By Luana Maria Benedito
SÃO PAULO (Reuters) – The dollar soared on Thursday and was even traded well above the psychological mark of 5.50 reais, in response to the elected government’s proposal to exceptionalize 175 billion reais from the spending ceiling for the payment of the Bolsa Família and Luiz Inácio Lula da Silva’s statements on the markets’ reaction to fiscal easing measures.
At 9:33 am (Brasília time), the spot dollar advanced 1.78%, at 5.4784 reais on sale. Earlier, the US currency shot up 2.76%, to 5.5308 reais on sale, above 5.50 for the first time since July.
While it has moderated losses since then, the real remained the day’s worst performing currency among a basket of global peers.
On B3, at 9:33 am (Brasília time), the first contract dollar futures contract rose 1.43%, to 5.4960 reais.
The draft of the Transition PEC presented the day before by the vice-president-elect, Geraldo Alckmin, brings a proposal to “exceptionalize” the 175 billion reais spending ceiling for the payment of Bolsa Família from 2023 in the amount of 600 reais, with an additional of 150 reais per child, without a set deadline, confirming the fears of market agents.
Aggravating investors’ discomfort, Lula again criticized this Thursday the spending cap rule and disdained the reactions of the financial market to his speeches.
“Ah, but if I say that, the stock market will drop, the dollar will rise. Patience. Because the dollar doesn’t rise and the stock market doesn’t fall because of serious people, but because of speculators who speculate every single day,” said the president-elect during a speech in Egypt, where he is participating in the COP27.
“The PEC has been the main driver of the detachment of the local market from abroad, in the midst of the elected government’s attempt to swell the piece more and more, raising the transition cost and demanding an almost infinite ‘waive’ (license to spend) for this mandate,” wrote Jason Vieira, chief economist at Infinity Asset.
“The format is not good, it deviates from what many who voted for the change of mandate expected, as a ‘pragmatic’ government was being sold, something that apparently is not happening, especially in comparison with the 2002 mandate (of Lula).”
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