Reacting to another day of sharp decline of close to 5% in the Brazilian stock market and a strengthening dollar against the domestic real, Brazil's President, Luiz Inácio Lula da Silva, told reporters that his country this time will not have an economic package to deal with the global financial crisis and that Brazil doesn't accept socializing the consequences of the crisis.
"There will be no economic package," vowed the Brazilian leader. "Every time in this country that there has been talk about an economic package the Brazilian workers were the ones who suffered the losses, every time. So, there will be no package. We will be taking measures step by step, we will take the necessary measure in response to each new fact."
"In times of lean cows," said Lula using a Brazilian idiom meaning in tough times,Â "nobody came here to help, now that there are losses they want to socialize them with us. We don't want this kind of socialism. We don't want to socialize misery, We want to socialize prosperity."
The Brazilian president reminded that Brazil's domestic debt is not computed in dollars anymore making the country less vulnerable to the US meltdown and mentioned that Brazil has US$ 207 billion in reserves. He also observed that his government thanks to a temporary measure signed by him is now capable of helping banks in difficulty and granting loans to those who wish to export.
"Mexico's crisis, in 94, brought a US$ 50 billion loss to the economy and Brazil almost broke. Asia's crisis brought losses of US$ 70 billion, and Brazil almost broke. The Russia crisis brought Russia a loss of US$ 40 billion and Brazil almost broke. The American, crisis has already brought a loss of almost US$ 1 trillion to the United States alone, this is more than 30 times all the other crises put together and why are they heartbroken? Because Brazil hasn't broken yet."
Lula warned the countries affected by the crisis to come to their senses. "When we were eating the bread kneaded by the devil (had a hard time) nobody helped us, now that we are having a nice mortadella sandwich we don't want to go back to the bread kneaded by the devil."
Bovespa, the Brazilian stock exchange closed this Tuesday, October 7, 4.66% below the previous day, at 40,139 points. Earlier in the day the market had declined over 5% before a speech by American president George Bush talking about his faith in the economy to overcome the slump.
The US dollar, on the other hand, had a big jump once again. After going up 7.5%, Monday, the American greenback got another 5.05% bump, ending this Tuesday at 2.31 reais per dollar, the highest value since May 31, 2006.
Latin American stocks plunged Monday, led by a stunning 15% intraday drop in Brazilian shares, on concern about a world recession that could devastate the region's commodities-based economies.
Trading was halted twice on São Paulo's Ibovespa index as stocks reached their lowest level in more than two years before rebounding. Brazil's currency, the real, slumped nearly 7% in its biggest one-day percentage loss against the US dollar since 1999 and closed at a level not seen since September 25, 2006. The real finally closed at 2.17 to the US dollar from 2.04 on Friday.
The Ibovespa later recovered, but still ended the day down 5.4% at 42,101, its lowest closing since November 28, 2006. Last May the Bovespa hit 73.000 points.
Argentina's Merval fell 5.9% to close at 1,423, while Mexico's IPC index slid 5.4% to 21,749. Chile's IPSA dipped 6% to 2,450 (worst since September 1998), and Colombia's IGBC fell 4.9% to 8,761.
The Chilean peso lost 4% to the lowest since June 2005 closing at 592 to the US dollar.
Mexico's peso meanwhile dropped to 11.8 against the US dollar, a sharp decline from 11.1 on Friday and the lowest since the government lopped three zeros off the currency in 1993.
Across the region, panicky traders said they had no idea when the market carnage triggered by the U.S. mortgage default debacle would end.
Monday's losses follow a batch of steep market declines on Latin American markets during three sessions last week. They mark the second time in a week that the Ibovespa fell more than 10% in intraday trading, and Monday was the first time since 1997 that Brazilian trading was halted twice in a day.
Brazilian equities, which have been pumped up with massive cash inflows for years, are now the hardest hit in the region. Foreign investors who only months ago gushed about Brazil's apparent immunity from the downturn are dumping shares in favor of investments they consider less risky.
Latin America must "realize that competition for capital is going to intensify," US Commerce Secretary Carlos M. Gutierrez told reporters on Monday, ahead of a trip to Brazil this week.
The Ibovespa has lost 34% of its value to date this year, including a 22% decline since September 19, when Brazilian President Lula da Silva shrugged off questions about the impact of the US financial crisis by telling reporters to "go ask Bush."
Lula da Silva called an emergency economic meeting with the nation's finance minister and central bank president, and the Bovespa stock exchange put in place a new rule calling for a longer trading halt if Ibovespa losses hit 20% in one day.
The Ibovespa is likely to bottom out around the 30,000 points, still 40% below Monday's close, said Ricardo Araújo, a finance professor at the Getúlio Vargas Foundation University in Rio de Janeiro.