Brazil’s real is on course to end the week lower as the Wednesday arrest of a ruling-party senator threatens to sidetrack President Dilma Rousseff’s economic agenda.
The arrest of the government’s leader in the Senate, Delcidio Amaral, has delayed voting on a new fiscal target that would allow the government to end 2015 with a deficit of 119 billion reais ($31.7 billion) before interest payments. If Congress doesn’t pass the measure, the government risks breaching budget rules. That could spark a new round of requests to impeach Rousseff.
“What we have now is this hangover after all these arrests, which caused a paralysis in Congress and worsened the political imbroglio,” said Camila Abdelmalack, an economist at CM Capital Markets in Sao Paulo. “Not a single step has been taken to consolidate the budget amid deepening political frictions, and there is this feeling that this mess is far from over, which increases aversion toward Brazilian assets.”
The real has fallen 0.7 percent this week to 3.7328 per dollar as of 12:20 p.m. in Sao Paulo. The currency rebounded slightly Friday, gaining 0.3 percent, on strong flows from foreign buyers, according to traders from SLW Corretora de Valores and Correparti Corretora de Cambio.
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