Good morning. In today’s issue: Are markets bailing on Brazil? Congresswoman asks for police protection from Tourism Minister. Financial aid program for states could deepen regional inequality. Embrapa to launch genetically-modified pinto beans.
Are markets bailing on Brazil?
The positive (though inconsistent) performance of the São Paulo stock exchange hides a growing pessimism among market operators about the Brazilian economy. Investors have recently shifted their portfolios from companies depending on domestic consumption, to focus more on exporters. The best-performing companies this year are driven by sales abroad—notably in the commodities and energy sectors.
On the flip side, the worst-performing shares belong to companies selling to Brazilian consumers, such as retail chains, shopping mall administrators, and travel firms. That reveals a lack of faith from investors that the economy will gain traction this year. GDP growth in Brazil is driven by family consumption—so, not believing in domestic consumption amounts to betting against the Brazilian economy.
The election of Jair Bolsonaro injected optimism in local investors—which were the driving force of the recent surge in Brazil’s stock market. Since taking office, however, the president has proven not to be the libertarian investors...