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Brazil's Roller Coaster Market By:
Larry Rohter
Buenos Aires, June 24 — Brazilian stocks, bonds and the national currency, the real, oscillated widely in nervous trading today, amid continued concerns about the outcome of Brazil's coming presidential election and signs of weakness in the country's economy. At one point in the day's trading, the real briefly hit a record low in value against the dollar. The real has fallen by more than 10 percent since the beginning of June, and the main stock market index has dropped to an eight-month low. Investors in Brazil have several reasons to feel nervous, but the one
that is looming largest in many minds is the popularity of Luiz Inácio da
Silva, candidate of the left-wing Workers' Party. In a series of
recent polls, he has consistently led his nearest rival by two-to-one in
the presidential campaign, which ends with the election in October, and
widespread doubts persist about Mr. da Silva's willingness to honor
Brazil's debts if he wins the election. Brazilian markets have also been rattled by the collapse of the Argentine economy and by Uruguay's decision last Thursday to give up trying to keep the Uruguayan peso from sinking rapidly in value. Largely out of concern for the recent deterioration in Brazil, the Mexican and Chilean pesos have fallen sharply in recent days to new lows against the dollar. Today's market turbulence in Brazil came despite Mr. da Silva's efforts
over the weekend to calm concerns about the policies he would pursue if
elected. In a "Letter to the Brazilian People" published
on Saturday, he blamed the current government for the sliding markets. He
promised a "new social contract" if he is victorious, but he
also pledged to do nothing that would "destroy confidence in the
capacity of the government to honor its commitments." In the document, Mr. da Silva said his government would show "respect for the country's contracts and obligations," an important assurance from a leader whose party has, until very recently, called for Brazil to repudiate its foreign debt. But Mr. da Silva did not explicitly rule out renegotiating that debt, saying that his primary commitments were to making Brazil grow again, to creating jobs and to protecting the country's ability to determine its own destiny. In that sense, the letter contained little that was new, echoing speeches Mr. da Silva has made in recent months to Brazilian business groups. Many executives here fear he would abandon the current government's emphasis on fighting inflation and building up a large budget surplus. But for the first time, Mr. da Silva put his pledges in writing, and he did so before the publication of the party's official platform, expected at the end of the month. "Lula said everything we hoped to hear," Nathan Blanche of the economic consultant Tendências Consultoria told the newspaper O Estado de São Paulo, using the nickname popularly applied to Mr. da Silva. Still, Mr. Blanche said: "I don't think it's going to change the perception of the market. It's like a husband who cheats on his wife 365 days a year and then sends her flowers promising to be faithful." For almost a year, Mr. da Silva has been avoiding American and European reporters, systematically turning down requests for individual interviews intended to clarify his position on the debt and other issues. But the president of the Workers' Party, José Dirceu, said in an interview in São Paulo last week that there were limits to what his party was willing to say to calm foreign and domestic investors. "You can't ask the Workers Party to maintain the current economic policy, because we're not going to do it," he said. "If that's what you want, then you should vote for José Serra," the candidate designated by Fernando Henrique Cardoso and the Brazilian Social Democratic Party, in power since 1994. In hopes of halting the recent slide, the Brazilian government said on June 13 that it would draw $10 billion from an existing credit line with the International Monetary Fund, originally negotiated last year, to replenish its reserves. But on Friday, Treasury Secretary Paul H. O'Neill of the United States said he would oppose any additional assistance to Brazil, even though the government there, in sharp contrast to Argentina, has been the fund's model pupil. "Throwing the U.S. taxpayer's money at a political uncertainty in Brazil doesn't seem brilliant to me," Mr. O'Neill told Bloomberg News. "The situation there is driven by politics. It's not driven by economic conditions." FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Action on Aging distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.
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