In 2024, the Brazil’s economy faced strong instability due to one poor tax management, Debt growth and a sustained increase in inflation: these factors generated a 35% drop in the Brazilian stock market index. However, despite pessimistic forecasts, the market He managed to recover in early 2025. This rebound was favored by an improvement in the Perception of investors and movements in global markets that benefited emerging economies.
Changes in the political landscape have been key in this process. The possibility of modifications in the government by 2026 has promoted optimism in the markets, despite the current economic challenges. In financial markets, assets prices usually reflect the future expectations of investors, whether they are positive or negative. Even in moments of uncertainty, a small indication of stability can be sufficient to reactivate trust and raise prices.
A clear example of this is the Performance of the ETF ishares msci brazil ($ ewz), which groups the main actions of Brazilian companies and in the First quarter of 2025 rose +17.1%.
Currently, Brazil faces a complex macroeconomic and political context. In 2024, the fiscal deficit reached almost 9%, while public debt approached 85% of GDP.
In December, the Brazilian stock market played background, with the real depreciate to 6.5 per dollar and extremely high interest rateswhich made Brazil one of the markets with the worst performance worldwide. Brazil is not only quoting at historically low levels, but also looks attractive compared to other emerging markets.
Companies like Petrobras ($ PBR) and Ambev ($ Abev) have dividends close to 10%, While the most important private bank in the country, Itaú (ITUB), is among the financial entities with lower valuations in its sector.
In general terms, Brazilian actions present some of the cheapest valuations within emerging markets. He ETF $ EWZ It offers good exposure to domestic demand and has its yield in the Argentine Stock Exchange.
This fund faithfully reflects the low level of price of the country’s share market, with investments in key sectors such as consumer goods, basic services, energy and real estate, all closely linked to local economic activity. In addition, it provides an attractive return for dividends of 8.33%, which represents an interesting incentive for investors. Currently, it is quoted at historically low levels, which could represent a purchase opportunity.
Another aspect to highlight is the weight of banking sector within the ETF EWZ, which allows you to benefit from the solid credit system in Brazil and its positive impact on domestic consumption.
Source: Yahoo Finance
Although the government of Lula maintains a populist and left posture, The President It is not characterized by being dogmaticunlike your predecessor Dilma Rousseff.
More relevant is still the figure of its Minister of Finance, Fernando Haddada pragmatic economist who has begun to address the problem of fiscal deficit. Aware that controlling public spending is key to reducing inflation, in December he announced significant cuts in the budget, with which the government expects to save approximately 11.8 billion dollars in the next two years.
Is now the time to enter?
Some investors fear a new market correction. While there is always that possibility, recent cases such as Argentina and Peru have shown that fears can be exaggerated. There are always opportunities to invest in Brazil with such low value.
In addition, in the regional political context, Latin America is experiencing a turn to more pro-market. The rapid advances observed in neighboring countries, as in Argentina, could motivate Brazil to adopt more orthodox and friendly economic strategies with investment.
From a global perspectivethis could be a good time to consider entry into the Brazilian market.
Guardian Capital Director.-
Source: Ambito
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