Brazil: A turning point?

The winds of political change are blowing across South America. The process began in Argentina with the election of Mauricio Macri in 2015 as successor to left-leaning president Cristina Fernández de Kirchner. In Venezuela, socialist president Nicolás Maduro is under increasing pressure following a catastrophic slowdown in the country’s oil-dependent economy.

Now, in Brazil we believe the ousting of Dilma Rousseff and the appointment of centrist vice-president Michel Temer as her successor could herald a new dawn.

Markets have already begun to respond favourably, with interest rate futures, the Brazilian real and the benchmark Bovespa stock index all recovering from last year’s nadir.

The situation remains delicate but we are optimistic. We believe Temer’s recent appointment of a credible economic team, coupled with moves towards wider political and economic reforms will help stabilise Brazil within the year and set the scene for sustainable annual GDP growth of 2.5%-3.0% thereafter.

 Alexander Gorra – ARX, a BNY Mellon company

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