Lula’s Fiscal Goal Doubts Impact Stocks and Currency
On October 27, 2023, Brazil’s main stock index, Ibovespa, declined due to President Lula hinting at a potential fiscal target challenge for 2024.
This index decreased by 1.29% and ended at 113,301 points. Meanwhile, Brazil’s currency rate, the real, rose to R$ 5.01, showing a 0.46% increase.
President Lula shared his doubts about a fiscal goal for 2024. Finance Minister Fernando Haddad had previously set this goal.
But Brazil had achieved a positive balance only once in the past nine years. Many in the financial world now question the government’s dedication.
They wonder about its plan to keep a balanced budget. A budget in August had set a fiscal target.
Yet, many believe there might be changes to this plan soon. President Lula sees a small 0.5% deficit as a minor issue.
This view might affect Brazil’s financial rules and economy. Without strict measures, interest and inflation rates might rise.
This could increase the country’s debt and make lowering interest rates harder.
Before Lula’s comments, the stock market had risen by 0.49%. The currency was valued at R$ 4.96, a slight drop from before.
Future interest rates also saw changes. By January 2025, rates might rise by 1.8%. By January 2027 and 2029, they might increase by 2.09% and 1.88% respectively.
Higher rates could make borrowing more expensive for Brazil. The government had a balanced budget plan.
But, experts think it’s hard to achieve. Increased expenses and doubts about making more money are challenges. To balance, the Finance Ministry needs to find R$ 168.5 ($34) billion more.
Despite Lula’s views, the official team believed the budget was doable. Yet, even financial experts see challenges in reaching the target.
Background Lula’s Fiscal Goal Doubts Impact Stocks and Currency
Economic confidence, measured by a 5-year risk score, was at 190 points on October 27. Last year, it was higher at 281 points.
Foreign investors took out R$ 3.2 billion ($640 million) from stocks by October 25. Still, the year’s total is a positive R$ 6.1 billion. Including all offers, the gain is R$ 16.8 billion.
More: Brazil news in English, every day from The Rio Times.
Live Market IntelligenceBrazil — Live Market Board
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Brazil — Live Market Board
+0.46%
183,827.59
+0.46%
65,071.30
+0.20%
11,055.91
-0.73%
2,782,561
-0.59%
2,558.92
-0.79%
60,220.45
+0.32%
| Instrument | Last | Change | YoY | Prev. | High | Low | Volume |
|---|---|---|---|---|---|---|---|
| IBOV | 183,827.59 | +0.46% | +21.85% | 182,991.13 | 168,310 | 167,142 | — |
| USD/BRL | 5.16 | +0.01% | -5.13% | 5.16 | 5.18 | 5.14 | — |
| SELIC | 14.00% | — | — | — | — | — | |
| PETR4 | 41.64 | -0.05% | +35.19% | 41.66 | 41.97 | 41.15 | 41,499,400 |
| VALE3 | 72.97 | +0.83% | +30.75% | 72.37 | 73.54 | 72.66 | 17,658,000 |
| ITUB4 | 38.60 | -1.03% | +4.57% | 39.00 | 39.34 | 38.39 | 29,487,800 |
| BBDC4 | 16.85 | +0.36% | +3.50% | 16.79 | 16.90 | 16.67 | 19,416,900 |
| BBAS3 | 19.37 | +0.47% | +0.73% | 19.28 | 19.44 | 19.16 | 11,069,200 |
| B3SA3 | 14.26 | -0.21% | +12.73% | 14.29 | 14.47 | 14.11 | 33,037,800 |
| ABEV3 | 14.89 | -0.80% | +21.91% | 15.01 | 15.07 | 14.81 | 16,453,100 |
| WEGE3 | 47.59 | +0.49% | +29.99% | 47.36 | 48.08 | 47.36 | 3,364,600 |
| PRIO3 | 59.14 | -0.19% | +50.67% | 59.25 | 59.81 | 58.74 | 3,325,600 |
| SUZB3 | 41.33 | +2.35% | -23.55% | 40.38 | 41.48 | 40.35 | 3,914,900 |
| RENT3 | 34.68 | -0.09% | +0.84% | 34.71 | 34.96 | 34.35 | 7,979,100 |
| AZZA3 | 15.89 | -2.63% | -53.76% | 16.32 | 16.42 | 15.82 | 1,330,300 |
| CSNA3 | 4.30 | +0.47% | -42.65% | 4.28 | 4.41 | 4.26 | 10,076,100 |
| GGBR4 | 24.69 | +2.19% | +51.38% | 24.16 | 24.85 | 24.18 | 7,047,600 |
| ENEV3 | 24.21 | -1.38% | +70.49% | 24.55 | 24.64 | 23.99 | 9,297,000 |
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