April 24, 2020 / 7:32 PM / 3 months ago

EMERGING MARKETS-Political turmoil hammers Brazil markets during pandemic

    * Real hits record low of 5.7472 to the dollar
    * Brazil markets rattled by Justice Minister's resignation
    * MSCI Latam stocks, FX indexes fall
    * Mexican peso sees steep weekly loss

 (Updates prices)
    By Susan Mathew and Ambar Warrick
    April 24 (Reuters) - Brazilian stocks sank as much as 9.6%,
and the real slid to new lows on Friday as political turmoil in
the country added to mounting concerns over the coronavirus
outbreak, while risk aversion ravaged Latin American markets. 
    Brazil's markets were rattled after the country's popular
Justice Minister Sergio Moro announced his resignation on
Friday, accusing President Jair Bolsonaro of political
interference in law enforcement. The dispute comes as Bolsonaro
faces widespread criticism for his handling of the virus spread
in the country.
    Moro was one of Bolsonaro's two "super ministers," along
with Economy Minister Paulo Guedes.
    "The risk is that Congress, or Bolsonaro, decide to abandon
the fiscally conservative tenets advocated by Guedes, resulting
in his departure from the administration," said Gustavo Rangel,
chief economist, LATAM, at ING. 
    "Such an event would be especially negative for local assets
and could ultimately threaten the sustainability of Bolsonaro's
own administration."
    The real marked its third straight session hitting a
record low, and was set to end the week down about 8.6% - its
worst in more than a decade. Sao Paulo's benchmark stock index
 eyed its worst session since mid-March. 
    Data also showed that industrial confidence in Latin
America's largest economy crashed to record low levels on
Friday, further marring the outlook for an economy already
wrought with flailing fundamentals. The currency is already down
almost 30% so far this year, while stocks 35%.
    Argentine stocks retreated and the currency
slipped to a new low as the coronavirus crisis added to concerns
over the country defaulting on its sovereign debt. 
    "(A default) would exacerbate local market instability and
widen the large premium between the official and the
non-official FX rates," ING's Rangel said. 
    Argentina's Buenos Aires province unveiled on Thursday a
restructuring offer to holders of its foreign law debt similar
to the one unveiled by the federal government.
    Other Latin American risk assets also retreated, with the
Mexican peso down 0.9%. The peso was set to lose about 5%
for the week, as a crash in oil prices, coupled with a surprise
rate cut by the central bank, weighed on the currency.

    The MSCI's index of Latin American stocks
sank 7%, while currencies fell 2.7% and was set
to post its biggest weekly loss in more than three years. 
    Key Latin American stock indexes and currencies at 1919 GMT:
  Stock indexes           Latest   Daily %
 MSCI Emerging Markets     878.74    -1.47
 MSCI LatAm               1501.34    -5.91
 Brazil Bovespa          74930.90    -5.95
 Mexico IPC              34707.74     1.36
 Chile IPSA               3694.79    -1.43
 Argentina MerVal        29312.85   -3.509
 Colombia COLCAP          1135.99    -1.37
      Currencies          Latest   Daily %
 Brazil real               5.6646    -2.44
 Mexico peso              24.9950    -0.76
 Chile peso                 858.8    -0.02
 Colombia peso             4033.6    -0.53
 Peru sol                  3.3947    -0.68
 Argentina peso           66.4200    -0.15
 (Reporting by Ambar Warrick in Bengaluru; Editing by David
Gregorio and Jonathan Oatis)
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