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Brazil Roller Coaster: Stocks 10% Down, Dollar 7% Up

Brazil's Bovespa Dragged down by the bearish behavior of international markets and fears of a global recession, the Brazilian stock market tumbled over 10% this Wednesday, October 22. Losses intensified at the end of the trading session reflecting the losses of the Dow Jones in Wall Street.

For the sixth time in the last three weeks, the Bovespa, São Paulo's Stock Exchange, stopped operation for half an hour, after the automatic circuit breaker was activated, something that happens when the Ibovespa, Bovespa's  index, declines by 10%.

One of the reasons for the pessimistic scenario was a statement by the British premier. Gordon Brown, admitting that the United Kingdom wouldn't be spared the recession.
Bovespa's bad day was due in part to  shares tied to commodities and banks. Oil multinational Petrobras' stocks, for example, dropped 9.59%, while mining company Vale saw its shares plummeting 7.8%.

Bad news didn't come only from overseas, however. The publication in the federal newspaper Daily Gazette (Diário Oficial) of temporary measure 443 led the market to fear interference of the state in the banking system.

The presidential measure opens the doors for the Banco do Brasil and Caixa Econômica Federal, two state-owned financial institutions, to buy directly or through their subsidiaries, banks headquartered in Brazil. This would allow the government to take over banks in financial trouble.

Brazilian Finance minister, Guido Mantega, made it clear that people shouldn't read too much into the new temporary measure, denying that any bank in Brazil is on the verge of collapse. In his press conference, Mantega tried to calm the market. "There is no bank breaking in this country," he said.

Despite the minister's assurances, however, Banco do Brasil's shares lost 15.4%, falling to 13.88 reais, while another bank, Unibanco, saw its stocks declining 13.7% to 12.72 reais. Two companies from the building sector also stumbled badly: Gafisa dropped 17,2%, to 15.12 reais and Cyrela slipped 16.1%, to 10.40 reais.

At the end of the day, on Wednesday, the Ibovespa had fallen a healthy 10.18% to sobering 35,069 points, the lowest in over two years. With yesterday's  collapse, the Brazilian market has now declined over 45% since the beginning of 2008. The Ibovespa had finished 2007 at 63,886 points.

Meanwhile the dollar started to zoom up again.  Ignoring measures from the Brazilian Central Bank to contain the greenback, the American currency went up 6.67%, closing at 2.38 reais.

Early afternoon, the Central bank sold US$ 216.1 million in swap exchange contracts with periodic adjustment. Another US$ 299.5 million were sold later in the day.

According to the Central Bank president, Henrique Meirelles, Brazil has already used US$ 22.8 billion to contain the dollar since the aggravation of the recent crisis in mid September when the American bank Lehman Brothers folded.


  • Show Comments (13)

  • dnbaiacu

    Brazilian and American lifestyles..
    [quote]. Brazil is physiologically and psychologically infinately healthier[/quote]
    That is a bit of an overstatement . And stretching it QUITE A BIT.And I am half-brazilian.
    🙂 😉
    If as much as the population in the U.S. was underemployed or “not” employed as in Brazil. More would be eating “beans and rice” and have the TIME to prepare healthier meals.
    Due to time or “lack of it”. Americans have to live life as “conveniently” as possible.
    Brazil is not that far from “colonial slave days” in many areas. They can “cook at home” because there is almost always someone “at home” to spend the whole morning making “almorco”. Worse ,, you don’t even have to be necessarily well-off to have an “empregada em casa”. Which is usually nothing more than a status symbol. Because the members of the household whose time it frees up aren’t really doing anything “that” much more productive with the extra time.
    Once on a plane I saw the worse.! A “young” couple that had their two young children cared for by TWO domesitics . Obviously one for each child. One child was crying yet the “domestic” was left to “console” it. The parents appeared “clueless” . It was a joke.!
    Paulistas really don’t have that much more time on their hands than Americans. The ones that have work anyway. And the ONLY thing that saves most of them from obsesity is the “walking” MOST still yet have to do because they don’t have cars. There is usually a good walk to your nearest “metro” station. And if it weren’t for the weekly “street markets” most Paulistas would nutrient deficient. On average incomes (not much) even in Brazil with the “street markets” ,having an abundance of fruit in the house is a “luxury”. 😀 🙁
    I’d say given the same circumstances , Brazil would be no different than the U.S. . Consumerism IS taking root in the worse way.. Credit . Just like in the States.
    As far as a “party being over”. If the “PARTY’ were to end, particularly in the Northeast, there would be chaos. All the “feriados” there help the people forget they DON”T HAVE WORK!
    It’s pretty simple. You have to be very rich or quite poor to have more TIME for family and friends as it appears is the case in Brazil. Being obsessed with novelas and futebol can never take the place of being informed and educated with “AFFORDABLE” books and good libraries and “free” internet access. What’s IN your head makes ALL the difference in the world especially in a capitalistic society. And the results of where Brazil lags behind in this aspect can readily be seen in the corruption and exploitation at ALL levels of society on a business basis. You have to be thick skinned to do business in Brazil on ANY level. Shortsightedness is the norm.
    In short, Brazil is just a beast of a different color. No more healthier pyschologically than the U.S or any other place for that matter.

