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Brazil's New Investment Growth Cycle

(Pedro Stoltenberg Jardim, the co-guest author of this particular blog, is founder of Doral Investimentos, an asset allocation advisory company based in Rio de Janeiro serving private and corporate clients in Brazil. Debora Toledo is involved with business intelligence at Doral.)



After a period of instability in Brazil, we remain convinced that we are in a revolutionary moment driven by a new culture and economic policy.


The new growth cycle is the product of the strategic combination of consumption and investment. The factors that contributed to the recovery were endogenous and exogenous. The agenda adopted by the Minister of Finance, Henrique Meirelles, was aimed at a change in the orientation of economic policy, which must be deepened by the governments that will succeed it. It is a long-term process, sustained by a profound transformation of Brazilian society.


In 2017, Brazil had a strong growth of the agricultural harvest and consequently the most expressive expansion of agrobusiness GDP. These factors were accompanied by a change in the economic policy marked by an increase in the confidence of businessmen and consumers, an increase in real wages, the easing of financial conditions, a sharp fall in food prices and consequently a reduction in inflation and a drop in interest rates.


The sum of these indicators of economic policy has made the capital market even stronger. Analysts now expect BOVESPA to reach 90,000 points, driven by a decline in the strength of public banks. Currently, companies have to use the debentures and stock market to finance themselves. In the past there were privatizations and concessions. This time there is a strong  presence of international investment.


The Brazilian stock market has risen, though it is less than that of other emerging countries. This index represents good news because it indicates a large flow that might still come. The average representativeness of emerging assets in the portfolios is around 15% and currently is below 10%. The return to this average value will give a new impetus to the Brazilian market, increasing the flow in 50% in Brazilian assets.


The optimism with the recovery of the economy is endorsed by the large number of potential investors who were not aware of independent asset management and were  obliged to be satisfied with investments of the popular banks. These potential investors are currently able to invest in these independent managers through the work of asset allocators, such as DORAL Investimentos.  The New Cycle of the Capital Market in Brazil allows them to build a customized and diversified portfolio which are supervised by a well regulated industry.


We at Doral Investimentos are prepared for this new cycle in the capital market and, despite possible instabilities, such as the elections and the pension reform, we see an optimistic future for Brazil and especially for the capital market.


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