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EMERGING MARKETS-Brazil stocks fall on tax fines, energy worries
January 8, 2013 / 3:30 PM / 5 years ago

EMERGING MARKETS-Brazil stocks fall on tax fines, energy worries

* Brazil tax authority fines MMX, Natura

* Energy rationing fears push electric utilities lower

* Brazil Bovespa falls 0.48 pct, Mexico IPC flat

By Asher Levine and Danielle Assalve

SAO PAULO, Jan 8 (Reuters) - Brazilian stocks fell on Tuesday as continued worries over energy rationing dragged down shares of electric utilities and potential tax fines weighed on shares of MMX and Natura.

Chile’s bourse fell for the first session in six, while Mexico’s IPC index was little changed.

Brazil’s benchmark Bovespa stock index fell for the third straight session, losing 0.48 percent to 61,634.17 points.

“Investors are being cautious before the fourth-quarter earnings season begins,” said Luiz Roberto Monteiro, a broker at Renascenca Corretora in Sao Paulo.

Shares of mining firm MMX Mineração e Metalicos SA , controlled by billionaire Eike Batista, fell 3.15 percent after the company said on Tuesday that it faces a potential fine of 3.758 billion reais ($1.857 billion) for overdue income taxes.

“They are certainly going to appeal, but a fine of this size would hurt cash flow quite a bit, meaning either they would have to look for new capital or Eike (Batista) will have to inject more money,” said Fabio Goncalves, an analyst with Banrisul Corretora in Porto Alegre, Brazil.

Batista has been known to increase his stake in his own companies, last year purchasing an additional 3 percent of MMX and offering to buy $1 billion in stock of his oil company OGX if needed.

An index of electric utility shares continued to slide the day after posting its biggest loss in nearly four months over concerns that low water levels in reservoirs could lead to energy rationing.

While Energy Minister Edison Lobao said late on Monday that he saw no chance of energy rationing in Brazil this year, shares of utilities such as Centrais Eletricas Brasileiras SA and Companhia Energetica de Minas Gerais fell 5 percent and 2.1 percent, respectively, on Tuesday.

“The electric sector is still on the same path as yesterday because water levels in the Northeast are low and the market isn’t believing what the government is saying about this,” added Goncalves.

Shares of Brazil’s No. 1 cosmetics maker Natura Cosmeticos SA fell nearly 4 percent after the company said it received two notices from Brazil’s tax watchdog late on Monday challenging tax practices at the firm.

The company is unlikely to provision for the potential tax payment and may only take charges related to lawyers’ fees, analysts said.

Mexico’s IPC index was little changed at 44,599.05 points as a 0.6 percent loss by retail giant Wal-Mart de Mexico partially offset a 1.23 percent gain by supermarket chain Chedraui.

Chile’s IPSA index snapped a five-day rally, losing 0.32 percent to 4,384.63.

Retailer Falabella lost 0.89 percent, contributing most to the index’s losses, while lender Banco de Chile fell 0.66 percent.

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