  • dnbaiacu

    [quote]. So you agree with my view point that we should utilize our rich soil to produce food to feed our citizens, [/quote]

    That’s the only SANE thing to do.. But that’s the whole point . The world IS NOT operating on sane principles as long as the “movers and shakers” are in control. This whole current situation is based on human greed and the resultant inequities. And yet you have some that see no need for “universal principles” to study. 🙁 😉 What a joke! 🙁 So this is what you get.
    But people the “know” , know the world isn’t going to be “CHANGED” by mans efforts. So the best thing to do now is operate with the only defense a human has against this madness….
    I speak loudly about this to help others to see that that is a viable option. Otherwise with everything that is going on today you are going to either EAT, SEX, DRUG , SMOKE , DRINK, MASTURBATE, GAMBLE, PROZAC, yourself to death. 🙁
    I think the Ethanol thing is all hype. Speculation into the far future. There are too many current critical issues to be dealt with before Ethanol compatible cars are produced on a massive scale with anyone having the money to buy them. It’s all silly speculation.
    I raise the question about “REALLY is inflation. Because to understand this is to understand MOST of what is going on right now. The gold standard was removed ,, WHY?
    It was so funny on CNN 😀 😀 The question was raised “how can the “government” ( we know it’s the Fed) spend money they don’t have?
    Well, they never answered the question 😉
    Most people still don’t know that the “Federal Reserve Bank” IS NOT the government. Of course they never taught us that in school. There’s a WHOLE lot they don’t teach us in school here . Yet we are all duped into thinking we are so FREE and FORWARD thinking here. BRINCADEIRA! 🙁 Had I known HALF of what I know now. Some very SIMPLE things , I would have done things A LOT differently.
    Now they are over here interrogating Greenspan.. 😀 😀 He is just a mouthpiece! He and Bernakes positions are no more important than Condaleeza Rice’s. Bernake doesn’t push the buttons that make this all happen.
    I think Ch.c is right for the moment. But AES may have points that come light sometime in the future. How far from now? Time will tell. You just ride the waves. You avoid debt. Stay cash heavy, And have some land. And learn how to grow something. And slowly wean yourself off of luxuries. And get your kids out of whatever fantasy world you yourself may be promoting them to live in. Things ARE CHANGING and INFLATION is not going away. 😉

  • dnbaiacu

    Maintain Perspective…
    [quote]a fool and his money are soon parted. . .buy land by yourself, invest in your own perception,[/quote]
    Good , solid advice. ..
    Add to it, grow your own food. Get creative.
    This is a good Proverb.
    [quote]Do not toil to gain riches. Cease from your own understanding. 5À‚ Have you caused your eyes to glance at it, when it is nothing? For without fail it makes wings for itself like those of an eagle and flies away toward the heavens.[/quote]
    Proverbs 23:4,5
    This is reality. As many are learning the hard way.
    [quote] 7À‚ For we have brought nothing into the world, and neither can we carry anything out. 8À‚ So, having sustenance and covering, we shall be content with these things.[/quote]
    1Timothy 6:7,8
    Less Stress.
    If you have money.. ENJOY IT! Share some of it. But being content with the necessities is key to not being anxious about anything the “crooks and robbers” are doing.
    Has anyone ever asked themselves what is this phenomenon “INFLATION”? The earth is capable of feeding us all. The billions of us quite well. It is greed and selfishness that is preventing this from happening. Nothing more , nothing less. No excuse that the earth is over-populated and can’t feed us all. Simply NOT TRUE.

