Brazil’s currency dropped to a record low on Thursday as a government promise to find R$70bn (US$12bn) in cost savings over the next two years failed to calm investors’ nerves over the public finances of Latin America’s largest economy.
The real fell 1.2 per cent, breaking through the psychologically significant threshold of six to the US dollar for the first time. The yield on the benchmark 10-year government bond rose 0.32 percentage points to 13.52 per cent, an all-time high, with markets doubting the efficacy of new spending restraints and tax changes designed to balance the budget.
The long-awaited proposals, unveiled late on Wednesday, follow mounting concerns over fiscal policy under President Luiz Inácio Lula da Silva, who has promised extra cash for welfare and infrastructure in order to raise living standards for the population of 213mn.