Brazil’s stock index Ibovespa falls 1.4% on political tensions as dollar rises to R$5.209

RIO DE JANEIRO, BRAZIL – The Ibovespa was knocked down by the political scenario for the second day in a row on Tuesday, July 6. The attention of investors focused on the accusation that President Jair Bolsonaro had coordinated a scheme of “rachadinhas” [salary kickbacks] when he was a member of Congress. This was reflected in the stock market, where only three stocks closed in positive territory.

Ibovespa, the main index of the B3 exchange, closed down 1.42% at 125.103 points, the lowest since the end of May. At its minimum for the session, Ibovespa fell below the symbolic mark of 125,000 points.

In the foreign exchange market, the dollar rose for the 6th consecutive day, following the global rise in the currency and reflecting domestic uncertainties.

The dollar recorded a 2.39% increase and closed the trading session at 5.209 reais – just a week after falling slightly below the 5 reais mark, which is considered an important psychological barrier in the market. “Worrying political risks are hindering appreciation of the real,” Sidnei Nehme, executive director of NGO Corretora, said in a note.

“As long as this tense political environment prevails, traders in the foreign exchange market can stimulate volatility that interests them commercially, but they will hardly be able to change the likely scenario that indicates an appreciation of the real,” the specialist says.

The Brazilian currency recorded the worst performance of the day among emerging currencies against the dollar. “The political discussion has gained a lot of importance recently and will continue. There is nothing to suggest that it will fall off the radar anytime soon,” commented Bruno Lima, senior equity analyst at BTG Pactual Digital.

According to audios published in a report by UOL and attributed to a former sister-in-law of the president, the then-federal deputy Jair Bolsonaro fired her brother for allegedly passing on a lower amount of his salary as a parliamentary advisor than agreed.

This was not the first time that the president’s name had been implicated in alleged cases of “rachadinha.” Even before he ran for office, reports in the Folha S. Paulo newspaper had denounced alleged machinations by phantom employees in his office. When he ran for president, the case of Fabrício Queiroz came to light in Estadão, involving his son Flávio Bolsonaro when he was a state deputy in Rio de Janeiro.

Other bad news included the progress of the Covid CPI, discussions about tax reform and alleged corruption in the purchase of coronavirus vaccines.

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