We believe the recent global market volatility has created an attractive entry point for Brazilian equities. Asset prices have seen a violent pullback due to market sentiment around recent COVID-19 headlines, but Brazil’s investment case continues to improve as the country moves from recovery to growth and, in our view, a compelling turnaround opportunity. After 13 years of subsidy-led wealth redistribution and unfriendly business policies, Brazilians elected a new government in late 2018 under the leadership of President Jair Bolsonaro.
The new government cracked down on corruption and showed prudence in its central bank policies. Between President Dilma’s 2016 impeachment and December 31, 2019, Brazil’s stock index, the Bovespa, surged despite persistently high unemployment and low economic growth. We credit much of the market optimism to the country’s significant reform programs and future prospects for growth.