Dollar rises at the opening of 2023 after Lula’s inauguration

The foreign exchange market started the first trading session of 2023 with the commercial dollar on the rise. At 9:15 am this Monday (2), the American currency advanced 1.21%, quoted at 5.3430.

On the first day of financial market negotiations after the inauguration of President Luiz Inácio Lula da Silva (PT), investors should evaluate the first actions of the new government. In his inauguration speech, Lula made statements that were met with reservations by financial market analysts, who said they were concerned with a government that intervenes heavily in the economy and with the balance of public accounts.

Lula made in his inaugural speeches a strong defense of the State in the economic development of the country. Speaking at a session in Congress, he cited public banks and other state-owned companies as actors in the process and specifically cited the BNDES (National Bank for Economic and Social Development) and companies that induce “growth and innovation, such as Petrobras”.

He called the spending cap “stupid”, noting that it will be revoked. The measure was already provided for by the proposal articulated by the government and approved by Congress, which expanded the Budget in 2023 and demanded the Executive to present a new rule for public accounts to replace the current norm.

On Sunday, the president also signed the first measures in the economic area, including a determination for ministers to take measures to remove state-owned companies from the privatization program.

The measure affects in particular Petrobras and the Post Office, which were in the process of privatization already under analysis by members of the TCU (Tribunal de Contas da União).

Lula also signed the MP (provisional measure) extending the fuel exemption in the country, a measure created by Jair Bolsonaro (PL) in the midst of the increase in oil prices and which had a deadline of December 31, 2022.

Chosen by the PT for the presidency of Petrobras, Senator Jean Paul Prates (PT-RN) stated that the exemption is valid for 60 days and defended the reinstatement in March. According to him, however, for diesel and LPG (liquefied petroleum gas, cooking gas) a greater continuity of exemption is being studied – from six months to one year.

Prates also said last Friday (30) that he intends to review the fuel price policy of the state-owned company, adopted in the Michel Temer government and reinforced by the Jair Bolsonaro government, which provides for monitoring the import parity, a concept that simulates how much it would cost to import the products.

The set of measures touches on points that regularly bring uncertainty to investors regarding the risk of growth in public spending. “Possibly we will have a lot of volatility in the beginning of 2023 in the market until we can understand what is fact and what is rumor”, said Camila Abdelmalack, from Veedha Investimentos.

On Thursday (29), the Brazilian Stock Exchange closed 2022 with an accumulated gain of 4.69%. The positive result of the Exchange was difficult to predict a few days ago, a representative situation for a year marked by the volatility in investments caused by a global inflationary crisis and the troubled national political scenario.

Two weeks earlier, the benchmark indicator for the domestic stock market, the Ibovespa, had accumulated an annual drop of almost 2%. The last few days, however, saw a strong recovery —the stock market rose by almost 7% in two weeks— as investors began to consider that the elected government was showing more attention to the balance of public accounts and that Congress could put the brakes on excesses, such as occurred with the dehydration of the PEC that authorized the expansion of expenses in 2023.

In this Thursday’s session, the last of the year, the Ibovespa fell 0.45% to 109,734 points. The day had low business volume due to the proximity of the end of year festivities.

In the foreign exchange market, the spot commercial dollar closed the session up by 0.51%, quoted at R$5.2790, on sale. The US currency ended 2022 with a cumulative drop of 5.3%, the first annual low since 2016, when the currency had plummeted 17%.

The US stock market ended this Friday (30th) its worst year since the 2008 US real estate crisis. is behind this result.

In addition to the competition that fixed income represents for the stock market, analysts have come to fear that the tightening of the credit supply could result in a global recession in 2023, which would be an even worse scenario for companies and that drove away even more investors. of so-called risk markets.

A benchmark for shares traded on the New York Stock Exchange, the S&P 500 indicator closed the year down 19.5%, the worst annual result since the 38.5% drop 14 years ago.

With an even bigger dip, the Nasdaq index has lost 33% this year, coming close to the 40.5% drop in the year of the financial crisis. It is in this segment that medium-sized companies with great growth potential are located, many in the technology area. It is a sector sensitive to high interest rates because cheap credit is necessary for the expansion of these businesses.