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Brazil stocks rise after new president

Jan 03 2011 17:43 AFP

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Sao Paulo - Brazil's stock market and currency rose Monday, after the inauguration of new President Dilma Rousseff who has vowed to maintain the economic policies of her predecessor, Luiz Inacio Lula da Silva.

The main Bovespa index was 1.38% higher at 70 262 points half-way through the trading day, while the currency, the real, was at 1.656 to the dollar, a rise of 0.24% from last week.

The ever-rising real was putting pressure on Rousseff's promises to bring down Brazil's key interest rate of 10.75% - one of the highest in the world for a big economy - and to stop a strong real from hurting exporters.

With inflation creeping towards 6%, well above the government target of 4.5%, the central bank is expected to hike the interest rate further, pushing the real higher and making Brazilian exports even more uncompetitive.

The inflation and currency outlook is clouding Brazil's economic outlook. While gross domestic product grew an estimated 7.6% last year, it is expected to drop to 4.5% this year.

Rousseff has pledged to cut billions from government spending, while maintaining social programs that, under Lula, lifted 29 million Brazilians out of poverty.

She also has to ensure infrastructure investment to get the country ready to host the 2014 football World Cup and the 2016 Olympic Games.

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