Brazil Markets Sink as Traders Mull Lula’s Plan to Beef Up State

Petrobras, Banco do Brasil push benchmark Ibovespa lower
Investors worried spending spree will erode fiscal accounts

Luiz Inacio Lula da Silva, Brazil’s president, after being sworn-in during an inauguration ceremony at Planalto Palace in Brasilia, Brazil, Jan. 1, 2023.Photographer: Maira Erlich/Bloomberg

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By Julia Leite and Barbara Nascimento

January 2, 2023 at 3:05 PM UTC

Updated on

January 2, 2023 at 9:23 PM UTC

This article is for subscribers only.

Brazilian assets tumbled on the first session of 2023 as traders digested plans by President Luiz Inacio Lula da Silva to use state-owned companies to drive economic growth.

Petrobras slumped as much as 6.9% in Sao Paulo, the main drag on the benchmark Ibovespa index, which fell 3.1% at the close. Lender Banco do Brasil SA dropped as much as 5.3%. Swap rates jumped across the curve and the real led losses among major currencies, down 1.4% with holidays in the US and UK thinning out liquidity in global markets.