By Bruno Federowski
SAO PAULO, May 18 Brazilian equity and currency
markets plummeted on Thursday as fresh accusations against
President Michel Temer dampened the outlook for his structural
Temer was caught on tape encouraging a prominent executive
to pay a monthly fee to keep jailed former House Speaker Eduardo
Cunha silent in the country's biggest-ever graft probe, sources
said on Wednesday, confirming a report in newspaper O Globo.
Temer denied reports that he had authorized such payments.
Brazil's benchmark Bovespa stock index fell as much as 10.7
percent, triggering a temporary halt on trading. Shares of
blue-chips Petróleo Brasileiro SA, Banco Bradesco SA
and Itaú Unibanco Holding SA subtracted
the most points from the index.
The Brazilian real tumbled 7.5 percent to 3.38 to the
dollar, its weakest since December 2016, driving the central
bank to intervene in markets to cushion the currency's decline.
"The real trading at 3.10 was predicated on successful
passage of pension reform and other structural reforms. That is
no longer the base case," analysts at Brown Brothers Harriman
wrote in a note to clients.
"As we've long complained, 3.10 was pricing in perfection.
Now, in this imperfect situation, the big question is where
should it trade now that this basic assumption of perfection has
been turned on its head?"
Those concerns spilled over into other markets, with
Argentine's main Merval stock index slumping. Mexican
companies with exposure to Brazil, such as América Móvil
and bottler Coca-Cola FEMSA, also tumbled.
Bets that U.S. President Donald Trump could be forced out
from office following reports that he sought to interfere with a
federal investigation helped to drive all Latin American
Uncertainty over the implementation of his expanisionist
pledges have weighed on demand for riskier, emerging market
assets as investors scurried for the safety of U.S. bonds
Key Latin American stock indexes and currencies at 1630 GMT:
Stock indexes daily % YTD %
MSCI Emerging Markets 988.68 -1.98 16.97
MSCI LatAm 2525.08 -6.97 15.97
Brazil Bovespa 60999.62 -9.68 1.28
Mexico IPC 48369.89 -0.78 5.97
Chile IPSA 4782.15 -1.47 15.19
Chile IGPA 24030.78 -1.34 15.90
Argentina MerVal 21025.01 -2.99 24.28
Colombia IGBC 10640.23 -0.76 5.06
Venezuela IBC 66184.95 1.24 108.75
Currencies daily % YTD %
Brazil real 3.3868 -7.51 -4.06
Mexico peso 18.9200 -0.73 9.64
Chile peso 675.8 -0.78 -0.75
Colombia peso 2927.2 -1.03 2.54
Peru sol 3.284 -0.30 3.96
Argentina peso (interbank) 16.0000 -2.44 -0.78
Argentina peso (parallel) 16.12 -0.37 4.34
(Reporting by Bruno Federowski)