March 21, 2019 / 9:46 PM / 4 months ago

EMERGING MARKETS-Latam FX weaker, Brazil hit by arrest of ex-president

 (Recasts throughout, updates prices)
    By Susan Mathew
    March 21 (Reuters) - Latin American currencies weakened on
Thursday as the dollar soared, while Brazil shares fell sharply
following the arrest of a former president of the country on
graft charges.
    A slump in the dollar's top European rivals, the euro and
pound sterling, on Brexit worries helped the greenback shrug off
the Federal Reserve's surprisingly more dovish stance on
    Mexico's peso fell for the first time in five days,
down 0.2 percent, while Chile's peso slipped 0.7 percent.
    Argentina's currency extended losses to a fourth
straight session. Data showed that the economy contracted 2.5
percent in 2018, as the country slipped into recession thanks to
sky high interest rates by the central bank in an attempt to
curb inflation, which led to a freefall in the currency.

    Argentine President Mauricio Macri, set to face a
re-election battle in October, has been struggling to revive
growth since the currency crisis.
    Stocks in Buenos Aires slumped 1.6 percent and
posted their biggest one-day drop in more than two weeks.
    In Brazil, the arrest of former President Michel Temer on
graft charges knocked down the real and stocks,
as it threatened to delay fiscal reforms by the government seen
as crucial to the economy.
    The currency fell 0.4 percent, snapping a four day rally,
while the benchmark Bovespa stock index declined 1.3 percent.
    Temer, who was succeeded by President Jair Bolsonaro in
January, was arrested on allegations that he was the leader of a
"criminal organization" that diverted 1.8 billion reais ($471.62
million) in funds as part of a scheme related to a nuclear power
plant complex on the Rio de Janeiro coast. 
    The scandal comes just as Congress is getting ready to take
up a bill to overhaul the social security system. Projected
savings from the Armed Forces Social Security reform proposal of
10.45 billion reais after the proposal was modified is much less
than the initial 92.3 billion reais expected.
    "The market was already having a negative bias after the
announcement of the proposal to change the military pension
system. The news of Temer's arrest only further worsened
concerns about the progress of the reform," said Victor Candido,
chief economist at Guide Investimentos.
    E-commerce company B2W and it parent company
Lojas America were the biggest losers on the
benchmark. B2W announced plans to increase the number of vendors
in its marketplace platform to 40,000 this year. 
    Meanwhile, stocks in Mexico, Chile and
Colombia rose between 0.2 percent to 0.3 percent,
tracking a rise in world stocks.
    Key Latin American stock indexes and currencies at 2100 GMT:
    Stock indexes             Latest    Daily %
 MSCI Emerging Markets         1069.68      0.11
 MSCI LatAm                    2835.13     -1.19
 Brazil Bovespa               96729.08     -1.34
 Mexico IPC                   43251.19      0.22
 Chile IPSA                    5261.33      0.31
 Argentina MerVal             34186.08     -1.61
 Colombia IGBC                13370.32      0.32
       Currencies             Latest    Daily %
 Brazil real                    3.7931      0.12
 Mexico peso                   18.8515      0.05
 Chile peso                      669.4     -1.11
 Colombia peso                  3086.5      0.00
 Peru sol                        3.287      0.15
 Argentina peso                41.0000     -0.27

 (Reporting by Susan Mathew in Bengaluru and Stéfani Inouye in
Sao Paulo; Editing by Diane Craft)
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