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Why Brazil deserves to be in the ‘group of winners’ for investments in 2023, second largest asset manager in the world

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BlackRock releases its 2023 capital markets outlook (Image: Reuters/Brendan McDermid)

THE blackrock, largest asset manager in the world, launched this Wednesday (30) its booklet containing investment perspectives for 2023, with a central message that may be bitter to the markets’ palate: the conditions that guaranteed a “bull market” (bull market) for stocks and bonds over the past decade may have given a definite goodbye.

In the manager’s view, Brazil and the world face long-term production constraints, leading to inflation that will not be able to be completely tamed even by central bank action.

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A gloomier perspective in relation to the global increase in prices is linked to the aging of the workforce, the energy transition and the arrival of a new geopolitical order, catalyzed by the war in ukraine and which must have as its greatest challenge the tense relationship US–China.

Even in the face of these challenges, local executives at blackrock and the company’s chief strategist at Latin America they see opportunities for “tactical” growth for the Brazilian capital market, given its prominent position among growing economies.

Selic below 10% is a trigger for the resumption of risk appetite

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Delivering a terminal rate close to 14%, the interest cycle that started in mid-2021 penalized the stock market, directly impacting the custody volume of the blackrock year to date.

In the assessment of the manager’s local executives, the return to a more favorable scenario towards risky assets must go through a decrease in interest rates, at least below the 10% threshold.

In this sense, the premature action of the Brazilian Central Bank in the fight against inflation and the closing of the cycle in a chronology prior to the developed markets may catalyze a reversal of the contractionary monetary policy in 2023.

The manager understands that the Brazilian market has already executed a pricing of the most unfavorable macroeconomic conditions, contrary to Europe and USAwhose markets may still experience significant corrections over the course of next year.

“We infer an ‘underweight’ recommendation for developed markets, with the possibility of a decrease in inflation only in 2024. The scenario is more attractive for emerging markets”, evaluates Axel Christensen, head of BlackRock’s operation in Latin America.

For Axel, this attractiveness of the Brazilian market for foreign investors occurs already assimilating the prospect of public spending represented by the Transition PEC –– the package you want to make additional space BRL 198 billion in the 2023 budget for social spending.

According to Axel, other emerging countries, such as Colombia and Chileand developed economies such as the United Kingdom itself have increased public spending as a way of inducing a new cycle of growth.

Brazil is on the ‘winners’ side’

In addition to “pioneering” in the interest rate race, the manager points out that Brazil is well placed to support investments related to climate change, one of the five macrotrends pointed out by the company that should govern the markets in 2023.

As Axel points out, “investors closely monitor opportunities in mining, the food industry and agribusiness”.

The manager’s speech alludes to the exploitation of base metals such as copper, now seen as a key element for the energy transition. Nicknamed the ‘green metal’, copper is an essential part for the transmission of electricity from solar and wind sources, in addition to the construction of charging points for electric vehicles.

The adoption of ESG practices by Brazilian companies, such as Natura (NTCO3), is also another promising front for investments in the country.

Second Karine Saade, head of the Brazilian operation at Black Rock, from the point of view of fiduciary relationships, the placement of sustainable governance brings benefits to the companies’ business model, as it reduces litigation and attrition with regulators.

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Source: Moneytimes

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