First Brazil’s stocks tanked,
Ibovespa Tumbles Toward Bear Market as Rousseff’s Win Sinks Real
Brazil’s benchmark equity index led global declines as President Dilma Rousseff’s re-election damped speculation for a change in policies that wiped out $553 billion of stock market value and left the economy in recession.
The Ibovespa (IBOV) dropped 2.8 percent to 50,503.66 at the close of trading, the most among the 20 biggest indexes globally. After tumbling as much as 6.2 percent earlier, approaching the threshold for a bear market, the gauge pared losses as education companies and pulp exporters rallied. The real posted the world’s biggest loss as it sank 1.9 percent to a nine-year low.
After years of weak growth, high inflation and intervention, Dilma’s re-election tanked the currency, too,
The real’s plunge to 2.5224 per dollar put it at the weakest level on a closing basis since April 2005. One-month implied volatility on options for the real, reflecting projected shifts in the currency, was the world’s highest. The currency sank 12 percent in the past three months.
“To some extent, markets were already pricing in her victory last week, and that may explain why the reaction to the election results wasn’t as negative as I expected,” Alvaro Marangoni, a partner at Quadrante Investimentos Ltda., said by phone from Sao Paulo. “We’re all waiting to see if policies are adjusted so the economy can recover.”
That’s an optimist, indeed.
The states that opposed Dilma out in the grasslands, soybean farms, cattle ranches and productive and innovative industrial centers down south, went for her free-market opponent. The states with 25% of the population dependent on welfare went for Dilma,
The takers have become politically stronger than the makers
As Monica Showalter of IBD said,
Now Brazil can look forward to not just low growth, but also high protectionist trade walls, more taxes, more corruption, more intrusive government and an increasingly arrogant state.
I was optimistic on Brazil years ago, but no more.