(Bloomberg) -- Brazilian assets tumbled on Tuesday, leading losses across the globe as growing pressure for extra further public spending fueled concern on the country’s fiscal outlook. 

The real fell 0.5%, the sole decliner among major currencies, while the Ibovespa stock gauge slumped 1.8% and swap rates spiked as traders digested news that the government’s new monthly aid to the poorest will temporarily reach 400 reais ($72) per individual. That’s higher than the economic team had said was possible, which should mean about 30 billion reais of the new expenses will bypass Brazil’s spending cap rule, according to people with knowledge of the matter who asked not to be named because discussions are private.

Newspaper O Estado de S.Paulo earlier reported on the increased aid, adding that President Jair Bolsonaro’s administration decided to review its 2022 fiscal target in order to make room for extra spending. The so-called spending cap rule, which limits government expenses, is seen by investors as a key pillar of the current economic policy.

Veja magazine said Bolsonaro will likely officially announce his new flagship social program, dubbed Auxilio Brasil, this afternoon. The revamped social program could be a boon to the president, who has seen his popularity slide and is up for re-election in 2022. 

The Economy Ministry declined to comment. 

An uncontrolled fiscal deterioration had been cited as one of the biggest tail risks for Brazil in Bank of America’s previous surveys of Latin American fund managers.  

The government’s willingness to spend more ahead of the election race only adds to other uncertainties, according to Greg Lesko, a portfolio manager at Deltec Asset Management in New York. “Markets won’t like it,” he said. 

 

 

 

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