BRASILIA: Brazilian stocks dropped for a second day on Thursday, as shares of Petr?leo Brasileiro SA plummeted after the state-controlled oil company announced a temporary diesel price cut.
Brazilian truckers kept protesting high diesel prices for a fourth day on Thursday, crippling highways nationwide even after the company acted.
Brazil's lower house of Congress voted on Wednesday to eliminate certain taxes on diesel. The Senate has yet to vote on the tax cuts, which truckers say are needed before they will end protests.
Petrobras, as the oil company is known, on Wednesday announced a temporary 10 percent diesel price cut at refineries, insisting its independence from political interference was intact.
But the action, together with recent delays in plans to privatize state utility Centrais Eletricas Brasileiras , raised new investor worries about the possibility of more interventionist state posture in an election year.
"For people who already had doubts about how the government would react in a moment of instability, what happened with Petrobras and also Eletrobras in the last few days was a worrying sign," said Fabio Carvalho, head of fixed income trading at CM Capital Markets.
Petrobras shares tumbled 13.5 percent to a one-month low, their biggest daily drop since May 2017. They were by far the largest decliner on the benchmark Bovespa stock index, which was down 2 percent, and accounted for more than 1,000 points of the Bovespa's 1,605-point drop.
For years, Petrobras kept local prices lower than global prices, effectively offering subsidies that helped its debt balloon. It had since followed a policy of tracking global prices closely.
In a report, analysts at UBS said keeping local fuel prices artificially low could reduce Petrobras' operating profit, curb buyer interest in its assets and bump up funding costs.
Most other Latin American financial markets also fell, extending a recent slump fueled by concerns over global trade frictions and potential contagion from a sell-off of the Turkish lira.
The Brazilian real and the Mexican peso both weakened, with the Mexican currency surrendering gains from the previous day that came in the wake of reports of movement on the renegotiation of NAFTA with Canada and the United States.
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