Insightful Word
  • Investing
  • Stock
  • Economy
  • Politics
  • Investing
  • Stock
  • Economy
  • Politics
No Result
View All Result
Insightful Word
No Result
View All Result
Home Politics

Why Brazil’s economy is booming but its stock market struggles to keep up

admin by admin
December 24, 2024
in Politics
0
Why Brazil’s economy is booming but its stock market struggles to keep up
0
SHARES
4
VIEWS
Share on FacebookShare on Twitter

Brazil wraps up 2024 in a puzzling duality: impressive economic growth on the one hand and lackluster market performance on the other.

Gross domestic product (GDP) growth is expected to hit 3% for the third consecutive year, unemployment is at record lows, and the trade surplus has reached new heights.

Despite these achievements, financial markets tell a starkly different story.

The iShares MSCI Brazil ETF has plummeted 33% this year, while the Brazilian real is the worst-performing major currency globally.

Five-year bond yields have surged five percentage points to nearly 15%.

Brazil’s fiscal spending fuels investor fears

Investor unease stems from concerns about Brazil’s long-standing fiscal challenges.

Excessive government spending, which often triggers inflation and high debt payments, looms large.

President Luiz Inácio Lula da Silva, commonly known as Lula, has stretched fiscal limits during his current term, prioritizing social spending over budgetary discipline.

A November budget package aimed at restoring investor confidence fell flat, avoiding meaningful spending cuts and instead relying on uncertain revenue-boosting measures.

“I think the economic team is really flummoxed about what to do next,” says Ryan Berg, director of the Americas program at the Center for Strategic and International Studies in Barron’s report.

Structural reform in Brazil remains elusive

Brazil’s fiscal issues are deeply entrenched, with 95% of the federal budget constitutionally mandated.

Changing these allocations requires a three-fifths majority in Congress, an almost insurmountable task given the fractured legislature comprising 30 political parties.

Still, some analysts see potential opportunities.

“Bond markets might be near the point where all that is in the price,” argues Arif Joshi, emerging market debt portfolio manager at Lazard Asset Management.

He notes that government bonds offering 15% returns, coupled with inflation below 5%, could attract investors if Lula signals fiscal restraint.

However, one major concern has been alleviated: Brazil’s central bank remains independent.

Gabriel Galipolo, a Lula appointee who assumes the role of governor next year, has demonstrated a commitment to monetary vigilance, voting to raise the key interest rate to 12.25% since September.

Lula’s administration has also proposed a tax system overhaul for 2025 to simplify the country’s complex tax framework, which could further reassure investors.

International trade offers a silver lining

Brazil’s economic fortunes are buoyed by its robust trade relations.

The country exports three times more to China than to the US, insulating it from potential tariff threats under a returning Donald Trump.

Additionally, the European Union recently signed a free-trade agreement with the Mercosur bloc, after 25 years of negotiations.

If ratified, the deal could significantly boost Brazilian exports.

Despite some positive indicators, structural issues remain at the heart of Brazil’s economic struggles.

Past reforms, like pension changes under former President Jair Bolsonaro, have only scratched the surface.

“Maintaining high growth depends on Lula pulling a rabbit out of a hat,” CSIS’ Berg says.

While the president has demonstrated resilience, translating that into meaningful fiscal reform will be his biggest test yet.

The post Why Brazil’s economy is booming but its stock market struggles to keep up appeared first on Invezz

Previous Post

Netflix stock price target raised to $1,000 at KeyBanc

Next Post

Biden to decide fate of Nippon Steel’s $15 billion bid for US Steel: here’s what you need to know

admin

admin

Next Post
Biden to decide fate of Nippon Steel’s $15 billion bid for US Steel: here’s what you need to know

Biden to decide fate of Nippon Steel’s $15 billion bid for US Steel: here’s what you need to know

Trending News

From $10,000 to stocks: why Warren Buffett stopped gifting his family cash for Christmas

From $10,000 to stocks: why Warren Buffett stopped gifting his family cash for Christmas

December 9, 2024
What is the IMF projecting about the global economies for 2024 and 2025?

What is the IMF projecting about the global economies for 2024 and 2025?

October 24, 2024
Oracle stock price has surged, but beware of key risks

Oracle stock price has surged, but beware of key risks

July 17, 2025
Subscribe to Insightful Word


    Recent News

    Dow futures soar 250 points today: 5 things to know before Wall Street opens

    Dow futures soar 250 points today: 5 things to know before Wall Street opens

    August 7, 2025
    Affirm stock price is rising: is it a buy before earnings?

    Affirm stock price is rising: is it a buy before earnings?

    August 7, 2025
    Intel stock plunges sharply after Trump calls on CEO to resign: here’s why rebound may take time

    Intel stock plunges sharply after Trump calls on CEO to resign: here’s why rebound may take time

    August 7, 2025
    Goldman Sachs boosts Nvidia price target to $200 ahead of Q2 earnings

    Goldman Sachs boosts Nvidia price target to $200 ahead of Q2 earnings

    August 7, 2025

    Recent News

    Dow futures soar 250 points today: 5 things to know before Wall Street opens

    Dow futures soar 250 points today: 5 things to know before Wall Street opens

    August 7, 2025
    Affirm stock price is rising: is it a buy before earnings?

    Affirm stock price is rising: is it a buy before earnings?

    August 7, 2025

    Latest News

    • Dow futures soar 250 points today: 5 things to know before Wall Street opens
    • Affirm stock price is rising: is it a buy before earnings?
    • Intel stock plunges sharply after Trump calls on CEO to resign: here’s why rebound may take time

    About Insightful Word

    • Contacts
    • Cookie Notice
    • Privacy Policy
    • Terms of Service
    • Trading tools
    • Contacts
    • Cookie Notice
    • Privacy Policy
    • Terms of Service
    • Trading tools

    Copyright © 2025 Insightfulword.com. All Rights Reserved.

    No Result
    View All Result
    • Investing
    • Stock
    • Economy
    • Politics

    Copyright © 2025 Insightfulword.com. All Rights Reserved.