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Brazil Stocks Suffer Fall As Corruption Scandal Lingers Over Petrobras

Brazil Stocks Suffer Fall As Corruption Scandal Lingers Over Petrobras

Posted by Laura Zúñiga on November 17, 2014

RIO DE JANEIRO--Brazil's stocks fell for a third straight day as shares of state-owned ene-rgy giant Petrobras plunged amid a deepening investigation into alleged corruption at the company.

The benchmark Ibovespa index of most-traded issues sank 1% to 51256.99 points, closing below its year-end 2013 level.

Brazil's real weakened to BRL2.6025 to the dollar, according to Tullett Prebon via FactSet, compared with BRL2.5981 at Friday's close.

Petrobras led the local market lower. Its shares fell 4.6% to BRL12.60, the lowest close since March 17, after a conference call with investors to discuss the company's third-quarter operating results failed to comfort investors.

Petrobras last week delayed the release of its third-quarter earnings as it investigates the possible impact of an alleged kickback scheme on its financial results.

On Monday, the company reduced its forecast for oil-production growth in 2014 to 5.5% to 6% from the year earlier, down from an original guidance of 7.5%.

Fitch Ratings also expressed concern Monday that the corruption allegations, which mostly involve the contracts Petrobras awarded to construction companies for major projects, could hurt the company's ability to do business going forward.

"Executives will likely exercise incremental caution when signing or amending contracts," Fitch said. "This issue will be most relevant for modifying specifications for floating, production, storage, and offloading (FPSOs) under construction, which could cause delays in

deliveries and therefore affect long-term production growth."

Other important shares also weighed on the Ibovespa Monday.

Mining giant Vale, which has been suffering from a downturn in prices for iron ore, saw its shares slip 0.4% to BRL19.73. The company said late Friday that it had replaced its director of ferrous metals and strategy.

Local banking giant Bradesco shares fell 2.2% to BRL34.96.

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