WEDNESDAY, MAY 21, 2014
BRASILIA–Brazil’s stocks fell and currency strengthened Wednesday amid weakening job creation and labor tensions, and after the finance minister said inflation is declining.
The Brazilian real exited active trading at 2.2076 reais per U.S. dollar, stronger than 2.2165 reais a dollar the day before, according to Tullet Prebon via FactSet.
The Ibovespa stock index closed down 0.31%, at 52203 points, after spending most of the day in positive territory.
The country’s largest company, state-controlled oil producer Petróleo Brasileiro SA, or Petrobras, rose 0.92% to 17.46 reais. Another blue-chip, miner Vale SA, went up 0.58% to 26.18 reais per share.
In recent weeks, Brazil’s labor unions have launched a series of strikes, some demanding salary increases well above annual inflation. Police officers and city-bus drivers have walked off their jobs in large cities such as Rio de Janeiro and the northeastern resort of Recife, causing disruption for commuters and raising safety concerns.
Other strikes are being called for in the coming weeks, as the World Cup approaches. Brazil will host the event from June 12 to July 13.
After the tournament political campaigns for the October general elections will kick into full gear.
Labor Ministry Manoel Dias told reporters Wednesday that “workers have had salary increases higher than inflation” in the past decade and “many strikes are inexplicable.” Politics may also be behind the streak of strikes, he said. “There is also manipulation. It has always been like this in electoral years. There are people willing to create difficulties,” he said.
Mr. Dias’ comments came after his ministry announced that Brazilian employers added 105,384 jobs in April. The result is the worst for the month since 2000, when 125,071 jobs were added, the ministry said. The result shows that Brazil “keeps creating jobs, but at a slower rate,” according to the ministry’s press release.
Brazil has shown high employment rates even as economic growth slowed in the past few years. Economists have blamed the tight job market as one cause of persistently high inflation.
But consumer prices could be on a downward trend. Brazil’s mid-month consumer-price index, the IPCA-15, rose 0.58% compared with a 0.78% climb in the month through mid-April, the Brazilian Geographic and Statistics Institute, or IBGE, said Wednesday. The most recent 12-month reading for the IPCA, in April, was 6.3%
Finance Minister Guido Mantega said the mid-month results show inflation is losing steam. “We have acted against inflation. Interest rates are high,” told reporters outside the ministry Wednesday morning.
Brazil’s benchmark interest rate Selic was gradually raised since April 2013, to 11% from 7.25%. The central bank has a mandate to keep the IPCA at 4.5%, with a maximum tolerance of 6.5%. The bank’s next monetary-policy meeting next week may leave the Selic unchanged, many analysts now believe.