Brazil’s Stocks Fizzle as Political Problems, Inflation Persist

Oct 3, 2021

Brazil’s Stocks Fizzle as Political Problems, Inflation Persist

On the surface, growing commodity markets should indicate that Brazil's future looks bright. But the reality is that global investors have lost confidence in the county’s leadership, including President Jair Bolsonaro. Experts believe the situation will deteriorate as global development slows.

Brazil was a popular investment play earlier this year, but it has since lost favor, according to Marc Chandler, chief market strategist at Bannockburn Global Forex. “Investors have lost faith in Bolsonaro.” Some observers may be surprised by this, given the country's soaring export revenues in recent months as oil, mineral, and food prices have recovered.

Nonetheless, the lack of investor confidence is reflected in the financial markets. The real, the country's currency, has taken a beating recently. According to data from the financial website Trading Economics, one US dollar was worth less than BRR5 in June, but it was worth roughly BRR5.5 lately. In other words, the real has lost at least 10% of its value in just over three months.

Brazil's stock market appears to be in decline as well. From June to September, the Bovespa index of the country's top stocks was down around 12%. Similarly, the $5.1 billion iShares MSCI Brazil exchange-traded fund (ticker: EWZ), which tracks a basket of Brazilian stocks, fell 19% in the same time frame. According to Morningstar, the iShares fund experienced outflows of nearly $1.5 billion in the six months through August, underscoring investor discontent.

A few main issues are most likely to blame for investor unhappiness. First, surveys show that Lula de Silva, a left-wing presidential challenger, is beating President Bolsonaro. Bolsonaro supporters have been accused of encouraging violence, and he has sworn to stay in government, saying to a gathering of followers, "Only God will remove me!" Chandler claims that “he has been subtly threatening social violence and raising issues about the validity of elections.” Investors are often jittery as a result of such incidents.

Meanwhile, according to TradingEconomics, inflation rates have quadrupled in the last year, rising to an annualized 9.7% in August from 3.1 percent in August 2020. Aside from rising gasoline prices, the country's hydroelectric sector has been impacted by bad weather, which has hampered the country's ability to run its hydropower facilities. According to a recent analysis from the Institute of International Finance, “a severe drought pushed up electricity rates in May, as power firms rely significantly on hydroelectric plants.”

The country's central bank has hiked the benchmark Selic interest rate five times since March, to 6.25 percent, to combat rising inflation, but it is unlikely to be enough to bring inflation under control anytime soon. Chandler claims that they haven't been forceful enough. He points out that real interest rates, which are adjusted for inflation, are still below zero. Some economists argue that interest rates should be higher than inflation to prevent price increases from spiraling out of control.

However, the probability of global growth slowing is undoubtedly Brazil's most serious challenge. Brazil, as a producer of raw materials and commodities, relies on the expansion of global importers such as the United States and the United Kingdom.

“When world growth is really strong, Brazil does best,” Chandler adds. The global government's pandemic-related spending has likely peaked, as have central banks' efforts to cut the cost of borrowing money. He says, "It wouldn't surprise me if global growth slowed this year."

In other words, as global growth slows, Brazil's economy may fall.

Subscribe Our Newsletter

B2PRIME Liquidity update

Tamta

B2PRIME Expands Liquidity Solutions by Introducing Global Indices and Commodities

B2PRIME, Prime of Prime multi-asset liquidity provider, has just expanded its liquidity solutions, introducing futures-based indices and commodities.

Companies
AOC: 'No Mystery' Why It's Hard To Ban Lawmaker Stock Trading
AOC: ‘No Mystery’ Why It’s Hard To Ban Lawmaker Stock Trading

Last week, 27 legislators signed a letter pushing House of Representatives leaders to react fast to bring "commonsense, bipartisan" law prohibiting Congressmen from holding or trading assets to the floor.

Stocks
Get the ultimate solution: B2BinPay Get the ultimate solution: B2BinPay
Sponsored
Anna

What is The Difference Between Liquidity Provider and Liquidity Aggregator?
Forex is a platform where everyone, from a huge corporation to a beginner trader, can start making a profit from their funds. The Forex market is so gainful, thanks to its exceptionally high liquidity.

discover
5 Best AI ETFs

Alexander

5 Best AI ETFs for 2023-2024

In today's fast-paced world of technology, there is one phenomenon that is capturing global attention – Artificial Intelligence (AI). With its ever-growing capabilities and potential, AI is quickly becoming a driving force in various industries, from healthcare to finance, transportation, and more.

