RIO DE JANEIRO, BRAZIL – International investors put away the deafening noise of the global media and “experts” about Brazil’s economic decline and the macroeconomic challenges and uncertainties due to the presidential election.
They know: Brazil, the second-largest economy in the Americas, is corrupt to the core like most of the countries in the region, but wealthy, the government is business-friendly, privatizations are taking place, digitization startups are extraordinarily competitive and expanding rapidly, and planned infrastructure investments will steadily improve the competitiveness of the Latin American giant.
And last but not least: Brazil is a commodity and food superpower.
Therefore, unlike the New York indices, the Brazilian stock market enjoys what has guaranteed Ibovespa positive returns in 2022.
As of January 21, net inflows of foreign funds into the B3 secondary market reached R$20.1 billion (US$3.7 billion), the strongest monthly inflow since January last year, when inflows totaled R$23.6 billion.
The favorable winds of foreign capital flows have contributed to the better performance of Ibovespa compared to its main peers in developed markets. While the main local benchmark of the Brazilian stock market rose 5.13% in 2022, the S&P 500 fell 8.60%.
Juliano Arruda, director of Latin American equities at Goldman Sachs, explains that global equity funds raised about US$950 billion last year, an unprecedented amount in history, benefiting Brazil.
“In the last three weeks, about US$15 billion has flowed into emerging markets, with about 80% invested in equities and 20% in bonds. Latin American equity markets have done particularly well – probably as a result of the strong start to the year in commodities and signs that China is ready to revive its economy after a change in strategy last year,” said Chris Turner and Francesco Pesole, strategists at ING Bank in the Netherlands.
According to David Beker, head of economics for Brazil and Latin America at Bank of America, there is greater optimism about China’s growth today, benefiting companies linked to the Asian country’s momentum, particularly Vale.
The mining company’s shares, which weigh about 15% in Ibovespa, are up 7.82% through 2022. “The more attractive price levels we saw at the end of the year, the devalued exchange rate and less political noise probably helped too,” he says.