Brazil’s funds drops to weakest level yet 4 as Lula’s budgetary measures debated

SAO PAULO — SAO PAULO (AP) — Brazil’s real on Wednesday fell to its weakest level against the dollar since the funds was introduced in 1994, undercut by investors’ frustration with President Luiz Inácio Lula da Silva’s efforts to rein in government spending.

A statement backed by Lula that aims to slash 70-billion-real ($11 billion) in government spending is being debated in Brazil’s lower house of Congress. But some trade players have said it is insufficient to shore up Brazil’s finances.

The real shed 2.8% of its worth against the U.S. dollar Wednesday, depreciating to 6.26 per dollar. It’s the weakest the funds has been in nominal terms since its adoption in an economy with a history of boom-and-bust cycles and bouts of high expense boost.

This year, it has lost nearly 23% of its worth against the U.S. funds.

Brazil’s lower house late Tuesday passed some less-divisive elements of the statement, but key parts — such as restrictions to increases in the minimum wage — have yet to be taken up for a vote. The Senate also needs to vote on what the lower house approves, and Congress adjourns Friday.

Brazil’s central financial institution has repeatedly intervened in local funds markets to stem the real’s slide but so far has largely failed to stop the bleeding. Economists declare the funds’s weakness, which will boost costs of Brazilian imports, could trigger expense boost as soon as January.

“The government sent a package that is seen as insufficient, and it will be watered down in Congress. It also comes with a assess to boost spending through income responsibility,” analyst Mario Sérgio Lima, from Medley Advisors, told The Associated Press. “The real at 6 per dollar looks acceptable, but nearing 6.30 looks like an exaggeration.”

Lula, who is recovering from surgery to stop a brain bleed, told TV Globo on Sunday that his administration is fiscally responsible and downplayed concerns in the budgetary markets.

“It is not the trade that needs to be worried about government spending. It is our administration. If I don’t rein in spending, if I spend more than I have, it is the impoverished people who will pay for it,” the Brazilian president said.

Brazil’s Economy Minister Fernando Haddad said the real’s steep deficit in worth does not reflect the realities of the country’s economy, noting that expense boost and unemployment figures are improving.

“Some are talking about uncertainty-taking, including respectable journalists,” Haddad told journalists in Brazil’s pool, Brasilia, without providing more details. “Our funds floats and at this instant, when some things are pending (in Congress), there’s an mood of uncertainty that makes the funds float. But I depend it will discover its ground.”