Why is Brazil investment one of the most attractive cyclical opportunities right now?

Why is Brazil investment one of the most attractive cyclical opportunities right now?

After exceeding expectations for GDP growth, bringing unemployment down to just 7.5% and seeing a 32.7% rally in equities, the Brazilian economy nailed 2023. Not for nothing did it become the ninth largest in the world. And 2024 looks promising too, with Global X stating categorically that Brazil investment “remains one of the most attractive cyclical opportunities in emerging markets, if not the world”. 

A strong cyclical opportunity 

The financial advisory company recently published an article highlighting reasons to invest in Brazil this year. The compelling list runs long, particularly for investors looking at Brazilian stocks and shares. 

In this article, we summarise the main reasons Global X is hedging its bets on Brazil this year. 

Investment Grade status 

The article points out that Brazil is just two steps from achieving investment-grade status. Indeed, in 2023 both Fitch and S&P raised Brazil’s status to BB, up from BB-.

According to S&P, the new “stable” rating reflects “a strong external position and monetary policy that is helping to re-anchor inflation expectations”.

Energy powerhouse 

Brazil is fast emerging as one of the world’s powerhouses in green and non-green energy. Global X reports that the country has plans to expand its oil production, with the aim of becoming the world’s fourth-largest producer in the next five years.

Renewable energy sources already play a huge part in energy production, particularly wind and solar. In addition, Brazil investment in green hydrogen has surged over the last few years, with Ceará in Northeast Brazil at the forefront globally. 

“Happily isolated”

The report joins other analysts in highlighting Brazil’s geopolitical position. For Global X, Brazil is isolated from “headwinds” in other parts of the globe, particularly Eastern Europe and the Middle East. 

An article in Forbes reiterated this opinion in December last year. In it, the author called Brazil “a global powerhouse with one of the strongest, most diversified economies in the world”.  

As a result, the article said Brazil makes a natural choice for “savvy investors” who “seek it out as a safe place to store their money”. This security is one of the reasons that Forbes names Brazil as the second-best place in the world for property investment.

Bullish stock exchange

The Ibovespa’s strong performance in 2023 is another reason for optimism. Global X reports that the MSCI Brazil Index has grown in four of the last six cutting cycles. In addition, the rallies have averaged 96.7%. 

According to the Bank of America Corp, cited in Bloomberg, the Brazilian stock exchange is set to rally 11% this year. The corporation predicts the exchange will finish the year at over 145,000 points.

Decreasing interest rates

The article also points to the steady cycle of falling interest rates as another reason to consider Brazil investment this year. The Brazilian Central Bank (BCB) felled interest rates by 0.5% four consecutive times in autumn last year. Analysts believe there is still considerable room for further cuts and the BCB has cited 9% as its target. 

Conclusion about Brazil investment 

The reasons included in the article lead the financial advisory company to state that “Brazil stands out as a rich backdrop for investors”. Furthermore, Global X believes the short-term opportunities are “further brightened by attractive valuations and a monetary policy loosening cycle”. 

If you’d like to consider Brazilian investment this year and join “one of the most attractive cyclical opportunities” in the world, get in touch with our Investment Consultant team. 

(Sources: Global X, Forbes, Bloomberg, Reuters)