The Central Bank of Brazil started raising interest rates before its peers and, therefore, the cycle of rate hikes may be nearing its end, unlike the United States and Europe. The fiscal situation is far more worrying, says Axel Christensen, director of investment strategy for Latin America at BlackRock, the world’s largest asset manager, with US$ 10 trillion in assets. In the country, the executive sees opportunities in fixed income, government and corporate bonds.
“Certainly, there are aspects that we are concerned about, in terms of the fiscal situation, the growth of public debt and what economic policy decisions will be made around that,” Christensen said. There is also the fear that the general rise in prices could provoke unrest in society, as happened in neighboring countries, which saw a series of protests in the streets.
“The Central Bank of Brazil is much closer to reaching the end of the cycle of high interest rates than the Federal Reserve (the American BC), which has just started, or the European Central Bank, which has not even started yet,” Christensen said. In this environment, uncertainty about monetary policy in Latin America is lower than in the developed world.
Inflation in Brazil has not yet reached the point of starting to fall, but it is close, said the economist. On the negative side, the more intense hike in interest rates by the BC will compromise activity, said Christensen. The economist sees a risk of recession above 50% in Latin America, precisely because interest rates have been higher here than in other regions.
elections
Regarding the October elections in the country, Christensen believes that the polls so far show a presidential race without many surprises. Therefore, there should be no major market movements unless there is some unexpected change in the names involved in the dispute.
One of the factors to monitor is how the new configuration of Congress will look after the elections, as this will help to give a vision of the space of the next president of the Republic to touch his policy agenda, said the BlackRock executive.
The executive also stated that he would place Brazil on a list of “safe” emerging markets, but warns that the country faces important obstacles, such as low productivity and low structural economic growth.
The information is from the newspaper. The State of São Paulo.
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