  • Falupa

    problems in the market
    No country is safe from the bailout issues. I wish that this whole issue would be resolved and that the stock market would finally bottom out. However, now it seems like there is bad news coming out every other day. This only increases pessimism in the market and drops prices even further. Talk about terrible problems! It’s just frustrating.

  • Simpleton

    Damb, is it possible? A staight through post from Dn and no interrupting footnoted quotes to have to skip over? Definitely quite an essay! Only comment: check potential typo in second to last sentence. Think there may have been an “r” omitted in the “beast” word. Correcting that would make a true statement and point out as well what it is that happens all to often there. (True weaning often doesn’t occur until the offspring are into their upper 30’s to 40’s if it ever occurs at all.)

    Dn in an earlier post pinned where it is I am / what I have done / how it is I am trying for the life of me to be: “If you have money.. ENJOY IT! Share some of it. But being content with the necessities is key to not being anxious about anything the “crooks and robbers” are doing.” – Nice, very nice.

    AES hit a nerve as well “Brazil is physiologically and psychologically infinately healthier.” = so why do you think it is that Dn, I and others have this idea to try to get ourselves situated there as soon as that becomes practical?

  • João da Silva

    [quote]Brazilian and American lifestyles..[/quote]

    That was quite an essay, Dnb ! I am sure Augustus would agree with you 100%. 😀

  • João da Silva

    [quote]BOTH AES and Ch.C are correct , though they differ as how to finance the buying of productiveFarmlands and to cultivate crash crops .[/quote]

    It should read [b]CASH CROPS[/b] and not as [i]Crash Crops[/i] as I had written before.

    We already have a CRASH CROP. 😉

  • João da Silva

    [quote]I think Ch.c is right for the moment. But AES may have points that come light sometime in the future.[/quote]

    BOTH AES and Ch.C are correct , though they differ as how to finance the buying of [i]productive[/i]Farmlands and to cultivate [i]crash crops[/i] . AES, being an American, has his views and Ch.C being a [i]neutral[/i] Swiss has his own views. But…..But…., as for as I know I bet both agree with [i]our[/i] view that we have enough land on this planet to grow food for its inhabitants.

    BTW, I would love to hear the opinion on your comment on the Federal Reserve Bank from [i]both[/i] AES and Ch.C. 😉

  • aes

    Brazil is fine, the Real at 2.4 is strong, 5 years ago it would have been considered undreamed of, Bovespa at 35,000 five years ago would have been unthought of. What is key to Brazil is that personal debt is very low, Brazil is physically healthy. . .unlike the U.S. which has eaten itself into a gluttonous morbid financial obeisity of unnecessary self indulgent consumerism. One need only compare the physical state of the bodies at Copacabana, Ipanema or Leblon to the corporal morbidity of the over indulgent, under exercised, morally and intellectually vapid sunbathers at Santa Monica or any beach U.S.A. to understand that a diet of rice and beans has a greater Darwinian truth to it than all the crap of American eat outeries. Brazil may suffer greater economic disparity but at least people cook their own food at home, even if 10% of it is cooked by resident domestics. Americans no longer know how to take care of themselves, if it cannot be microwaved, or shaken or baked Americans would starve to death or at least lose some of their self indulgent toxic adipose tissue and discover that the body exists for more than eating and sitting around deluding itself by visual stimuli that it actually is living. America`s financial awakening is nature`s way of saying the party is over, the fat lady has sung and its time to pay the waiter. Brazil is physiologically and psychologically infinately healthier.

