Brazil stocks fall as Bolsonaro puts limits on privatization plan
Rio de Janeiro (AFP)
Brazil's stock market took a dive Wednesday after far-right presidential frontrunner Jair Bolsonaro defined limits for his privatization plans for the country's huge energy sector, specifically to keep key assets out of Chinese control.
His comments, given in an interview with Band TV late Tuesday, sent shares in state electricity company Eletrobras plunging more than 13 percent.
The Ibovespa stock index fell nearly two percent by the middle of the trading day. The dollar also rose against the real.
Investors had last week sent Brazil's stock market and real surging on Bolsonaro's promises to implement free-market reforms that would include sweeping privatizations of the country's many state-run companies.
But his interview showed he was not going nearly as far as investors had hoped.
"China isn't buying in Brazil -- China is buying Brazil," Bolsonaro said.
"Are you going to leave our energy in the hands of the Chinese?... Are we going to leave our energy in the hands of others?"
He also said that the current set-up of Petrobras, Brazil's state-controlled oil company, "has to be preserved."
Bolsonaro said his privatization vision meant selling off only electricity distribution, not generation, and only Petrobras's refinery operations, not the core part of the company.
And he said his promised reform of Brazil's unsustainable pension system had to be done "slowly."
Together, the statements took the wind out the sails of Bolsonaro's manifesto, which relied in part on his vow to shake up Brazil's struggling post-recession economy.
The comments on China were especially important.
China is the biggest foreign investor in Brazil, and its top trading partner.
Last year, China's State Grid -- China's largest state-owned enterprise -- announced it was buying a majority stake in a Brazil electricity giant, CPFL, for around $4 billion.
Bolsonaro, who for almost all of his 27 years in Brazil's congress has defended his country's statist economic model, recently changed direction to adopt free-market rhetoric offered by a key advisor, respected economist Paulo Guedes.
But at the same time, he has spoken admiringly of US President Donald Trump and his America First policies.
© 2018 AFP