The major São Paulo stock market, the Bovespa, dropped to a more than one-week low on Thursday, pulling away from its global rivals, dragged down by the fiscal overhaul enacted by Congress on the day of the election and weaker-than-expected industrial output statistics in July. The new measure imposes a 20% tax on dividends while lowering the corporate income tax rate. Brazilian banks were trading lower after the banking sector's social payments were cut to 14 percent of earnings, 0.5 percentage points higher than what market participants expected. Meanwhile, industrial production in Brazil declined 1.3 percent year on year in July, more than the predicted 0.5 percent drop, while June's flat figure was revised to a 0.2 percent drop. Overall, Bovespa has recovered well since the beginning of the pandemic, however, it has not fared so well since the beginning of 2021, as it has only had significant decreases until now.
Written by: Lucas Scala and Carolina Paixão
Edited by: Anna Kissajikian