Bribery Charges Hit Brazil’s Finance Minister and Markets

Latin American markets were mixed to lower on the day, as Brazil posted another fall on concerns the country’s ongoing political scandal may ensnare Finance Minister Antonio Palocci.

Still, Brazil came off earlier lows toward the close of the session. U.S. markets, meanwhile, were little changed. Mexico and Argentina rose on the day.


Brazil’s benchmark Bovespa Index tumbled 255.97 points, or 0.95%, while Mexico’s benchmark Bolsa Index advanced 58.18 points, or 0.40%. Argentina’s Merval Index jumped 10.76 points, or 0.72%.


Brazilian shares endured another negative session amid the latest developments in the country’s ongoing political scandal. This time, allegations reached market friendly Finance Minister Antonio Palocci.


Brazil newswire Broadcast reported that São Paulo state prosecutors received testimony from a former aide to Palocci when he was mayor of Ribeirão Preto, in the interior of São Paulo, in the 1990s.


The aide said that Palocci received kickbacks from contractors and then gave the money to the Workers Party. Subsequently, Palocci “vehemently denied” receiving kickbacks in a written statement.


On the corporate front, state-run oil firm Petrobras announced that it will raise the price of gas that is imported from Bolivia and then sold to distributors in Brazil.


Petrobras will implement a 13% hike on September 1st and then an additional 10% rise on November 1st. Separately, the firm announced that its U.S. unit, Petrobras America, won 53 offshore oil and gas exploration and production blocks in the Gulf of Mexico as a result of an auction by the U.S. Minerals Management Service.


Elsewhere, CVRD will take a 10% stake in Germany-based ThyssenKrupp Stahl AG’s 1.5 billion euro steel mill project in Brazil. ThyssenKrupp’s supervisory bodies today approved the deal, which is set to produce about 4.4 million metric tons of slabs a year.


Mexico added to gains posted yesterday, bolstered by telecom issues. In economic headlines, the National Statistics Institute, or Inegi, said that unemployment rose to 4% in July from 3.6% in June.


A mining and steel union official warned that Mexican mines, including those of Grupo Mexico, could face a second round of work stoppages on Monday if talks regarding the recent strikes do not move forward.


In research news, a major investment bank upgraded supermarket operator Controladora Comerci to “buy” from “neutral,” due to the firm’s better sales outlook.


Argentine issues advanced on the last day of the expiration of options contracts, which can sometimes lead to market volatility. In economic reports, the national statistics agency, or INDEC, said that industrial production rose a disappointing 6.7% year-on-year on a seasonally adjusted basis. July’s result follows a 6.4% advance in June’s output.


Thomson Financial Corporate Group – www.thomsonfinancial.com

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