SÃO PAULO (Reuters) – The spot dollar advanced this Monday against the real, in a session of lower liquidity due to a holiday in the United States, on the news that President Luiz Inácio Lula da Silva is considering raising the minimum wage above the minimum wage. 1,320 reais promised by the government and a more cautious external scenario.
In addition, market agents mentioned statements by government authorities about the intention not to increase the Tax on Industrialized Products (IPI). The goal, according to the vice-president and minister of Industry, Foreign Trade and Services, Geraldo Alckmin, is to extinguish the tax.
The spot dollar closed up 0.80%, at 5.1485 reais on sale. At the high of the day, the US currency advanced 1.09% (5.1632) and, at its lowest, fell 0.28% (5.0929).
The US currency showed little variation during the morning, operating at a slight increase against the real, but accentuated the gains in the late afternoon after the news about the minimum wage.
Lula is considering raising the minimum wage this year to above the 1,320 reais promised by the government, said Broadcast, an agency of the newspaper O Estado de S.Paulo, citing technicians from the economic team. The Ministry of Finance is against the proposal, and the final amount and the effective date have not yet been defined, according to the report.
Questioned by Reuters, the Ministry of Finance said that the portfolio’s position on the minimum wage was expressed by Minister Fernando Haddad in a press interview last week. On the occasion, Haddad indicated that the minimum wage this year will be at R$1,302, as proposed by the previous government and which is already in effect, with no additional increase. The minister argued that the value already represents a gain of 1.4% above inflation and fulfills Lula’s promise to grant annual real readjustments to the minimum.
“The point is more the signal than just the one-off increase that is being talked about,” said to Reuters the superintendent of commercial treasury at Banco Daycoval, Marcelo Sanches. “In the same way that the government backed down on some aggressive or controversial agendas, I think there is room to backtrack on this one,” he added, noting that the lower liquidity in the session may have made the reaction to the news more acute.
Still on the local scene, Alckmin’s statement earlier on the IPI to an audience of businessmen from the industry also gained the attention of investors. The Minister of Finance, Fernando Haddad, told journalists at the end of the afternoon, direct from the World Economic Forum, in Davos, that the decision not to raise the tax aims to signal to the industry that the government intends to move forward with the tax reform.
According to Sanches, the two pieces of news, about the minimum wage and the IPI, made “the fiscal perception worse and that was what made the price”. These developments occur after Haddad presented, last week, a package of economic measures, whose initiative was well seen in the market, but with plans evaluated as short term and focused on increasing revenues and not on cutting expenses, according to agents of market.
Sanches said, however, that despite the movement on Monday, the external agenda is still more important for price formation than the internal one.
The dollar accumulates a drop of 2.45% against the real at the beginning of this year, with analysts mentioning a strong inflow of funds from foreign investors, as commodities advance and the perception in the market increases that the Federal Reserve will adopt a less aggressive posture on interest rates, with inflation in the US showing signs of cooling down.
On Monday, the dollar was up about 0.1% against a basket of strong currencies.
“On the international front, the decline in commodity prices –for example, iron ore–… and the holiday in the US are the main factors”, said Adriano Ribeiro, senior economist at Banco ABC Brasil, referring to the impacts on the local exchange rate in session.
Anyway, returning to Brazil, analysts consulted by the Central Bank began to see less monetary easing this year amid higher expectations for inflation, according to the Focus survey released in the morning.
(By Andre Romani)
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