Brazil rises against its problems - April 24, 2016

Brazil rises against its problems

Good news just keeps coming from Brazil lately: the analyst of All Star Charts noted that Brazil got back above the 2008 lows. Although we (and other professionals) were expecting the growth, this is still great news. But there are some other problems in the country.

The analyst (whose findings were published on Business Insider) is expecting EWZ (which is based on the large and medium firms of the Brazilian stock markets) to be near $40. That might be a huge rise, since now it’s around $29 and already had a significant growth (more than 30%) this year.

This is not that surprising after having looked close at Brazil in the last months. We mentioned several times that developing countries may have a great year. First we speculated the growth in February. Then we believed India and Brazil may have an especially good period in front of them. After a short while, our predictions seemed to be supported by the numbers.

Just a month later, the legendary investor, Mark Mobius believed the same. He wrote on his blog at Franklin Templeton: “Brazil will have the opportunity to shine.” (You can read our short resume of his thoughts here.)

But as most developing countries, Brazil has its problems too. One of the most important one is corruption. Just this week, Brazilian President Dilma Rousseff lost an important vote in the lower house of the Congress, authorizing the Senate to start an impeachment trial against her. She is constantly attacked by the opposition because she may have faked some numbers in the budget. She might also be concerned in the Petrobras scandal. The trial against her would take half a year, and during that time Michel Temer Vice President would take Rousseff’s place. But the situation is not that simple, since Temer is affected in the Petrobras scandal as well. So as we can see, even now there are serious problems concerning the Latin-American country.

Corruption had a huge part in Brazilian economy’s big fall in the past. Even if the situation is not better now than it was some years ago, the country’s potential and opportunities compensate for these problems, and further hikes are quite possible, just as All Star Charts predicts.