Brazil's Real Fluctuates Ahead of Revised Fiscal Target Voteby
If vote not approved, president risks breaching fiscal law
Committee scheduled to vote on lower house head investigation
Brazil’s real fluctuated ahead of a planned vote in congress on the country’s fiscal target, which is key to avoiding a forced government spending shutdown.
The government is working to gather support among lawmakers to get approval to change this year’s fiscal target, allowing it to end the year with a primary deficit of 119 billion reais ($31 billion). The vote could happen as early as Wednesday. If the change isn’t approved, President Dilma Rousseff faces a tough choice: either breach budget law, which could be grounds for a new impeachment request, or be freeze spending. Planning Minister Nelson Barbosa said a failure to pass the measure would paralyze the government, newspaper Folha de S. Paulo reported.
The real declined 0.1 percent to 3.8571 per dollar at 10:17 a.m. in Sao Paulo. The currency is down 31 percent this year on concern the government will fail to ward off credit-rating cuts as the country is stuck in the middle of its longest recession since the 1930s. One-month implied volatility was 21.5 percent, the highest among 16 major tenders tracked by Bloomberg.
"The vote is about choosing between the fiscal state and the weak economy and this is far from ideal," Georgette Boele, an Amsterdam-based analyst at ABN Amro Bank NV, said.
The ethics committee of the lower house of Congress is scheduled to vote on whether to open an investigation into lower house head Eduardo Cunha’s alleged role in the Carwash corruption probe.
Swap rates on the contract maturing in January 2017, a gauge of expectations for interest-rate moves, dropped 0.06 percentage point to 15.68 percent.