SAO PAULO: Brazil's Bovespa equities index led losses among Latin American markets on Tuesday amid ongoing concerns over the nation's fiscal health after a court struck down a measure intended to control government spending.
On Monday, Brazil's Supreme Court suspended the effects of a decree by President Michel Temer, which would have put off adjustments to the salaries of federal workers for a year. That came as Brazil's Finance Minister Henrique Meirelles begins talks with major ratings agencies in a bid to avoid a credit downgrade, after lawmakers put off a vote on a key pension reform until February.
"Another blow to fiscal adjustment, given that the measure should bring 4.4 billion reais ($1.34 billion) of savings next year," analysts at local brokerage Coinvalores said of the Supreme Court decision in a note to clients.
Meirelles said in a radio interview on Monday that he will tell major ratings agencies this week that delaying a vote on a pension bill seen important to shoring up the nation's fiscal accounts does not mean it will not be passed. However, key lawmakers have warned that February is effectively the last chance for the unpopular bill.
Brazil's Bovespa had dropped 0.53 percent by midday.
Chile's blue-chip IPSA index posted mild gains on Tuesday, as markets continue to price in the unexpectedly dominant win of investor favorite Sebastian Pinera in elections over the weekend.
"Despite the fact that Sebastian Pinera's coalition will not have a majority in Congress, the change in government presents an opportunity to improve business confidence and should foster a continued macroeconomic rebound," Fitch said in a note.
Lithium company SQM was the big gainer on the IPSA, opening up over 6 percent on Tuesday, after it agreed with state development agency Corfo to suspend an arbitration battle for 30 days.
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