Ibovespa Falls as Embraer Tumbles Most in Month on Order Concern

The Ibovespa dropped as plane maker Embraer SA tumbled after Brazilian airline Azul said it may cancel an order valued at $1.87 billion of jets.

Petroleo Brasileiro SA, the oil producer known as Petrobras, contributed the most to the index’s decline. Pulp producer Suzano Papel e Celulose SA fell as a stronger real dimmed the outlook for exporters. Retailer Cia. Hering led retailers higher as traders pared bets for higher borrowing costs in Brazil.

The Ibovespa retreated 0.9 percent to 52,725.38 at the close of trading in Sao Paulo as 46 stocks declined and 22 rose. The real strengthened 0.2 percent to 2.5526 per U.S. dollar at 5:42 p.m. local time. Azul, the only airline in the country flying Embraer jets, is threatening to cancel its order if lawmakers approve the latest plan to subsidize flights to small cities.

“The possibility of Azul canceling its order would be really negative for Embraer, and that’s driving the stock down,” Pedro Galdi, the head strategist at brokerage SLW Corretora, said by phone from Sao Paulo. “In addition to that, some industries such as pulp and paper tend to react negatively to an appreciation of the real.”

Embraer sank 4.1 percent, the most since Oct. 13, to 23.28 reais. The amended proposal is “a bad subsidy,” Azul President Antonoaldo Neves said, sharpening the carrier’s criticism of a program it once backed. A revised measure heading for a vote this month is no longer as big a boost to Azul or Embraer, whose models have fewer seats than Boeing Co. or Airbus Group NV jets. Azul is threatening to cancel a 30-aircraft order.

Suzano, Petrobras

Suzano dropped 3.2 percent to 10.60 reais. Petrobras lost 2 percent to 13.98 reais. Hering advanced 2.9 percent to 24.90 reais.

Analysts covering Latin America’s largest economy cut their 2015 median growth forecast to 0.8 percent from 1 percent a week earlier, according to a central bank survey published today. They increased their estimate for inflation next year to 6.4 percent from 6.32 percent, the survey showed.

The Ibovespa has fallen 15 percent from this year’s high in September as President Dilma Rousseff’s re-election Oct. 26 ended speculation that a victory for an opposition candidate would help to boost growth and reduce intervention in state-owned companies.

Trading volume of equities in Sao Paulo today was 5.1 billion reais, data compiled by Bloomberg show. That compares with a daily average of 7.27 billion reais this year, according to data compiled by Bloomberg.

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