Bullish Brazil Gets Record High Stocks and Lowest Dollar in 9 Years

Bovespa, São Paulo, Brazil The Brazilian stock exchange (Bovespa), this Friday, May 2, in its first trading session since Brazil was raised to investment grade by Standard and Poor's (the Bovespa was closed for the May Day holiday) opened strong and even broke a record before slowing down during the day.

A little after the session was opened for business, the Ibovespa, the Bovespa's main index, surpassed for the first time 70,000 points going as far as 70,973 points before backtracking.

The Ibovespa ended up closing at a record level: 69,366 points, 2.21% more than the previous trading session. The dollar, on the other hand, reached its lowest value in nine years: 1.65 reais for one dollar.

Rating agency Standard & Poor's, one of the main international rating agencies, announced this week that it has increased the Brazilian credit rating to "investment grade." With this, Brazil entered the group of countries considered to be of low risk to investors.

The agency elevated the Brazilian rating from BB+ to BBB-, classifying the country as investment grade. The announcement, made in the afternoon, generated an immediate reflex. Ibovespa, the main index of the São Paulo Stock Exchange, posted appreciation of 6.33%, the greatest increase since October 17, 2002, and reached almost 68,000 points, a historic record.

The volume of papers traded during the day of the announcement (April 30) was over 9.7 billion Brazilian reais (US$ 5.7 billion). On the exchange market, the American dollar suffered depreciation of 2.52% and at the end of the day, one dollar was being sold for 1.633 reais.

Standard & Poor's raised the country's sovereign long-term credit rating from BB+ to BBB-, and the long-term local currency sovereign credit rating from BBB to BBB+, among other reclassifications. The agency classified the long-term perspective for the country rating as "stable", which means that the grade should be maintained for a long time.

According to a statement by the rating agency, the new rating reflects the country's maturity and that of its economic policy, with the reduction of fiscal imbalances and of the foreign debt, which "declined dramatically", according to S&P.

This year Brazil rose to being a net foreign creditor. S&P also pointed out that there was an improvement in perspectives for growth of the economy.

The press statement points out that public debt remains high, but that the history of pragmatic fiscal management and debt policies reduces the risk in the area.

The Brazilian government disclosed figures showing that in the first three months of this year the public sector posted a primary surplus, economies made for payment of interest on the debt, of over 43 billion reais (US$ 25.2 billion), or 6.39% of the Gross Domestic Product (GDP).

The target for the year is 3.8% of the GDP. With greater economy, the public administration obtained a nominal surplus, after payment of interest, of over 3 billion reais (US$ 1.8 billion) in the first quarter.

The agency points out that the force of confidence in Brazil resides in factors like the continuation of the economic policy, despite government changes, focussing on the control of inflation and on the regime of fluctuating exchange rates, low foreign debt and a public dept profile in the same line as that of other nations with similar risk classification.

The press statement adds that the country has reasonably transparent institutions that, aligned to pragmatic and forecastable policies, made the country reach a good grade of economic stability, with more solid fundaments for growth and fiscal equilibrium having been built over the last five years. "This should continue in coming years," says S&P.

According to Agência Brasil, the governor of the Central Bank of Brazil (BC), Henrique Meirelles, said that the S&P decision came at a meaningful moment. Especially, according to Meirelles, as it takes place at a moment of turmoil in the global economy.

This shows, according to Meirelles, the "greater resistance" of the Brazilian economy, recognized by the rating agency. According to him, "the performance of the economy, with regard to investment, employment and income, is a clear demonstration that 'investment grade' clearly reflects the decisive improvement in economic fundaments."

Meirelles was in São Paulo when he heard the news. Soon after that, an advisor in Brazilian capital Brasí­lia organized a teleconference, in which he said that an important figure, presented by Standard & Poor's, was a forecasted matter. This, pointed out the BC governor, is the result of stability.

"Forecastability is fundamental to guarantee sustained growth for the country and is the result of persistence in the implementation of consistent economic policies," pointed out Meirelles.



  • Show Comments (5)

  • ..

    [quote]If you know one of the Swiss Franc devaluation I will be flad to have the details….FROM YOU THE IDIOT….if you can ! [/quote]

    You don’t have to burst your piles over this worthless issue. Big things are coming to make your currency worthless. Guido is on the job to make our currency the strongest one in the world.Before you know what is happening, your currency is going to be worthless like Lira and Cruzeiros.

    In Guido, we trust and no one else.

  • ch.c.

    To Jony…the idiot !
    The Swiss Franc is the stongest currency in the world.
    No currency has been stronger than the Swiss Francs on an historical basis.
    More simple than that….there is not !

    If you know one of the Swiss Franc devaluation I will be flad to have the details….FROM YOU THE IDIOT….if you can !

    The US$ has lost 80 % in 40 years…against the Swiss Franc.
    The BP also lost OVER 80 %
    As to Euro or the currencies making the Euro, from the French Franc to the Italian Lira, to the
    Spanish Peseta, Portugal and Greek currencies, etc etc….they all lost at least 80 % of their value against the Swiss Franc in the last 40 years.
    The only exception being the DM, but not any stronger than the Swiss Franc. It simply lost… FAR LESS than 80 % !!!!!
    Even the JY lost value against the Swiss Franc.

    Sorry for you IDIOT JONY LOZEIDA !
    If you dont know your subject…..shut up…or prove me wrong !

    Let me conclude…that we have the world strongest currency despite we have, on average, the world second LOWEST interest rate.

    WE are doing something right….where others do wrong, Brazil included.
    Looks like Jony the idiot is not even aware of your many years with inflation well above
    1000 % !!!!!!!!!!!!!
    Looks like Jony the idiot is not aware that Brazil has taken off 4 times 3 ZEROES off their currency. Is that a…..strong currency ?????? Laugh
    Short memories are the quality of uneducated and idiots such as…JONY LOZEIDA !!!!!!!!
    You see, I even remember your REAL NAME.

    Ohhhh dear idiot Jony, to my knowledge no one need qualifications or deep knowledge in Macro Economics to find out what I wrote.

    Simply read……a chart…..and books !

    You have proven once more how deep an idiot….YOU ARE !
    Where have you acquired YOUR Univesity degree ? At a AÀƒ§ucar store and paid ONE BRL ?

    😀 😉 😀 😉

  • Jony

    I must have missed it again Mr. Ch.c.!!!
    I’m sorry I must have missed again your QUALIFICATIONS, could you please state all your achievements in Macro Economics as well as all of your Published Works in Economics so there will be no skeptsism about your true expertise on the subject matter. By doing so Mr. Ch.c, you will also eliminate any possible misunderstanding of your valued contributions with a mere racist sick mind, from the part of the “skeptics”, of course.
    Could you also give us an account of the history of the Swiss franc including all their struggles and its innumerous devaluations, but lets keep the focus on just the facts, your personal embellishments are not necessary this time.

    Thank you for your cooperation.

  • ch.c.

    May be a 9 years HIGH but……
    still needs to appreciate by over 50 % just to reach the 1995 level !

    Your currency first depreciated by nearly 75 % and then approximately doubled.
    BUT THAT STILL DOESNT MAKE your 1995 level….by far !!!!!!!!

    During the last 30 years your currency still has depreciated by OVER 99,95 %….against the already weak US$….and more against he strong currencies !!!!!
    Keep working harder.
    Your currency is still in a secular downtrend…..wether you like or not !

  • João da Silva

    Hey Forrest, it is hurricane weather here.The wind speed is forecast to be 100 Kms/hr early morning tomorrow.Pouring rain. All set to withstand the hurricane. How is the weather where you are?

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