By Reuven Benichou 26-02-2021
In: hive-exclusives | FX

BRL is Cheap, But Not Yet a Buy

(4 min read)
Resize text:

Brazil’s financial markets have tumbled this week tumbled after President Jair Bolsonaro’s 19 February decision to fire the head of state-controlled oil company Petrobras following clashes over fuel price hikes. It is the fourth time this year that Bolsonaro has criticized the company for rising fuel prices, and he introduced a two-month reduction in federal diesel taxes from 1 March. Hikes in fuel prices are usually the final straw that leads to public outcry. And with Bolsonaro’s popularity falling after the expiry of pandemic aid, the move is likely an attempt to shore up his popularity ahead of the 2022 elections.

However, Bolsonaro’s unilateral decision concerned investors. The risk is rising that the government takes a more interventionist approach and avoids making difficult decisions to control the fiscal situation. History suggests that leaders in Latin America tend to turn populist as presidential elections near. In the 2019, Argentinians opted to take back Christina Kirchner and punished incumbent Mauricio Macri, who chose steady reforms after 12 years of free-spending populism.

Since 2018, Brazil’s economy minister Paulo Guedes has struggled to implement his ambitious reform agenda. The economy remains one of the most protectionist in the world, and industry lobbies are very powerful. The key question now is whether Bolsonaro will risk backing Guedes ahead of the presidential election. The dismissal of Petrobras CEO – who was a close friend of Guedes – is a negative signal.


£39/month thereafter

For access to our Slack Chat Room, where we discuss all things markets with our researchers and subscribers



ECB Preview: Biding Time Until June (2 min read)

By Caroline Grady | Apr 20, 2021
Stepped up PEPP purchases since the 11 March ECB meeting leave little need for any policy changes at this week’s governing council meeting...

Russia Sanctions: The Shock That Never Came (5 min read)

By Tatiana Orlova | Apr 16, 2021
The most important measure bars US entities from newly issued local sovereign debt, effective from 14 June. The ban includes debt issued by the CBR...

Weekly Vaccination Update: J&J Pause and EU Supply Schedule (1 min read)

By Sam van de Schootbrugge | Apr 14, 2021
In this prime tracker, we review the latest vaccine developments globally. This week, we’ve added some brief commentary...


ECB Preview: Biding Time Until June (2 min read)

By Caroline Grady | Apr 20, 2021
Summary Thursday’s ECB meeting is unlikely to…

Five Things You Did Not Know About China (2 min read)

By Bilal Hafeez | Apr 13, 2021
China is a global economic superpower, yet…

Want To Join Our Community Of Leading Investors And Researchers In Our Slack Chat Room?