Brazilian assets face fresh volatility after supporters of former President Jair Bolsonaro stormed key government buildings, echoing the U.S. Jan. 6 insurrection of 2021, analysts said. | Reuters
Brazil’s real currency and benchmark Bovespa stock index, which outperformed other emerging markets in Latin America during most of 2022, had already been hit by turbulence in the first few days after leftist President Luis Inacio Lula da Silva’s Jan. 1 inauguration on concern about increased government spending.
Still, some analysts said any negative market reaction to the latest events could be temporary. “Given that the situation seems to be under control in Brasilia, I would expect any asset class impact to be short-lived,” said Alejo Czerwonko, CIO for Emerging Markets Americas at UBS Global Wealth Management.
“As the president gets stronger and the opposition weaker, one could see a greater radicalization from the left, perhaps pushing the agenda further than one would think,” Cherman said. Bruno Komura, analyst at asset manager Ouro Preto, expects a negative initial reaction in markets, with interest rates rising and currency and stocks falling, though the strong institutional reaction could help assets to recover by the end of the week.Carla Argenta, chief economist at CM Capital, points out that the Brazilian rioters were helped by lenient law enforcement in Brasilia, something that didn’t happen in the U.S.
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