EMERGING MARKETS-Brazil markets tumble after government slashes savings goal

jueves 23 de julio de 2015 17:31 GYT

(Updates to close, adds other Latin American markets, new
    SAO PAULO, July 23 (Reuters) - Brazil's currency, the real,
tumbled on Thursday after the government announced it would
slash its fiscal savings goals for this year and next, raising
investor fears that the country may lose its investment-grade
credit rating.
    The real  closed 2.2 percent lower at 3.29 per
dollar, its lowest level in four months. Stocks also fell, with
the country's benchmark Bovespa index erasing its gains
for the year.
    Late on Wednesday Brazil's government cut its primary
surplus goal for this year to 0.15 percent of gross domestic
product, from the originally budgeted equivalent of 1.1 percent
of GDP. 
    Markets on Wednesday anticipated the announcement based on
initial reports of the plans, driving the real 1.6 percent
lower. The actual cuts announced after markets closed were
bigger than many investors had expected. 
    "The sizes of the cuts were very surprising," Nomura
analysts Joao Pedro Ribeiro and Benito Berber wrote in a client
note. "Indeed, they raised questions not only about Brazil's
very short-term fiscal standing but also its ability, in a
politically turbulent environment, to implement the needed
fiscal consolidation to avoid a downgrade to junk."
    The primary surplus, or revenue available to meet interest
payments on debt, is closely watched by markets and credit
rating agencies as a gauge of a country's capacity to repay its
debt. The agencies have warned they may further downgrade
Brazil, a move which could undermine investor confidence and
raise borrowing costs. 
    The government also reduced its fiscal savings goal for 2016
to 0.7 percent of GDP from a previous goal of 2 percent.
    Meanwhile, Brazil's Bovespa stock index posted its biggest
one-day drop in nearly two months, falling 2.18 percent to
49,806 points and putting it into negative territory for 2015.
    Shares of banks and financial firms led losses on the index,
with Itau Unibanco SA dropping 4.2 percent and rival
Banco Bradesco SA sinking 4.4 percent.
    Investors are worried that a further deterioration of
Brazil's economy could lead to higher non-performing-loan rates
and diminished credit quality.
    Moves in other Latin American markets were more muted, with
Mexico's IPC stock index closing about 0.4 percent higher
and Chile's IPSA index about 0.5 percent lower.
    In currency markets, Colombia's peso sank about 1.6
percent, partly driven by lower prices for oil, the
country's main export. 
    Key Latin American stock indexes and currencies at 2107 GMT:
 Stock indexes            Latest        Daily  YTD pct
                                          pct   change
 MSCI Emerging Markets        923.56    -0.81    -3.42
 MSCI LatAm                  2325.87    -2.37   -14.73
 Brazil Bovespa            49,806.62    -2.18    -0.40
 Mexico IPC                44,836.33     0.37     3.92
 Chile IPSA                 3,871.28    -0.51     0.53
 Chile IGPA                18,825.98    -0.37    -0.24
 Argentina MerVal         11,625.229    -0.48    35.51
 Colombia IGBC              9,983.15     0.23   -14.19
 Venezuela IBC             14,989.39    -0.18   288.45
 Currencies                   Latest    Daily  YTD pct
                                          pct   change
 Brazil real                    3.29      2.2   -19.10
 Mexico peso                 16.2151    -0.03    -9.07
 Chile peso                      656    -0.34    -7.56
 Colombia peso              2,832.25     0.00   -15.69
 Peru sol                     3.1871     0.03    -6.53
 Argentina peso               9.1625    -0.03    -6.68
 Argentina peso                14.59     2.06    -4.04

 (Reporting by Bruno Federowski and Asher Levine; Editing by
Walter Brandimarte, Chizu Nomiyama and Andrew Hay)