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Brazilian stocks fell as analysts forecast a deeper contraction for Latin America’s biggest economy amid speculation that a growing corruption probe will imperil the government’s efforts to shore up its budget.
The Ibovespa equity index retreated 1.6 percent to 45,120.36 Monday, leaving it down by the same amount this month. A gauge of consumer discretionary shares tumbled the most in four years after a central bank survey showed analysts forecasting deeper contractions in Brazil’s economy this year and next. The arrest of President Dilma Rousseff party’s leader in the Senate added to speculation that the government will struggle to push through measures intended to improve fiscal accounts and restore growth.
"Investors are totally lost," Paulo Henrique Amantea, an analyst at brokerage H.H. Picchioni, said from Belo Horizonte. "Political and economic uncertainties are so huge that the best thing to do now is to adopt a very cautious strategy."
Meatpacker JBS SA contributed the most to the Ibovespa’s decline after Folha reported that Brazil’s audit office is investigating the possibility that the country’s development bank, known as BNDES, lost as much as 848 million reais ($218.9 million) by acquiring shares from the company at a cost that exceeded market prices. Iron-ore miner Vale SA fell to an 11-year low as Brazil said it will seek as much as 20 billion reais in compensation for a dam collapse at its venture with BHP Billiton Ltd.
Grupo BTG Pactual slumped to a record low, extending a four-day plunge to 32 percent. The Attorney General’s office has seized a note stating that Latin America’s biggest investment bank paid 45 million reais to Eduardo Cunha, now Brazil’s lower house chief, in exchange for amending a bill to favor the bank, newspaper Folha de S.Paulo reported.
Andre Esteves stepped down as BTG’s chief executive officer and chairman after he was arrested along with senator Delcidio Amaral on allegations both tried to interfere with the testimony of a jailed executive of state-controlled Petroleo Brasileiro SA about a pay-to-play scheme.
Standard & Poor’s is visiting Brazil this week to analyze the country’s political and economic situation, O Estado de S. Paulo reported over the weekend, without saying where it got the information. The visit comes less than three months after the company stripped Brazil of its investment-grade rating and increases speculation the nation might be downgraded again as Brazil heads toward its longest recession since the 1930s.