Brazil Asset Selloff on Protests Likely Short-Lived, Citi Says
Comment of the Day

January 09 2023

Commentary by Eoin Treacy

Brazil Asset Selloff on Protests Likely Short-Lived, Citi Says

This note by Maria Elena Vizcaino for Bloomberg may be of interest. Here it is in full:

Any pullback in Brazilian asset prices should revert quickly as the protests should be short-lived and not have major direct implications, Citigroup strategists led by Dirk Willer wrote in a note Monday. 

The Brazilian real was the worst performer among 23 emerging market peers tracked by Bloomberg, weakening 1.2%

The protests have been publicly criticized by far-right leaders, including former President Jair Bolsonaro, and they lack support from leaders in the executive, legislative and judiciary branches

Eoin Treacy's view

David long ago observed “governance is everything”. That is as true to today as in the past, but there is no getting around the fact that standards are deteriorating. Peaceful hand-off of power, following a free and fair election, is the basic starting point for liberal democracies.

Politicians deliberately questioning the election process has been a feature of right wing populists since Donald Trump’s defeat in 2020. That strategy was knocked back in the recent mid-term elections in the USA and it is to be hoped Brazil’s institutions are strong enough to withstand similar challenges. At least for now financial markets are shaking off the threat.

The iShares Brazil ETF continues to firm from the lower side of the two-year range.

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