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The Brazilian real has shrunk to a record low, hitting hard at several Israeli companies that do business with South America.

The real is trading at 3.57 to the dollar, brought 4.6% down from its Friday rate by fears that the debt-laden country will default on its debts after opposition candidate Luiz Inacio Lula da Silva's strong showing in pre-election polls.

Not only the Brazilian currency but its stocks and bonds also took a hammering as the leftist candidate surged beyond the incumbent, and a study showed that the turmoil in Sao Paolo's financial markets were frightening foreign investors.

In the tight presidential election race, due to end on October 6, Lula has won support of 44% of the public, expanding his lead against former favorite Jose Serra by a cool 25%. If Lula wins more than half the vote, no second round will be necessary.

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Meanwhile, the ripples have spread to the Tel Aviv Stock Exchange, where agrochemicals company

Makhteshim Agan Industries (TASE:


) is sinking 3% on heavy turnover because of its dependence on the Brazilian market. That country contributes between 30% to 40% of the company's sales revenues. Analysts from Bank Hapoalim noted that of Israel's companies, Makhteshim is the most highly exposed to Brazil, and raised the company's risk rating from medium to high.

Another company hurting from the crisis is Holland-based Global Telecom Village, which suffered heavy losses on the real's slump. GVT, which is controlled by Discount Investment Corporation and Clal Industries, provides telecom services in southern Brazil, lost $73 million in the second quarter of 2002 compared with $27 million in the parallel quarter of last year.