caused by concerns about slowing Chinese economic growth. FRX /
mexican peso MXN = rose 0.8% and hit three-week highs, while the Colombian peso COP = increased as he resumed trading after a vacation. But most emerging market currencies have fallen in recent sessions as investors become increasingly concerned about rising inflation.
Chilean peso CLP = rose 0.7%, following strong copper prices as supply disruptions to Peru, a major producer, pushed up rates for the red metal. MET / L
the soil of Peru PEN = fell slightly after a community said it would block a key mining road used by the Las Bambas copper mine in protest after negotiations with the government failed.
In El Salvador, President Nayib Bukele has said that the Volaris airline will accept bitcoins in the country. Cryptocurrency was adopted as legal tender in El Salvador last month. Bitcoin BTC = BTSP hit six-month highs on Tuesday at $ 63,528 to the dollar.
Main Latin American stock market indices and currencies:
Stock market indices
% daily change
MSCI Emerging Markets .MSCIEF
MSCI Latin America .MILA00000PUS
Brazil Bovespa .BVSP
Mexico CPI .MXX
Chile IPSA .SPIPSA
Argentina MerVal .MERV
Colombia COLCAP .COLCAP
% daily change
Real brazil BRBY
mexican peso MXN = D2
Chilean peso CLP = CL
Colombian peso COP =
Peru soil PEN = PE
Argentine peso (interbank) ARS = RASL
(Report by Ambar Warrick Editing by Paul Simao and Alistair Bell)
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