Good morning! Markets & Bolsonaro: is the honeymoon over? Senate could force government shutdown. Brazil’s bold plan for deepwater oil reserves.
Markets & Bolsonaro: is the honeymoon over?
Ever since Jair Bolsonaro became the leading presidential candidate last year, Brazilian investors have gotten really excited, wagering the government would have the muscle to pass the liberal agenda of economic guru Paulo Guedes. What investors failed to consider is Mr. Bolsonaro’s own track record—as a congressman, he voted for more state intervention. Just 3 months into his term, investors seem to realize they’ve bet in the wrong horse.
Mr. Bolsonaro has publicly disavowed the pension reform, alienated key allies, and lost a big chunk of his popular support. Meanwhile, foreign investors continue to bail on Brazil. As our Weekly Report showed back on Jan. 12, foreigners have increased their short positions ever since the “Bolsomania” started, back in September. In February alone, they pulled USD 662m from Brazilian stocks—continuing what is the big flight of capital since the 2009 global crash.