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Brazil Stocks Suffer Worst Fall Since 2001. Crisis Will Make Us Stronger, Say Authorities

Brazil's Bovespa Brazil is telling Brazilians and the world that there's no reason for panic in the wake of the latest Wall Street meltdown, which saw the bankruptcy of 159-year old financial giant Lehman Brothers and the buying out of Merril Lynch by Bank of America for liquidation price.

The president of the Brazilian Central bank, Henrique Meirelles, said this Monday, September 15, that Brazil is monitoring the international financial crisis carefully. "Brazil is ready to tackle an adverse situation of the international markets," Meirelles stated during a press conference in São Paulo. "Brazil's Central bank is in permanent contact with foreign central banks monitoring everything very carefully."

The Bovespa, São Paulo's stock exchange, with a trading volume of 6.571 billion reais (US$ 3.634 billion) closed Monday's trading session with a 7.59% loss, the largest decline since September 11, 2001, when the Bovespa index, the Ibovespa fell 9.17%.

The stock exchange closed at 48,416 points after having opened at 52,386 points. The Bovespa index has fallen 13,05% this month and 24.21% during the year. The dollar, on the other hand, went up 1.85% closing the day at 1.8140 reais per dollar.

Price reductions of raw material important for the Brazilian industry and losses of the bank sector were the main factors that dragged the Bovespa index down.Oil multinational Petrobras (-9.69%) and mining firm Vale (-9.86%) were the companies whose stocks fell the most.

Brazil's Finance minister, Guido Mantega, warned investors to avoid taking hasty decisions due to the sharp decline of the Brazilian stock exchange.

"Investors and bank client, should do nothing. They should leave everything the way it is because everything will be back to normal," Mantega told reporters soon after the closing bell rang.

"This is not the time for rashness, even because the Brazilian economy is sound. There is much fluctuation in this moment of crisis, fluctuations that will go back to normal later."

According to Mantega, "Brazil is a safe harbor" amidst the international crisis, since its economy is strong. He reiterated forecasts that the country will grow 5.5% this year and 4.5% in 2009,

"Brazil will be one of the economies that will be strengthened by this crisis, while other countries will be weakened,"  stated the minister.

As for the dollar hike, Mantega said that Monday's increase was not substantial. "The dollar gain was small," he noted, "This shows that there is not an impetus for the dollar to go up."

Mantega also believes that Brazil's growth won't be stunted by the falling prices of commodities and  the flight of foreign investors from the Brazilian stock market. The minister, however, thinks that the Lehman Brothers bankruptcy means the American financial crisis is getting worse:

"This was an important financial institution. Other institutions will also suffer some fall or will have bigger losses. This means a longer, more prolonged, more profound crisis of the American economy."

And he added: "The trouble is there, not here, We've been enduring a financial crisis for more than a year now."

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  • Show Comments (6)

  • VinnyCarioca

    “There’s an old saying which says `sell when the victory bugles are sounding, and buy when the canons are firing.’ Well, the canons are firing.

    There is also another famous old saying about “attempting to catch a falling knife”.

  • AES

    A bubble is when the delusion has become reality. The value of a thing is the cost of material and the cost of labor, that is what it is worth. . .what a thing is worth is what you can sell it for. The rest is hype and the emeror is not wearing any close and a cheap suit is still a cheap suit. . .if gold costs $175 to mine, it is the last fool in line that is paying a $1,000 for it, not because it is worth $1,000 but because others say it is. There is an old joke. . .a broker has a rail car filled with corn, he sells it for a profit, the next guy does the same, and so forth and so on. . . finally a poltential customer says to the broker if he would mind if he looked at the corn. . .the broker takes him down to the siding opens up the car and the customoer takes out a knife cuts into one of the bags, smells the knife and says, this corn is rotten. . .the broker says this corn is for selling not for eating.

  • João da Silva

    Ch.c
    [quote]Funny !
    Is this not what I have said…earlier ? [/quote]

    That is because we both are scholars of Chinese philosophy and ardent students of Sun Tzu! 😀 😉 😉

    btw, you might be very happy to know that I am seriously considering joining “The Party”. 😉

  • CH.C.

    Where there is a crisis, there is an opportunity.
    Funny !
    Is this not what I have said…earlier ?
    😀 😉 😀 😉 😀 😉

    But…..this is NOT what HE predicted…..while the market was BUBBBBBBBLING !!!!!!!!
    Being constantly bullish(it) doesnt make one right.
    Just imagine staying long China stock market when it was at 6000 and now at….2000 !!!!!
    😀 😉 😀 😉 😀 😉

    How many times have I said idiots only have a feijado in their brains. They can barely think and only one way. Their way of course !

    “There’s an old saying which says `sell when the victory bugles are sounding, and buy when the canons are firing.’ Well, the canons are firing.”

    😀 😉 😀 😉

    “Any brave souls who step up out there and buy today may well be seen as heroes in two or three year’s time,”

    😀 😉 😉 😀 😉 😀 😉

    But in my view…for the time being forget commodities will go up, except for a tradable rally !

    That doesnt mean I am bearish your stock market.

    Are lower oil prices not bullish for airlines, cars, and whatever consumers buy ?
    Is oil prices not a high cost for not only producing commodities but then transporting them to plants, warehouses, ports and also
    for the overseas shipping costs ??????

    If one has US$ 10.- in his pocket, does he prefer to buy 1 good at 10.- or 2 at 5.- ??????
    If one answer is 1 at 10.- then one should applaude the Brazilian car leasing rates at 33 % ! That same person should then say
    rates should go to 66 %….HOPEFULLY !!!!!

    😀 😉 😀 😉 😀 😉 😀 😉 😀 😉

    A bubble is a bull market followed by a further high and fast acceleration.
    When the bubble burst it is first the bubble…followed by a bear market.
    Therefore it may take years and years before seing again these peak commodities prices, just like MOST financials that will survive !
    NO DIFFERENCE !
    Japanese banks were LOWER at their 2007 peak than they were at their 1989 peak.
    Most technology companies and even GE were lower at their 2007 peak than they were at their 2000 peak !
    Adjust this for even a small inflation over the years and it is even FAR WORSE !!!!

    Therefore have we seen the POP or the POP ?????
    Peak Oil Price….. or….. Peak Oil Production ????
    If it is a Peak Oil Production…then why will so many large oil or gas fields coming into production in the next several years ?
    Such as those from BRAZIL !!!!
    😀 😉

    But also from….Georgia, Khasaktan, Russia, even Saudi Arabia that will increase production to 12 million bpd in 2012, and other field in the UAE spending tons of cash to increase…PRODUCTION ???????

    Including…..BOLIVIA, MEXICO AND….VENEZUELA !!!!!

    Do you believe these investments are made to produce LESS oil & gas ????????????????????????

    Just ask Morales and -Chavez, your closest neighbours and cousins.

    Hmmmmmmm
    😀 😉 😀 😉 😀 😉 😀 😉

  • VinnyCarioca

    The only way Brazil will continue on a bullish course is if commodities stay high. If the U.S. stock market continues to slide (and I think it will), the other world stock markets will fall too. The U.S. is Brazil’s largest trading partner. It’s GDP is 73% consumption. If they don’t consume, you don’t sell.
    And by the way, there is still such a thing called a valuation cycle. Getting long in the tooth.

  • João da Silva

    [quote]”Brazil will be one of the economies that will be strengthened by this crisis, while other countries will be weakened,” stated the minister. [/quote]

    I agree with the statement of the minister and fully support his efforts to strengthen our economy. Where there is a crisis, there is an opportunity.

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