Brazils rebound is impressive, though government intervention creates distortions that must be addressed. The election cycle destabilizes the operating environment.
There is no mistaking a sentiment uptick in perennially optimistic Brazil. The government has trod a sensible path of fiscal and monetary stimulus with the largesse of over $200 billion in reserves built up during the fat years. But run up to elections may make it hard to rein in fiscal spending and reverse monetary easing as the economy improves.
Brazil is capturing the imagination of direct and global portfolio investors scrabbling for growth stories, as highlighted by $7 billion in orders for a late July $500 million reopening of its 2037 dollar bond. The buyside likes Brazils China exposure through commodities, its large domestic economy that benefits from the emergence of the middle class and prudent macro policies. And it is boosting overall LatAm sentiment.
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