Brazil’s economy rises above the political storm

In our view, the extraordinary thing about Latin America’s largest economy is not the political turmoil that has more or less been par for the course in recent years – but rather the country’s resilience in the face of such upheavals. Far from hitting the buffers, the economy continues to make headway, while capital inflows have remained steady. Year-to-date, for example, Brazilian equities returned 21.1%, while over 12 months the return has been 24.6%. This compares well with both developed market equities (the UK, for instance, returned 11.8% year-to-date and over 12 months) and many other emerging market countries (Colombia, for example, with 14.4% year-to-date and 11.0% over 12 months)[1].

Two things have helped steady the ship. First, timely action from the Central Bank of Brazil brought inflation under control. Second, a reform programme under the auspices of Henrique Meirelles, finance minister, has done enough to give investors confidence in Brazil’s forward trajectory. Here, a key step is a plan to overhaul the country’s generous pensions system. Should Congress approve the plan, this should help address Brazil’s budget deficit and provide a boost to the economy.

Rogério Poppe – ARX, a BNY Mellon company

[1] FTSE All World Index, US$ as at 31 August 2017

In our view, the extraordinary thing about Latin America’s largest economy is not the political turmoil that has more or less been par for the course in recent years – but rather the country’s resilience in the face of such upheavals. Far from hitting the buffers, the economy continues to make headway, while capital inflows have remained steady. Year-to-date, for … read more

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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

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 … read more

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Brazil prepares to pass judgement on Dilma’s economic record

With the first round of Brazilian general election this weekend, President Dilma Rousseff looks in real danger of losing out. With a dubious economic record since she assumed power on 1 January 2011, Dilma has been criticised for interventionist policies which, while beneficial to vast swathes of the population in the short term, have hamstrung the economy in the long term. She, by contrast, has blamed the negative effects of crises abroad and a faltering global economy.

The electorate goes to the polls on 5 October. If no candidate gains more than 50% of the vote, a second round run-off will be held on 26 October.

Once the election question has been settled would you be more or less inclined to invest in Brazil? Join the debate and let us know your thoughts using the comment button below.

With the first round of Brazilian general election this weekend, President Dilma Rousseff looks in real danger of losing out. With a dubious economic record since she assumed power on 1 January 2011, Dilma has been criticised for interventionist policies which, while beneficial to vast swathes of the population in the short term, have hamstrung the economy in the long term. … read more

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Brazil v Mexico

Latin America's Economic Derby

As Brazil takes on Mexico in the second round of Group A fixtures in the football World Cup, few eyes will be on the countries’ head-to-head economic battle. But while the Seleção are hot favourites to beat their Latin American rivals on the pitch, Mexico is in the ascendency when it comes to economics. Brazilian President Dilma Rousseff is facing increased pressure from her electorate for radical reforms, the like of which the Mexican government has been implementing over the past few years. Brazilian World Cup glory could provide Dilma with a short-term popularity bounce but with elections looming in October, she faces a battle for her political future.

As Brazil takes on Mexico in the second round of Group A fixtures in the football World Cup, few eyes will be on the countries’ head-to-head economic battle. But while the Seleção are hot favourites to beat their Latin American rivals on the pitch, Mexico is in the ascendency when it comes to economics. Brazilian President Dilma Rousseff is facing … read more

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