Brazil’s Stocks Fall as Budget Bill Delay Raises Reforms Concern

  • Companies that depend on domestic demand fall most on Ibovespa
  • Itau Unibanco and Ambev contribute most to decline of index

The Ibovespa fell, led by companies that depend on domestic demand, as the delay of a congressional vote on a budget bill raised concern that it may take longer than expected to rein in Brazil’s fiscal deficit.

Indexes of Brazilian health-care service providers and financial stocks were the worst performers among 10 industry groups tracked by MSCI Inc. Lender Itau Unibanco Holding SA and brewer Ambev SA contributed the most to the Ibovespa’s decline.

Any impediments to shoring up Brazil’s budget would disappoint investors who made the Ibovespa the world’s top performer this year on bets that Acting President Michel Temer will improve the country’s finances. The government failed to gather enough lawmakers to approve a bill that frees up as much as 30 percent of the federal budget. Since Brazil lost its investment grade credit rating last year, cutting the budget deficit is seen as key to restoring investor confidence.

"The fiscal reform is a key part of the plan to put Brazil back on track, and any noise on that process makes the market worried," Paulo Henrique Amantea, an analyst at the brokerage Guide Investimentos, said from Belo Horizonte.

The Ibovespa dropped 0.5 percent to 59,051.00 at 10:46 a.m. in Sao Paulo as 38 of its 59 stocks fell. Ambev SA slid 1.1 percent, the most in three weeks. Itau fell 1.2

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