Gerdau Slumps Most Since 2011 on Corruption Investigation Report

  • Company named among graft scheme beneficiaries, newspaper said
  • Probe adds to political and economic turmoil in Brazil

Gerdau SA, Brazil’s biggest steelmaker by market value, slumped the most in four years after a report that it was mentioned in a graft probe.

Shares fell 9.6 percent, the most since August 2011, to 5.44 reais as trading volume was 40 percent above the average of the past three months, according to data compiled by Bloomberg.

The final report from a Congress committee that investigated an alleged bribe scheme to avoid payment of taxes mentions Gerdau among the companies benefited, newspaper Jornal do Comercio said, citing the report. The steelmaker said in an e-mailed response to questions that it never made any illicit payments to officials. 

Investors are concerned the investigation could lead to penalties including fines, according to Rafael Ohmachi, an analyst at the brokerage Guide Investimentos.

"That concern is weighing over the stocks today," Ohmachi said from Sao Paulo. "It also adds to the general distrust regarding the Brazilian markets. Investors feel very uncomfortable with so many scandals."

Brazil’s benchmark stock gauge fell 2.2 percent Friday on speculation the political crisis that has paralyzed Latin America’s biggest economy is nowhere near the end.

The lower house leader, Eduardo Cunha, on Wednesday accepted a request to impeach President Dilma Rousseff that argues she illegally financed her re-election campaign and broke the fiscal law by overspending this year and last. Cunha himself faces a possible congressional ethics probe because of allegations that he lied about the existence of overseas banks accounts. Both Cunha and Rousseff deny any wrongdoing.

Goldman Sachs Group Inc. this week warned that Latin America’s biggest economy is entering “an outright depression.” Political turmoil, fueled by a corruption investigation that entangled politicians, state-controlled oil producer Petroleo Brasileiro SA and the country’s biggest builders, has prevented the government from getting approval for measures intended to shore up the budget and restore growth.

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