Brazil real climbs on fiscal data, stocks drop
www.forbes.com Reuters, 01.30.03, 4:02 PM ET By Todd Benson
SAO PAULO, Brazil, Jan 30 (Reuters) - Brazil's currency strengthened on Thursday as investors waded back into the market after a recent spate of losses, encouraged by fresh data showing the country's fiscal health on the mend.
Stocks, however, backtracked as investors, spooked by the possibility of a U.S.-led war against Iraq, took profits following Wednesday's 3 percent surge.
"The outlook here is fine, the problem is the market climate abroad right now," said Tomas Taterka, a stock broker at Concordia brokerage in Sao Paulo. "When you've got a war looming, investors are going to cash in profits every chance they get, and that's what happened today."
After jumping more than 1 percent in early trading, the Sao Paulo Stock Exchange's benchmark Bovespa <.BVSP> index slipped 1.04 percent to 10,750.7 points in choppy trade.
In the currency market, the Brazilian real
The gains came as the government posted a record primary budget surplus of 52.4 billion reais ($14.7 billion) in 2002, easily beating its target agreed on with the International Monetary Fund for the fourth year in a row.
The surplus, which excludes debt servicing costs, was the equivalent of 4.06 percent of gross domestic product, leaving the new government of President Luiz Inacio Lula da Silva with ample room to shoot for a higher number, traders said.
"The 4.06 number was very good," said Gustavo Alcantara, a fund manager at Banco Prosper in Rio de Janeiro. "That means the government can easily raise the target to above 4.5 percent without resorting to a harsh fiscal shock."
Lula's finance minister, Antonio Palocci, said on Wednesday the government intends to raise its primary surplus target for 2003 to above the current 3.75 percent of GDP goal mandated by a loan agreement with the IMF.
By increasing the surplus, the Lula administration would be sending a signal to investors that it is taking the necessary steps to reduce Brazil's hefty debt-to-GDP ratio, which ended 2002 at 56 percent.
In the stock market, losers outpaced winners by a ration of 35 to 13, while six shares settled unchanged. Final trading volume was modest, totaling 404.9 million reais.
Bellwether stock Tele Norte Leste Participacoes (Telemar) <TNLP4.SA>, Brazil's biggest fixed-line telephone company, led the market lower. Telemar shares skidded 1.52 percent to 26.50 reais.
Long-distance carrier Embratel Participacoes <EBTP4.SA>, the Brazilian unit of troubled telephone giant WorldCom Inc. <WCOEQ.PK>, was among the few stocks settling on the upside.Embratel shares, among the most volatile at the exchange, shot up 3.77 percent to 3.58 reais.
In the banking sector, stock in Banco Bradesco <BBDC4.SA>, Brazil's No. 1 private bank, retreated 2.42 percent to 9.68 reais despite news it had offered 50 million euro bond.
Among exporters, shares in mining giant Companhia Vale do Rio Doce (CVRD) <VALE5.SA> settled unchanged at 89.50 reais after the company announced it would pay a minimum of $400 million in dividends in 2003.