Brazil’s currency and stocks dropped during Friday’s trading on concerns that fiscal reforms could be derailed by a potential investigation into whether President Michel Temer pressured an ex-minister to allegedly favor a cabinet colleague’s property investment.
iShares MSCI Brazil Capped ETF shares slipped 2 percent Friday, while shares of Brazil’s largest non-government owned bank, Banco Santander, fell nearly 2 percent, closing at $8.20 per share. The real slipped as much as 2.2 percent to 3.4679 reais but later pared back losses to 0.47 percent. Brazil’s main stock market index, the Bovespa, fell 1.3 percent before cutting losses to trade 0.2 percent lower.
Geddel Vieira Lima, the Cabinet minister in charge of congressional relations, resigned after Temer was pressured to remove Lima for allegedly using his public office to obtain a permit for the luxury oceanfront building in the city of Salvador. Lima’s resignation, along with accusations by another minister that Temer also discussed the investment with him, rattled investors on Friday, pushing Brazil’s currency and stock prices lower.
Traders fear the investigations could make it harder for Temer’s administration to gather support for tough austerity measures including a congressional amendment curbing growth of public spending.
Vieira Lima is the fourth Cabinet minister to quit over corruption allegations since Temer replaced impeached leftist Dilma Rousseff earlier this year and vowed to clean up government. Temer lost three Cabinet ministers to graft allegations related to the sprawling bribery and kickback scandal surrounding state-controlled oil company Petrobras.
Brazilian stock market losses were limited by a rise in shares of miner Vale SA as prices of China-listed iron ore futures extended their recent rally.
Other Latin American markets were little changed in thin trading the day after the U.S. Thanksgiving holiday. Many global investors were away from their desks as North American markets were scheduled to close early on Friday.
The Brazilian real slumped as much as 2.2 percent to 3.4679 reais to the dollar, the biggest intraday drop since a day after U.S. President-elect Donald Trump’s unexpected victory. It later pared losses to trade 0.92 percent lower on the day.
Source: Reuters & CNBC
