BUSINESS-ECONOMY
An unsuccessful attempt to allay persistent fears over Brazil's debt trajectory by the government's economic team members sent the country's assets plunging. Among 23 developing market currencies, the Brazilian real led the pack of declining currencies, plunging as much as 1.4 per cent against the dollar. While comparable contracts in Chile and Mexico fell, in Brazil, those with maturities in January 2029 saw a spike of over 40 basis points in swap rates. Guilherme Mello, Brazil's economic policy secretary, reaffirmed the government's budgetary strategy during a conference call with investors. According to a Bloomberg report quoting sources, the actions implemented by the government of Luiz Inacio Lula Da Silva are strong enough to support the country's alleged budgetary framework. The slump comes after Lula ignored aides last week and sparked a market rout that threatens the economy. The real hit an all-time low last week after the government's spending-cut package underwhelmed traders and is down 20 per cent this year. The dangers were crystal clear. President Lula's top economic aides pointed them out to him again and again. Any moves to water down the fiscal austerity plan in the works will spark a selloff — another selloff — across Brazilian financial markets. And yet, Lula decided he did not care. To dilute the plan's much-needed savings, he instructed his aides to include a number of tax relief measures for the poor in the package that was announced late last week. Just as predicted, markets crashed instantly, erasing 2.4 per cent of a stock market that had been declining for months. For now, investors remain cautious and predict the selloff will continue. None
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