LATAM WRAP-Focus on Brazil as political risks rise
By Paul Kilby
NEW YORK, July 17 (IFR) - Another raft of negative headlines out of Brazil overshadowed LatAm debt trading on Friday in what was a quiet session to close a volatile week for the asset class.
Rising political risks in Brazil are creating further uncertainty about the government's ability to push measures through Congress and get a flagging economy back on track.
A decision by the speaker of the lower house of Congress Eduardo Cunha on Friday to break with the government of President Dilma Rousseff further complicated finance minister Joaquim Levy's efforts to implement his fiscal plan and avoid further ratings downgrades for the sovereign.
"The government has become more difficult to manage than just two weeks ago," said Klaus Spielkamp, head of fixed-income sales at Bulltick.
"This is why we are seeing the Bovespa and the Real suffer today."
The Real was trading close to 3.20 against the dollar earlier today - from 3.13 quoted on Monday - while the Bovespa stock index was down about 1% on the day.
News late yesterday that Brazil's former president Luiz Inacio Lula da Silva was being investigated for alleged influence peddling also added to the malaise hanging over Brazil amid growing calls for the impeachment of the current president.
Still, with the exception of the construction companies involved in the Petrobras corruption investigation, the country's credit markets have been holding up relatively well, though liquidity has been very light. Continuación...