Brazilian Stock Exchange President: “Brazil is cheap. It lost relevance among emerging countries.”

RIO DE JANEIRO, BRAZIL – Gilson Finkelsztain, president of B3, the Brazilian Stock Exchange, said in an interview with Veja magazine that the country is “very cheap” and, in recent years, “lost relevance even among the emerging countries”.

The statement was made when he was questioned whether the movement of foreign investors entering the Brazilian stock market should last or is a matter of opportunism to buy cheap shares. For him, the trend can continue for quite some time.

The truth is that Brazil was and still is very cheap through the combination of attractively priced shares and a depreciated exchange rate. In recent years the country has lost relevance even among the emerging countries. Foreign investors are looking for solid growth in these countries, and given our low growth, they have left Brazil in the background.

But with the cheap stock market and the current search for protection against inflation through assets such as banks and commodities, Brazil is again attracting international flow. The outlook is positive, but it is worth remembering that foreign investors seek stability and growth. Gilson Finkelsztain, president of B3, in an interview to Veja magazine

A production engineer who made a career in the financial market, Finkelsztain, 49, also talked about his expectations for this year’s elections. According to him, the election “always brings uncertainty”, but he evaluates that the pre-candidates presented so far are well known.

“We are already familiar with this subject. We have been through several experiences of political transitions. Today, there is a certain maturity that, if made carefully, these changes do not affect the market’s stability. I believe that we will have some volatility, but nobody expects there to be some rupture or dramatic change in the Brazilian scenario,” he says.

About the boom in the number of investors and the arrival of more young people to the stock exchange during the covid-19 pandemic, the president of B3 cites a “combination of very positive structural changes”, among them the fact that the generation born in the 1990s “has a greater willingness to study the market and more propensity to take risks, unlike the previous generation, which lived with an economic scenario of inflation and very high interest rates”.

He also says he doesn’t believe that inflation and higher interest rates will end the good phase and make people turn to fixed-income products. “Today, investors are more mature, unlike ten to twenty years ago, when people were attached only to fixed income products. Variable income has gained space in portfolios, as have other products. The capital market dynamics have changed in Brazil and will not go back to what it was.

Asked about the risk of President Jair Bolsonaro’s (PL) interference with Petrobras, whose performance has a substantial impact on Ibovespa and, consequently, on the performance of the stock exchange, he said that the government has done well to the state-owned company, which is controlled by the state but has private shareholders.

“Maybe, if we didn’t have all the evolution of the governance discussion that Petrobras went through in the last four years and the Law of State-Owned Companies, the company would be being used as a political instrument. In the current situation, Petrobras shows that there is no problem in having a mixed economy company listed on the stock exchange, as long as the controlling shareholder understands that having partners means treating them with respect, without using the company as if it were 100% owned by the government,” he says.

About a resumption of IPOs at B3, Finkelsztain says that this year will be a little more restricted due to inflation adjustments, higher interest rates, and lower growth. “With the normalization of conditions, these companies should resume their movement to go public. Of course, not all of them will make it, but if you look at the investment industry in Brazil, less than 15% of the assets are allocated to equities. As the economy normalizes, the search for good assets and good equity opportunities will resume.”