Investing
Contact us bg

Contact Us

Contact the Liquidity Provider
for any questions and advertising inquiries

    Please fill out this contact form to get in touch with us

    / 3000

    By clicking “Get in touch” button, you agree to the privacy policy

    Successful!
    Thank you for your request.
    We will contact you shortly.
    Close

    Constantine

    Best DAO Projects in 2025

    Best DAO projects in 2025

    Alexander

    Crypto Nodes That Pay: Your 2025 Guide to Top Passive Income Opportunities in Crypto

    crypto nodes that pay

    Alex

    Pi Network: Scam or Groundbreaking Crypto? The Full Analysis

    Pi Network Explained

    Constantine

    Triple Net Lease: Meaning, Benefits, and Strategies Explained

    Triple Net Lease

    Constantine

    Hanging Man Pattern: How to Identify and Trade It Effectively

    Hanging Man Pattern

    Alex

    5 Infinite Banking Mistakes That Could Cost You Thousands

    Infinite Banking Mistakes to Avoid

    Aleksander

    Solana Firedancer: Solving Solana’s Biggest Problems with a New Engine

    Solana Firedancer explained

    Alexander

    What Is an Interest Coverage Ratio? How to Use This Financial Metric to Evaluate Company Health

    Interest Coverage Ratio Explained

    Hazem

    After-Hours Trading: Can You Trade After Financial Markets Close?

    After-Hours Trading Explained

    Alexander

    How to Scale a Crypto Exchange Business and Stay Competitive

    how to scale crypto exchange business

    Constantine

    Crypto CrypticStreet Review: The Future of DeFi and Secure Crypto Trading

    Crypto CrypticStreet Review: The Future of DeFi and Secure Crypto Trading

    Alexander

    Bitcoin Power Law Explained: How It Shapes BTC’s Long-Term Growth

    Bitcoin Power Law Explained: How It Shapes BTC’s Long-Term Growth

    Hazem

    Megaphone Pattern​: What Is It? How to Use It In Trading

    Megaphone Pattern​: How to Read & Trade with It

    Constantine

    Top 5 Liquidity Bridge Providers in DeFi

    Top 5 Liquidity Bridge Providers in DeFi

    Hazem

    Max Funded IUL Explained: Is It a Legitimate Financial Strategy?

    Understanding Max Funded IUL

    Alexander

    Tax Refund Timeline: When Will You Get Your Tax Return?

    how long does it take for tax refund

    Constantine

    Crypto Liquidity — What is it, and How to Measure It?

    What is Crypto Liquidity and How to Measure It?

    Constantine

    AI in Finance: A Game-Changing Trend Shaping the Industry

    AI in Finance

    Hazem

    5 Ways to Make Money with ChatGPT and Build Your Wealth

    Make Money with ChatGPT

    Constantine

    Top AI Companies to Invest in April 2025

    Top AI Companies to Invest in March 2025

    DeepSeek vs ChatGPT: Which AI Technology is Better For You?

    DeepSeek vs ChatGPT: Feature-by-Feature AI Tool Comparison

    Constantine

    Top Solana Meme Coins in 2025: Best Presales and Where to Buy

    Solana Meme Coins 2025

    Alexander

    How Renewable Energy Stocks Can Supercharge Your Portfolio

    How Renewable Energy Stocks Supercharge Your Portfolio

    SEC Crypto Regulations: What Financial Advisors Need to Know

    SEC Crypto Regulations: Insights for Financial Advisors
    liquidity-provider-logo
    • News
      • Stock Market Forecast
      • Stocks
      • Banks and Finance
      • Companies
      • Crypto
      • Forex
      • AI
      • Technology
      • DeFi
      • NFT
    • Articles
      • Crypto Payments
      • Trading
      • Crypto Exchange Business
      • Forex Business
      • Fintech
      • Liquidity
      • FinTech Awards
      • Blockchain
      • Investing
      • NFT
      • DeFi
    • More
      • Videos
      • Liquidity Providers List
      • Crypto Payment Providers
      • White Label Brokerage Platforms
      • Broker CRM Platforms
    [email protected]

    © 2024 Liquidity Provider. All Rights Reserved

    Privacy Policy Cookie Policy
    This site is registered on wpml.org as a development site. Switch to a production site key to remove this banner.