Under Lula, Brazil is walking on the financial wild side
Investors have started to worry about deficits and debt
In the year to mid-June Brazil’s currency, the real, fell against the dollar by 17%, the worst performance of any major currency over this period. The São Paulo stockmarket lost 10% of its value between January and mid-June even as other emerging markets rallied. The reasons for this slump are not hard to divine: investors doubt the commitment of Luiz Inácio Lula da Silva, the left-wing president, to responsible fiscal and monetary policies, and mistrust his renewed flirtation with a big state. Their worries now seem to have been heeded, at least partly. This month both Lula and his politically influential wife, Rosângela “Janja” da Silva, went out of their way to back Fernando Haddad, the finance minister, and his efforts to cut the fiscal deficit. Markets have responded: the real has gained about 5% from its low at the start of the month and the stockmarket has risen too.
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This article appeared in the The Americas section of the print edition under the headline “Lula points to a spending binge”
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