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Last Updated: Wednesday, 29 March 2006, 05:24 GMT 06:24 UK
Political row hits Brazil shares
Guido Mantega, Brazil's new finance minister
Guido Mantega has sought to reassure investors
The Brazilian stock market has continued to slide after the resignation of the country's finance minister amid a political scandal.

Brazilian shares fell 2.5% on Tuesday as investors cast doubts on whether new Treasury boss Guido Mantega would maintain a tough monetary strategy.

Mr Mantega has previously criticised Brazil's high interest rate policy.

Predecessor Antonio Palocci - a key ally of President Lula da Silva - quit on Monday amid corruption claims.

Policy concerns

Mr Palocci has denied he was present in a house where lobbyists held parties with prostitutes and cash was allegedly stored for political payoffs.

Mr Mantega sought to reassure the markets of continuity in monetary policy on Tuesday.

The market was, and still is, waiting for proof that he [Mr Mantega] won't change policy
Miriam Tavares, AGK Brokerage

However, the Brazilian real fell 1.8% against the US dollar while shares on the main Bovespa index fell more than 2% to 36,682.

Shares have fallen 6.5% since the start of the month.

President Lula's left-leaning government has waged a war against inflation in recent years, keeping interest rates high.

However, analysts have questioned whether the government will lift curbs on spending ahead of October's Presidential election and adopt a more populist economic stance.

"The market was, and still is, waiting for proof that he [Mr Mantega] won't change policy," said Miriam Tavares, from AGK Brokerage.

Brazilian markets were also hit by a further rise in US interest rates, amid concerns that investors may move money out of emerging economies into more established markets.

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