Brazil Stocks Slump on Moody's Downgrade Signal, Political Fight

  • Lenders including Bradesco may be cut to junk on turmoil
  • Ministers Levy, Barbosa reported to dispute fiscal target

Brazil’s stocks fell after Moody’s Investors Service downgraded miner Vale SA, the world’s biggest iron-ore producer, and said it would review lenders including Banco Bradesco SA for cuts.

The credit revisions follow Moody’s signal, on Dec. 11, that it may cut the nation’s sovereign credit rating to junk amid forecasts for the longest recession since the 1930s and political turmoil. Speculation that tensions between Finance Minister Joaquim Levy and Planning Minister Nelson Barbosa regarding the fiscal policy are heating up again fueled concern the crisis that has paralyzed Brazil isn’t close to an end.

"The political and economic situations make investors very concerned, especially considering that all the internal disputes in the government may lead to the exit of Levy, which would be horrible," Filipe Borges, a trader at the brokerage Solidez Corretora, said from Sao Paulo. "The possible downgrades for Brazilian companies just show how uncomfortable everybody is."

The Ibovespa retreated 0.6 percent to 45,343.27 at 10:43 a.m. in Sao Paulo, with three stocks falling for every one that rose.

A Valor Economico newspaper columnist reported Friday that Levy is seeking a so-called primary budget surplus target of 0.7 percent of gross domestic product next year to restore credibility and avoid further credit-rating downgrades. Barbosa wants to lower the target to between zero and 0.7 percent.

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