Wednesday, 23 September 2015 23:11
SAO PAULO: The Brazilian real on Wednesday sank to a fresh all-time low of 4.12 per dollar as local political and fiscal concerns magnified losses suffered by Latin American currencies in general.
The real initially gained nearly 1 percent after Brazil’s Congress voted overnight to uphold key presidential vetoes needed to avert a surge in public expenditures.
It later reversed gains and weakened 1.9 percent as other Latin American currencies posted smaller losses, pressured by concerns about the economies of China, Europe and the United States.
Sentiment in Brazil remained particularly fragile as lawmakers postponed a decision on another key veto against a salary increase for judiciary workers that could cost the government an additional 36 billion reais ($ 8.7 billion) by 2019.
“The most important veto is the one about the salary of judiciary workers and we don’t know when it’s going to be analyzed by Congress,” said a trader with a Brazilian brokerage who was not allowed to speak on the record.
President Dilma Rousseff’s efforts to close a budget gap in 2016 will be in vain if lawmakers reject her vetoes on a number of bills that would dramatically increase government spending over the next few years.
Next year’s fiscal deficit was the last straw that drove Standard & Poor’s to downgrade Brazil to junk last month. Investors fear other ratings agencies could follow suit if Rousseff fails to bridge the budget gap.