  • João da Silva

    [quote]The earth is capable of feeding us all. The billions of us quite well. It is greed and selfishness that is preventing this from happening. Nothing more , nothing less. No excuse that the earth is over-populated and can’t feed us all. Simply NOT TRUE.[/quote]

    Good comment. So you agree with my view point that we should utilize our rich soil to produce food to feed our citizens, instead of planting sugar cane to distill Ethanol to power the automobiles or try to export Pork to the Muslims in Middle East or Beef to the Hindus ? 😀 😉

  • ch.c.

    you are a follower not a leader.
    AES : You are such a junkie that you are trapped.. ….at every of your writing, analysis and even contradiction.

    Why dont you ask Joao, if I did NOT said well BEFORE the fact : Sell the brazilian bonds, sell the Brl, sell Brazilian
    Real Estate Companies, sell the grains commodities, sell Oil, etc etc…… !!!!

    And dear idiot, it was better to sell oil at US$ 120.- than still being BULLISH aqt Us$ 70.- !
    Same for Petrobras. Since the Tupi discovery, the more oil discovered, the more Petrobras went DOWN, despite initially the oil price ZOOMED UP by over 50 % !!!!!

    Same for your junk ethanol…since 2005 ! Just scroll and re-read my hundreds of comments from 2005 and onwards !
    Funny, BRAZILIANS sweared with a blue face that ethanol was oil competitive at US$ 35.- a barrel !!!!!!
    Even more Funnyyyyyyyyyyy…when oil price was at Us$ 150.-………Cosan ALREADY LOST MONEY !!!!!!

    Brazilians excel at cheating, lying and hiding !!!!!!
    Proven hundreds of time !
    Just scroll my hundreds of comments with proofs and arguments !!!!!!!

    So far…AES…YOU HAVE NEVER EVER EVER…CAME UP WITH PROOFS AND EVEN LESS WITH ARGUMENTS OR COUNTER ARGUMENTS and of course never ever with a basic stats that can be cross checked from different sources.

    YOU SWALLOWED AND CONTINUE TO SWALLOW whatever Bin the Crook say !


    OHHHH YOUR Governments bonds IN LOCAL CURRENCY are so strong that the free market trade them now at 18 % FOR MEDIUM TERM BONDS !!!!!!! Sign of strength….as you said !!!!!

    AES…..ENJOY BEING STILL LONG FROM THE TOP….ALL THE COMMODITIES, THE BRL, THE BRAZILIAN GOVERNMENT BONDS IN BOTH THE BRL AND IN US$ AND THE BOVESPA including the companies in the Real Estate, Sadia, Votorantim, Aracruz, JBS, Cia Vale, Petrobras, Cyrela, Gafisa and of course….SHORT THE US$ !!!!!

    Ohhh dear idiot, the oil price will not be anytime soon at US$ 200.- or the soyabeans at US$ 25.- or the Brl/US$ at 1,30, or Gold at US$ 1200.- contrary to what you suggested so many times.

    Give these targets to your children. There is hope in 15-25 years !

    In the meantime….you will end up as a street beggar or a thief !
    Or a criminal…member of the world renowned BRAZILIANS DEATHS SQUADS….graciously offering their overtime outside their regular police jobs !!!!!!

    With people like you AES……it is not a surprise…that Brazil is a Tropical Mud !

    😀 😉 😀 😉 😀 😉 😀 😉 😀 😉 😀 😉 😀 😉

  • aes

    a fool and his money are soon parted. . .buy land by yourself, invest in your own perception, you seem a creature of comapanies and the opinions of organized others, there is no entrepenureal spitit in either your advice or your investments, you are a follower not a leader.

  • ch.c.

    Two companies from the building sector also stumbled badly: Gafisa dropped 17,2%, to 15.12 reais and Cyrela slipped 16.1%, to 10.40 reais.
    Allo, allo…AES….I cant hear you anymore !
    Are you there, concerning the “healthy” real estate companies in…..BRAZIL…you stated a week or so ago ?
    Just read a chart if you can ! But please…please….not upside down…if you can do so !!!!!

    😀 😉

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