Brazil’s stock market declines over bribes scandal

As Congressional hearings begin in a bribes-for-votes scandal involving the ruling party in Brazil, the South American’s country’s stock market declined on Tuesday and its currency lost value against the US dollar.

The Brazilian real lost 0.17 percent to sit at 2.342 to the dollar, although it is still around 13 percent higher than it was in 2005 due to high domestic interest rates and strong exports.

The Bovespa index on the Sao Paulo Stock Exchange was down 0.71 percent to 25,142.

Analysts have advised investors to exercise caution as the political crisis worsens.

The ruling Workers Party has been accused of paying congressmen to secure their votes in support of party positions on various issues.

The former treasurer of the party, slated to testify before the hearings on Wednesday, denies these charges, but has admitted to funding campaigns without reporting the full amount of donations received.

Investors worry that if the scandal harms the image of Brazilian President Luiz Inacio Lula da Silva, the government will resort to higher government spending to try to improve his re-election chances in 2006.

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