Brazil’s bonds are still among the top global performers, and the country’s equity markets stable, despite a political scandal that finds President Michel Temer facing a criminal investigation for endorsing bribes.
The country’s most recent market rally was driven in large part by enthusiasm for Temer’s ambitious economic reform agenda, the prospects of which have been called into question amid the political turmoil.
“There is not exactly optimism; there is a feeling of investors giving the benefit of the doubt to the government, since much has been advanced in this past year,” Zeina Latif, chief economist at XP Investments was quoted by the Financial Times as saying. “But the government should not rest on its laurels — markets can quickly review their positions.”
“Brazilian markets have been relatively resilient, for several reasons,” Michael Gomez, head of emerging markets at Pimco said. “We have seen a very large adjustment in the current account deficit, which was chronic in the prior years and now for the most part is closed.”