Ibovespa Declines as Political Tension Fuels Impeachment Doubts

  • Consumer stocks decline most on benchmark equity index
  • Gol tumbles as bondholders said to oppose debt restructuring

The Ibovespa fell for the fifth time in six days as fresh political turmoil fueled concern that a change in government will be harder than anticipated.

Stocks trimmed this year’s rally after Eduardo Cunha, Brazil’s lower house chief and one of the most powerful politicians implicated in the country’s sprawling corruption scandal, was temporarily suspended from working as a legislator. The Ibovespa leads gains among major markets this year on bets that if efforts to impeach President Dilma Rousseff are successful, a new administration will be able to shore up Brazil’s finances and pull the economy out of its worst recession in a century.

"All the attention is focused on the process of putting in place a new government, so the noises and setbacks in building a political consensus makes the market more cautious," said Hersz Ferman, an economist at the brokerage Elite Corretora in Rio de Janeiro. "We should face more volatility."

The Ibovespa fell 1.7 percent to 51,671.04 in Sao Paulo as 46 of its 59 stocks declined. Companies that depend on domestic demand, led by for-profit college managers Estacio Participacoes SA and Kroton Educacional SA, were among the worst performers on the benchmark equity gauge.

Gol Linhas Aereas Inteligentes SA sank 17 percent after people familiar with the issue said that a group of bondholders views the airline’s debt restructuring proposal as unfair and has hired U.S. investment bank Houlihan Lokey Inc. to negotiate with the company. The shares jumped 28 percent Tuesday after the bond exchange proposal was announced.

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