Brazil markets slide amid rising reform tensions

Brazil markets slide amid rising reform tensions

SAO PAULO, Brazil, July 29 (Reuters) - Brazilian stocks
closed lower for the fifth straight day on Tuesday as mounting
social tension and political opposition to the government’s
reform agenda unnerved investors.

Brazil’s currency, the real , also weakened, closing
lower for a third day running at 2.935 per U.S. dollar, a 4
centavo loss that left it 21 percent stronger in the year so far.

"The political and social environment in the country is making
the market a little uncomfortable," said Sergio Machado, head
of currency trading at Banco Fator in Sao Paulo.

The Sao Paulo Stock Exchange’s benchmark Bovespa <.BVSP> index
closed down 0.15 percent at 13,623 points.

Investors are nervously eyeing Brazil’s political outlook,
fearing a spate of protests against the government’s economic
policies could undermine its reform agenda in Congress.

"The hazy outlook for the reforms is making the market
hesitant," said Marcelo Sagae, a trader at Lloyds TSB in Sao
Paulo.

With judges and public sector workers threatening to strike
against the government’s pension reform proposal, many market
watchers fear the bill — which is seen as key to Brazil’s
financial health — could be further watered down in Congress.

At the same time, landless peasants and urban squatters have
been stepping up efforts to seize land and vacant buildings
across the country, putting the left-leaning government at
odds with one of its traditional support bases.

"The government needs to show that it is capable of handling
the situation before it gets out of hand," said Hideaki Iha,
senior currency trader at Souza Barros brokerage in Sao Paulo.

In stock action, paper and pulp giant Klabin <KLBN4.SA> helped
keep the market from falling further by climbing 0.7 percent
to 2.88 reais. Late Monday, Klabin posted a 1 billion reais
($345 million) profit in the second quarter after clocking a
loss in the same year-earlier period.

In the telecommunications sector, market bellwether Tele Norte
Leste Participacoes <TNLP4.SA> bounced back from a recent
slump, rising 2.81 percent to 33.30 reais. Telemar shares
account for about 13 percent of the Bovespa index.

On the downside, stock in aircraft manufacturer Empresa
Brasileira de Aeronautica, or Embraer <EMBR4.SA> , closed down
4.06 percent at 13 reais. One analyst said investors were
readying themselves for disappointing second quarter results
due next month.

Power distributor Eletropaulo <ELPL4.SA> also weighed on the
market with a 3.63 percent slide to 23.88 reais.