The Brazilian stock exchange index, Bovespa, fell 4.5% on Tuesday, September 9, hitting the lowest level in a year as prices for top commodity exports slumped and Brazil's Finance minister, Guido Mantega, predicted the currency will extend its steepest monthly decline since 2002.
As sugar, oil and metals plunged, related industries shares in the stock market tumbled, the real sank 2.3% to its lowest level since January. Petrobras (oil) and Vale do Rio Doce (iron & metals) concentrate 30% of the Bovespa index.
This means that the Bovespa index fell below the benchmark of 50.000 and later 49.000 points (48.435) accumulating losses of 6.74% in a week, 14.4% in the month and 24.18% since the beginning of the year.
The historic maximum was 73.438 points last May 20. Last year the São Paulo stock exchange soared 43.65%.
Finance Minister Mantega said the Brazilian currency will keep weakening as falling commodities narrow the country's trade surplus and reduce investment. The Brazilian real, which climbed 17% last year, has weakened 8.2% this month and closed Tuesday at 1.7777 against the US dollar.
"We've reached the limit of the real's appreciation," Mantega said during an event in Brazilian capital Brasília. "And in a way it's good because it won't hinder our exports." He added that the real decline "won't stoke inflation because energy and commodity prices are falling".
The Central Bank increased the benchmark interest rate in the past three meetings to 13% from a record low of 11.25% in April in a bid to fight inflation at the highest level since 2005.
Brazil's current account deficit widened to 19.5 billion US dollars in the 12 months to June, the biggest gap in six years as companies stepped up profit remittances and increased imports, pointed out the Central bank.
Mantega also admitted that global turbulence in financial markets is limiting investment flows into Brazil.