Colombian peso tumbles after Petro win, Brazil’s real rises

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The Colombian peso tumbled on Tuesday,

on track for its biggest one-day fall since late 2008, after

leftist Gustavo Petro was elected president of the Andean

nation, while Brazil’s real rose after its central bank pointed

to higher rates for longer.

The peso’s spot rate shed almost 5% against the

dollar shortly after the opening of trading after a holiday on

Monday. Petro’s victory was seen by some observers as a sign of

yearning among voters for a more equal and inclusive society,

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but analysts and business leaders said the former guerrilla will

need to act fast to reassure investors.

The election result marked a radical change for a country

still scarred by decades of conflict and highlights the depth of

frustration with the right-leaning political establishment.

Nearly half of Colombians live in poverty.

“Addressing challenges such as inequality and poverty could

be credit-positive for the sovereign if this reduces social

tensions in the country without materially affecting fiscal

sustainability,” said Renzo Merino, a senior analyst at Moody’s.

“Alternatively, a negative investor confidence shock would

dampen economic growth and could weigh on Colombia’s fiscal

consolidation process and the sovereign’s credit profile.”

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Colombia’s main stock index tumbled 5.1% to its

lowest level in more than five months, heading for its worst

one-day percentage fall in more than 28 months.

Most other Latin American currencies were higher on Tuesday,

with the Brazilian real leading gains with more

than a 1% gain after its central bank said the strategy to bring

inflation next year to around the official target involves more

interest rates hikes.

It also added that it plans on maintaining rates “in

significantly contractionary territory” for a longer period.

Brazil’s former President Luiz Inacio Lula da Silva, the

front-runner to win the country’s October presidential election,

proposed a new fiscal framework based on “credibility and


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In Chile, workers at state-owned Codelco are due to start a

nationwide strike on Wednesday to protest a decision by the

government and the copper miner to close a troubled smelter, a

union official said. The peso gained 0.4%.

William Jackson, emerging markets economist at Capital

Economics, said the strike may not be enough to give a lift to

the copper price given subdued global demand.

But Jackson added that 0.3 percentage points could be cut

from Chile’s quarterly GDP growth for every week that workers

were on strike, further straining the country’s balance of


Key Latin American stock indexes and currencies at 1428 GMT:

Stock indexes Latest Daily %


MSCI Emerging Markets 1016.87 1.64

MSCI LatAm 2111.26 0.66

Brazil Bovespa 100171.38 0.32

Mexico IPC 47855.76 0.16

Chile IPSA 5084.37 0.34

Argentina MerVal 86941.87 -0.137

Colombia COLCAP 1375.74 -5.38

Currencies Latest Daily %


Brazil real 5.1319 1.08

Mexico peso 20.1554 0.60

Chile peso 882.1 0.00

Colombia peso 3904 -0.16

Peru sol 3.7105 0.05

Argentina peso (interbank) 123.6800 -0.61

Argentina peso (parallel) 213 1.88

(Reporting by Shreyashi Sanyal in Bengaluru; Editing by Paul




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