20 Jun 2013

Financial Times: should you invest in Brazil?

Posted by rodrigo

Recent public demonstrations of political dissatisfaction in Brazil’s major cities left a question in the air: Are those who invest in Brazil worried? Financial Times, in article published in June 19th says that the short answer is No.

Brazilian stocks have had a rough ride lately but equity investors are far more worried about the US Federal Reserve than they are about protesters, and the Bovespa index has headed south since long before they took to the streets. The same is true of the currency and other assets. Beyondbrics has not seen a single analyst make any connection between the protests and asset prices.

Of course, another question is on: should investors worry? One threat to their interests would be that the government may react in an overly placatory way, but until now, despite some readjustment on the bus fares there is no chance of getting into what some protesters want, the free bus fare to all citizens, and government not even considers that as a remote possibility.

Another threat would be that the government may simply ignore the protests, assuming they calm down over time. That would leave Brazil stuck in its low-growth rut, and this may no longer be as appealing to policy-makers as it once was.

As this new reality is still in full swing, investors should bear in mind that any threat should be treated only as speculation. In addition, the Brazilian people has demonstrated political awareness which, by itself, is already proof that the country, though it has internal problems, also has a concerned population, who wants to place Brazil among the best countries to live in.

To read the original article, follow this link.