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Brazil surges amid global uncertainty

Brazil equities investments

Latin America’s largest economy is presenting an untapped opportunity for equities investors after a period of economic turmoil.

In the midst of worldwide economic uncertainty, Brazil stands out as providing excellent opportunities for investors, with recent transformative decisions positioning the country’s economy for a promising future, according to a global investment firm.

GQG Partners highlighted the world’s ninth-largest economy is often overlooked by investors seeking international equity opportunities, primarily due to its recent turbulent economic history.

“In a world full of geopolitical tensions, inflationary pressures and collapsing banks, one major economy has been navigating the volatility remarkably well: Brazil,” the firm said in a report.

“After recovering from its worst decade in more than a century, this approximately $2 trillion economy has quietly emerged as a surprise winner in the post-COVID world. Despite its central bank hiking interest rates from 2 per cent to almost 14 per cent, Brazil’s economy has beat market expectations for the third year in a row.

“We believe the country’s structural reforms over the past decade, which appear to be underappreciated by other investors, have positioned Brazil for continued outperformance.”

Despite market apprehension regarding the 2022 re-election of former president Luiz Inácio Lula da Silva and concerns he would take a hard-line approach to tackling economic problems, the investment manager noted these fears have not eventuated.

Instead, Lula has indicated a balanced and pragmatic approach to economic issues, drawing parallels with his initial term as president in 2002. This period is widely recognised as a golden era for the Brazilian economy, characterised by remarkably strong growth and historically low unemployment rates.

“[Lula’s] administration is targeting a balanced budget next year – in contrast to most developed markets. Furthermore, a powerful, right-leaning congress has promised to keep in place reforms from the prior decade,” the firm noted.

Praising Brazil’s central bank for its proactive stance on inflation, GQG Partners noted the institution has been ahead of the curve by raising interest rates ahead of global peers and is now poised to cut them. The firm predicted lower interest rates will fuel further economic growth and contribute to an upswing in equity market valuations.

“Overall, while the markets and media remain highly pessimistic on Brazil’s outlook, we believe the country offers some of the most attractive investment opportunities in the world,” it said.

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