Fiscal chaos and mismanagement turn humor into “markets” once and for all

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With no results in the economy, Paulo Guedes decided to use precatorios (judicial debts) and education resources to finance the Citizen Income – which was considered a “mega-walled” – with this, the stock fell back to the lowest level in three months


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SÃO PAULO (Reuters) – The Ibovespa fell sharply on Monday, at the lowest closing level in three months, in a session marked by concerns about the country’s fiscal scenario, in the face of an announcement by the Citizen Income, a program that should replace Bolsa Família.

The Ibovespa fell 2.41%, to 94,666.37 points, the lowest level since June 26, when it closed at 93,834.49 points. The financial volume of the session totaled 27.44 billion reais.

At the beginning of the session, the index followed the optimism of international markets, rising more than 1.3% in the maximum. Soon, however, it lost strength. At the worst moment, it dropped 2.7%.

In the announcement of the Citizen Income, Senator Marcio Bittar said that the program will be funded with funds from Bolsa Família itself, surplus resources after payment of precatories and with a slice of the funds from the Fund for Maintenance and Development of Basic Education (Fundeb).

The government leader in the Chamber of Deputies, Ricardo Barros (PP-PR), explained that the amount of the benefit to be paid will only be defined during the votes in Congress, depending on the approval of proposals that will indicate sources for this aid, in case the one dealing with precatories.

The announcement had a negative impact on the stock market, raising investors’ perception of risk.

For Étore Sanchez, chief economist at Ativa Investimentos, the Brazilian budget has no fiscal space for the Citizen Income and this Monday’s announcement reinforced this view.

“In essence, the program has several fiscal problems, but the outlets for its viability announced today ended up surprising because they are marginally worse than expectations,” said Sanchez.

HIGHLIGHTS

– SANTANDER BR UNT rose 2.1%. BANCO DO BRASIL ON gained 0.7%, but ITAÚ UNIBANCO PN yielded 0.04% and BRADESCO PN fell 0.3%.

– JBS ON fell 4.54%. Other companies in the sector followed suit. MAFRIG ON lost 4.26%, while MINERVA ON depreciated 5%.

– EMBRAER ON increased 3.9%. Azul said on Sunday that it had received approval to operate the Embraer E195 jet modified for cargo purposes.

– COSAN ON fell 2.9%, after announcing that it will request the cancellation of the registration request for IPO of its subsidiary Compass Gás e Energia, citing “the deterioration of market conditions”.

– MELNICK ON lost 1.76% on his debut at B3. The construction company priced its IPO at R $ 8.50 per share on Thursday, raising R $ 713.6 million.

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