Brazil Has No Fears, Says Lula. But Foreign Investors Are Fleeing

São Paulo stock exchange Bovespa in Brazil Brazilian President, Luiz Inácio Lula da Silva, reaffirmed today how solid is the Brazilian economy, ruling out any negative impact on Brazil from current American financial market woes. As for the fall of the real vis À  vis the dollar, Lula told reporters that this is just part of the economy's normal adjustments.

"The American turbulence is not going to cause trouble to Brazil," said the president in the Itamaraty, Brazil's foreign ministry's Palace. And added:

"We really have balanced accounts, and our reserves are enough. What's important is that the dollar gets adjusted as long as the economy requires changes. That's why we call it floating dollar."

The president ruled out any government intervention to contain the rising American currency.

Meanwhile, the São Paulo Stock exchange (Bovespa) closed over 3% lower, this Wednesday, August 15, on the wake of Wall Street's decline. With this result, the Brazilian stock market has already fallen 9% this month of August.

Ibovespa, Brazil's main stock market index, dropped 3.19% to 49,285 points. This was the fifth day in a row that the Ibovespa fell taking the stock market to its lowest level since April 30 when it closed at  48,956 points.

The Bovespa has already closed in the red twice this year: in February (-1.7%) and July (-0.4%).

The dollar, on the other hand, keeps going up closing at 2.03 reais for one US dollar. This was the first time in three months that the American currency was over 2 reais.

Economist Sérgio Manoel Strap, an analyst with the LLA Investments, is betting that some investors are coming back now  to take advantage of the stocks' lower value, after weeks in which the most used verb was: sell.

Foreigners have being pulling out from the Brazilian stock market. In the first ten days in August alone, foreign investors have withdrawn over 1.6 billion reais  (US$ 820 million) from the São Paulo stock market.

The American mortgage crisis had already taken out 3.2 billion reais (US$ 1.6 billion) from Bovespa in July, a record amount for fleeing money.

The balance of foreign investments in the stock market for the year, however, is still US$ 20.8 billion in the black thanks mainly to foreigners participation in IPOs (Initial Public Offerings). They invested US$ 25.8 in Brazilian companies, 73.1% of all the money applied in these IPOs.

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