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Brazil Market Has Fallen 51% in 2008, Worst in Country’s History

Financial bomb The falling prices of oil, which hurt state-controlled oil multinational Petrobras, the most important company listed in the Brazilian stock exchange, were a main contributor together with the international bad mood to another slump, this Friday, October 24, in the Brazilian market.

Brazilian shares dropped 6.91% to 31,481 points. According to consultancy company Economática, the accumulated results for 2008 are the worst in the history of the Brazilian stock market.

In October alone the market has fallen 36.5%, the fourth worst result for Bovespa, the Brazilian stock exchange. When the whole year up to October 24 is considered, the drop is a staggering 50.7%. Brazil never had it so bad. In terms of points the Ibovespa, Bovespa's main index, hasn't been that low since November 2005.

On Friday, among the main companies listed by Bovespa, Petrobras fell 10.13% to 20.40 reais,  mining company Vale lost 5.36% to 22.05 reais, Bradesco bank dropped 7.36% to 20.01 reais.

Four interventions by the Brazilian Central Bank (BC) were not enough to avoid the appreciation of the dollar. Once again, the greenback had a tortuous day throughout the trading session closing at 2.327 to the dollar, a 0.95% increase from the previous day.

The dollar went up 10% this past week, accumulating a 22% increase in the month of October. For the year the gain for the American currency has been over 30%. At the end of 2007, one dollar was worth 1.77 reais.

Brazil's central bank said Wednesday it would pump the equivalent of US$ 50 billion into currency markets to stem a two-month tumble in the real that is threatening companies and stoked inflation.

Authorities said the injection will be in the form of contracts that will allow investors to protect against further declines in the Brazilian currency. Brazilian Finance Ministry, Guido Mantega, announced that it had scrapped a key tax that foreigners pay on financial market transactions.

Brazilian prices as measured by the IGP-10 index of wholesale, consumer and construction costs rose 0.78% in the month ended to October 10 after declining 0.42% the previous month.

Brazil's Bovespa had rebounded Thursday from early losses trading up 0.38% to 35,203.38. On Wednesday the index had plunged more than 10% and trading was suspended automatically when it fell more than 10%.

Earlier in the week Brazil allowed its two largest state-run banks to buy stakes in financial firms, some of which it says could be facing difficulties from the drying up of credit in domestic markets. The government also increased credit lines to farm and construction industries.

The Finance Ministry said it had eliminated a tax known as the IOF which was 1.5% on currency exchange for inflows of foreign capital and 0.38%on foreign currency loans.

Later, the Central bank held two auctions of dollar swap contracts worth a total of 2.27 billion USD. It said it was ready to expand its sales of such contracts to 50 billion USD, prompting the Real rebound.

Bzz/Mercopress

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  • Show Comments (5)

  • João da Silva

    Cindy
    [quote]Expats are taking over the local high paying jobs. [/quote]

    Excuse me Cindy. Your comment is slightly confusing. Are you saying that the Expats are taking over the highly paid jobs in Brazil or in U.S?

  • Ric

    Only Big in South America
    Where would you expect it to be big, Cindy? In Asia? Of course it’s only big in South America, because that’s where it’s located. BerÀƒ§o EsplÀƒªndido and all that.

    China and India are big in the far east, Russia is big in eastern Europe and W. Asia, the US and Canada are big in N. America, and Brazil is Big In South America. How could it be otherwise?

  • cindy

    Brazil has the worst poverty and crime in any country.
    Items are expensive and real estate is expensive.
    Brazil is only big in south america.
    Expats are taking over the local high paying jobs.
    nothing in brazil but a bunch of woman looking for foreigners!!!

  • ch.c.

    Furthermore
    “Four interventions by the Brazilian Central Bank (BC) were not enough to avoid the appreciation of the dollar.”

    Currency interventions have never ever been effective more than ONE DAY ! Except a few times in history such as the Plaza Accord in 1985……but this was to stop a US$ bubble on the upside, not the downside !

    Developed nations have stopped currency interventions around 8 or 10 years ago.
    Currencies interventions using interests rates are also WORTHLESS !
    Just look at the Brazilian Interests Rate, being the World Highest after inflation, they still did not stop the Brl decline !!!!

  • ch.c.

    Worst in Country’s History
    Even more scary when your LARGE companies from their top fell by much more than that when measured in US$ :

    Petrobras went from US$ 75.- to 21.-
    Cia Vale from 40.- to 10.-
    …..in less than 6 months !!!!!

    But also in Local currency
    Aracruz from Brl 15.- to 2.20
    Gafisa from Brl 36.- to 12.- despite the Brazilian Real Estate market is still shiny….as per AES
    Rossi Residential from Brl 30.- to 3.-
    JBS from 10.- to 3.-
    Sadia from 14.- to 4.-
    do the maths in US$…and it becomes a tragedy !!!!!

    and not necessarily from the Bovespa top area
    Gol from Brl 84.- to 8.-
    Cosan went from Brl 63.- to 9.- while they still should be profitable….as per the Brazilian ethanol costs analysis SOFTWARE !!!!!! smiles

    but…but…but…..dont worry :
    LULA confirmed many times that Brazil is…..IMMUNE !!!!!!!!!!
    Trust HIM !

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