Brazil is booming, but you wouldn’t think so from looking at the stock market, says Craig Mellow in Barron’s. Annual GDP growth is running at 3%, double what was expected at the start of the year. But the Ibovespa share index is down more than 3% in 2024. What’s the problem? Financiers don’t trust Luiz Inácio Lula da Silva, the leftwing president. He has so far managed to increase welfare spending “without bursting Brazil’s macroeconomic seams”. But in a country where “past fiscal sins” leave the state shelling out 30% of revenue on debt service costs, market paranoia is understandable.
The central bank doesn’t seem to trust Lula either – it has raised interest rates to ward off rising inflation. Tighter credit is proving a headwind for local stock prices. Some assets do now “look oversold”, but the “mood in the market is pretty horrible”, says Thierry Larose of Vontobel Asset Management.
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