Latin American currencies began December on a downbeat note, with Brazil’s real continuing its decline after an unsatisfactory fiscal package announcement. The real dropped 1.6% against the U.S. dollar, nearing record lows, amid investor disappointment over a fiscal package that included a tax exemption, which led to a market sell-off. Despite this, Brazil is aiming for a corporate income tax adjustment in 2025, according to the deputy finance minister. Concerns over fiscal instability persist, overshadowing central bank interest rate hikes intended to support the real.
Macquarie strategists foresee continued central bank tightening, although they doubt its ability to reverse the real’s depreciation since April. Brazil’s incoming central bank chief, Gabriel Galipolo, hinted at extended high interest rates and selective currency market interventions. The broader MSCI index for Latin American currencies slid 1.2%, with the stock index losing 1%.
Compounding regional concerns, U.S. President-elect Donald Trump urged BRICS nations, Brazil included, to eschew any dollar-replacing currency, threatening 100% tariffs in response. Meanwhile, the Mexican peso recovered slightly, ending down at 20.39 per dollar. Mexico’s economic outlook brightened slightly, with analysts raising GDP growth forecasts to 1.53% for the year. The Mexican equities index gained 1.3%, reaching a one-week high.
Copper-exporting countries Chile and Peru saw their currencies weaken alongside declining copper prices, with year-over-year economic activity in Chile growing by 2.3%, slightly under expectations. Regional stock markets saw varied performance, with Argentina’s Merval index rising 1.6% and Chilean stocks gaining 0.9%.
Key metrics included Brazil’s Bovespa declining 0.08%, Mexico’s IPC up 1.26%, and fluctuations in other regional currencies and stocks. Overall, Latin American markets faced challenges amidst fiscal and geopolitical pressures.
Original Story https://www.livemint.com/news/latam-fx-kickoff-december-lower-brazil-s-real-extends-slide-11733172950595.html
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