Brazil’s Black Monday Brings Market Down 5.43% and Dollar Up 7.53%

Brazil's Bovespa It was another black Monday in the Brazilian stock market, this October 6. São Paulo's stock exchange, the Bovespa, had to be closed twice after the Ibovespa index fell 10% and then 15%. Things only calmed down a little after Brazilian Finance minister, Guido Mantega, showed up for a press conference.

The Bovespa ended up closing at 42.100, a 5.43% slump, the lowest level since March, 5. 2007. The commercial dollar went up 7.53%, closing at 2.20 reais for sale, the highest value for the American currency since September 2006.

The Bovespa's rules call for the "circuit breaker" to be activated to calm the market every time there's an oscillation that is 10% up or down. If the market then falls 15% in the same trading session the session is closed again for a whole hour. The first stop occurred from 10:18 am to 10:48 am. The second one happened between 11:44 am to 12:44 pm.

According to the Bovespa press office, this was the third time in the stock exchange's history that the markets had to be interrupted for an hour. The first time happened on October, 28, 1997 and the second one on September 10, 1998.

In his press conference Mantega, announced measures to help small banks and exporting together with the injection of US$ 1,47 billion in the market by Brazil's Central Bank.

The Brazilian government intends to use money from its international reserves to guarantee credit in dollars to Brazilian exporters and to help to relieve the exchange rate pressure. Furthermore, the BNDES (National Bank of Economic and Social Development) is stepping up it credit lines to finance exports.

The first measure should work as a loan in dollars. The Central Bank promises to buy banks securities overseas and pay them with Brazil's reserves. It will be like a loan in dollars with a contract of repurchase by the loan takers. As explained by Central Bank chief, Henrique Meirelles:

"It's a credit line in dollars overseas using our reserves. It will be a purchase of securities by the Central Bank, therefore a sale of private banks' securities abroad, with a contract of repurchase."

Tags:

Ads

You May Also Like

Brazil’s 70% of GDP Debt Puts It Far from Investment Grade

Brazil is still far from the much coveted Investment Grade in spite of financial ...

Brazil Cracks Down on Amazon Deforestation with US$ 276 Million Fine

Brazil has taken a pro-active approach against the Amazon deforestation and has started punishing ...

Global Meltdown Spurs Bank Consolidation in Brazil

Bank shares in Brazil soared earlier this week after Banco Itaú announced the purchase ...

Why Divert the São Francisco? Brazil Needs First to Clean Open Sewer River Has Become

Saturday is wash day. Together with her daughter, Rita de Lima leaves her house ...

Greenspan Inspires Investment in Brazil

Latin American stocks ended the session mixed to higher, as Brazilian equities climbed after ...

IMF Couldn’t Be More Pleased with Brazil

The Executive Board of the International Monetary Fund (IMF) completed December 15 the ninth ...

A Brazilian Fairy-Tale Musical Comes to the Rio Stage. Can Broadway Be Far Behind?

Over the past few seasons there has been an explosion of films, television series, ...

RAPIDINHAS

Brazil and all other nations that speak Portuguese are once again bracing for an ...

US President Bush and Venezuelan President Chavez

In an Allusion to Chavez Brazil Warns US: We’re Nobody’s Middleman

Brazil would like to see the current relation with United States become something positive ...

Plastic Money: Brazilians Own 471 Million Credit and Debit Cards

Brazilians purchased 31.7 billion Brazilian reais (US$ 19.6 billion) in credit cards in July. ...