Since the beginning of his presidential campaign, Jair Bolsonaro has used his “finger guns” gesture as somewhat of a motif. It revealed a promise that was at the core of his program—his desire to scrap gun restrictions in Brazil. “Guns are our guarantee of freedom,” he said during a campaign event. On Tuesday, he made the first step towards it, signing a decree that mildly loosened gun ownership rules. But following a decree that could—at least in theory—boost gun sales, Taurus, Brazil’s biggest gun manufacturer, lost 22 percent in market value.

Taurus’ market value has been on an upward curve over the past 12 months, a period in which Taurus was the Brazilian company that gained most value—about 250 percent. The company’s share price in 2018 mirrored presidential polls that progressively showed far-right Jair Bolsonaro consolidating his lead in the presidential race. On August 30, Taurus shares were at BRL 2.38 each. On October 26, the last trading day before the presidential runoff (which Mr. Bolsonaro would win with 55 percent of votes), its value had jumped to BRL 11. And on the following day, it plunged again at the same speed.

</span></p> <p>Even some of Taurus&#8217; main shareholders got rid off chunks of their stock — with one of them seeling off 90 percent of his share in the company.</p> <p><span style="font-weight: 400;">What happened then—and is happening now—is that investors were cashing in on their profits, and the increasing offer of Taurus shares on the market made its price go down. The amazing volatility of Taurus shows that its increase in value had been merely speculative. Especially when one analyzes the company&#8217;s financial health.</span></p> <hr /> <p><img class="alignnone size-large wp-image-13287" src="" alt="taurus stock market brazil bolsonaro gun decree" width="1024" height="683" srcset=" 1024w, 300w, 768w, 610w, 1200w" sizes="(max-width: 1024px) 100vw, 1024px" /></p> <hr /> <p><span style="font-weight: 400;">Over the first nine months of 2018, Taurus had BRL 632.5 million in revenue—16 percent more than the year before. Even so, its losses amounted to nearly BRL 50 million reais and, more importantly, the company&#8217;s liabilities rose to BRL 1.2 billion—about BRL 445 million more than its assets. The company claims it has gotten some relief after renegotiating its debts, but it remains too soon for non-speculative optimism.</span></p> <p><span style="font-weight: 400;">And that is without considering the problems with products and recent scandals involving the company.</span></p> <p><span style="font-weight: 400;">In the U.S., where Taurus makes 70 percent of its revenue, Americans bought roughly 760,000 of the company&#8217;s handguns in 2017. Taurus firearms are known for their affordability: the Taurus 85 model, among the best-selling guns in the U.S., is quite similar to the Smith &amp; Wesson 60, but costs half of the price. The company also treats customers to free membership to the National Rifle Association, America&#8217;s biggest gun lobby.</span></p> <p><span style="font-weight: 400;">But the company recently agreed to recall 1 million potentially defective pistols as part of a <a href="">USD 239 million settlement</a>. A lawsuit alleged that nine Taurus handgun models had a faulty design allowing the pistols to inadvertently fire when dropped or to be discharged even when the safety feature is on. </span></p> <p><span style="font-weight: 400;">Then, in 2016, Brazilian federal prosecutors accused two high-ranking Taurus executives of selling USD 2 million worth of guns to a Yemeni arms trafficker named Mohammed Mana’a. Because the Middle Eastern country is under international embargo, it is illegal for anyone to sell weapons there. According to prosecutors, Mana&#8217;a transported the 8,000 guns via an alternative route through neighboring Djibouti, which Taurus was aware of.</span></p> <p><span style="font-weight: 400;">In addition to Yemen, prosecutors found possible evidence that the company used Mana’a as a weapons distributor for other war-torn African countries such as Sudan, South Sudan, and Ethiopia.</span></p> <h2>Great potential, great risks</h2> <p><span style="font-weight: 400;">Despite Brazil being the country with the single highest number of people killed by firearms, the country&#8217;s market has exceptional potential for manufacturers. Thanks, in large part, to a middle-class which is terrified of the country&#8217;s appalling violence stats. Between January and September 2018, almost 40,000 people were killed — and many citizens believe they will be more protected if they own a gun. In 2005, Brazil held a referendum around a law restricted the commerce of firearms and ammunition, and 64 percent of voters opted to lift restrictions on sale. </span></p> <p><span style="font-weight: 400;">With the political rise of Jair Bolsonaro, Taurus jumped on the bandwagon without blinking. It sold off its motorcycle helmets division and changed its name from Forjas Taurus to Taurus Armas (Taurus Guns, in Portuguese). The company published videos in support for Mr. Bolsonaro, with slogans such as &#8220;An armed people will never be enslaved.&#8221;</span></p> <p><span style="font-weight: 400;">But even if Mr. Bolsonaro&#8217;s decree does loosen up gun ownership laws to some extent, it doesn&#8217;t mean that arming oneself will get cheaper. That process costs today at least BRL 4,000 — four times the minimum wage. &#8220;That could limit the expected exponential growth,&#8221; reported consultancy firm Toro Investimentos.</span></p> <p><span style="font-weight: 400;">Besides, the pro-gun lobby in Congress wants to lift restrictions for the import of firearms in Brazil, bringing in foreign competitors to markets completely dominated by the Brazilian manufacturer. </span></p> <p><span style="font-weight: 400;">The future doesn&#8217;t look great for Taurus.

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BY The Brazilian Report

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