Brazil Stocks Decline After Earnings Disappointment at Oi, Copel

  • Companies in the index have so far missed estimates by 16%
  • Vale, the world's biggest iron-ore miner, follows metals lower

Brazil’s benchmark stock index fell for the first time in three days as investors weighed the third-quarter earnings reports from companies including meatpacker JBS SA and lender Banco do Brasil SA.

Pulp producer Suzano Papel e Celulose SA rose the most on the Ibovespa after posting a loss that was smaller than analysts estimated, while utility Cia. Paranaense de Energia was the worst performer after its profit disappointed analysts. The index lost 0.4 percent to 46,883.58 at the close of trading in Sao Paulo after rising and falling as much as 0.8 percent.

Among the 48 companies on the Ibovespa that have already reported third-quarter figures, half topped analysts forecasts and half missed, according to data compiled by Bloomberg. Even so, those earnings have missed estimates by a cumulative 16 percent, the data show. Economists expect Brazil’s gross domestic product to contract this year and next as the government struggles to pass measures intended to tame a budget deficit amid strong opposition from lawmakers including the ruling party’s.

"Despite the horrible situation we’re in, some companies are managing to surprise investors, posting good results." Hersz Ferman, an economist at brokerage Elite Corretora, said from Rio de Janeiro. "They are an exception, though. Most of the companies’ results have been how bad. And the worst part is all the political turmoil that never ends. Nobody knows who will lead the country’s recovery and how."

A political crisis that has paralyzed Brazil’s economy and fueled uncertainty among investors has escalated this week amid reports that Finance Minister Joaquim Levy will be replaced by former central bank head Henrique Meirelles. Brazilian news agencies have reported several times recently that Levy is on his way out, even as President Dilma Rousseff says he has her full support.

The power utility known as Copel slumped 8.7 percent, the biggest drop in more than two years. Suzano added 5.9 percent. JBS added 0.7 percent after third-quarter profit more than tripled. Banco do Brasil retreated 0.3 percent.

Vale SA, the world’s biggest iron-ore miner, fell for a seventh day as metals sank on concern demand from China will falter as the Asian country’s economy decelerates. State-controlled oil producer Petroleo Brasileiro SA lost 1.8 percent as a decline in oil prices dimmed the outlook for the company’s offshore investments.

While Levy is perceived as damaged after losing a series of battles to cut government expenses and raise taxes, some investors consider Meirelles, backed by former President Luiz Inacio Lula da Silva, to be more capable of putting Brazil back on track, Ferman said.

That assumption may not be right as Meirelles would have to take the same measures Levy has proposed to restore growth, according to Marcus Vinicius Tsukuda, an analyst at the equity research firm Eleven Financial.

"What the markets seem not to have understood yet is that it doesn’t matter who’s the minister,” Tsukuda said from Sao Paulo. “There’s no way other than the fiscal adjustment to put the country back on track to sustainable growth. The cook may change, but the recipe for the cake is still the same."

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