Against the current of the global market, the Brazilian stock exchange accumulates

The advance of vaccination against the coronavirus combined with injections of government incentives into the global stock market has fueled a rise in stock exchange indices internationally. Brazil, however, is at odds with the rest of the world.

Considering the variation of the dollar, in the period between January and September this year, the Ibovespa – the reference index of the Brazilian Stock Exchange – dropped 11.67%.

In contrast, most of the main international indicators point to gains. In neighboring Argentina, the Merval index increased by 28.7%. In the United States, Dow Jones, S&P 500 and Nasdaq rose, respectively, 10.58%; 14.68% and 12.11%.

The growth is repeated in other continents and the explanation for the discrepancy of the Brazilian stock exchange in relation to the others involves a combination of internal crises and global economic rearrangements.

the internal storm

Investment specialist at Invest, Juan Espinhel, declared in an interview to Estadão that, in his opinion, the return of the parliamentary recess in early August was a watershed.

“What’s behind this is the whole discussion about increasing emergency aid and how it’s going to be paid, given that the main agenda of the government today is increasing popularity,” he said.

Aiming at the 2022 presidential election and with a failure rate of 53%, President Jair Bolsonaro (non-party) pressures his economic team to enable a new round of emergency aid and a revamped Bolsa Família, with a new name (which changes constantly and which , by all indications, will be called Auxílio Brasil).

For this, the Ministry of Economy, headed by Paulo Guedes, tries to enact the PEC (Proposed Amendment to the Constitution) of the Precatório to postpone the payment of judicial debts of the Union.

Added to the water crisis that increases the cost of energy generation, the Brazilian scenario for next year is one of fiscal instability. Faced with risk, many investors seek protection in the dollar and increase pressure on the exchange rate.

:: With an accumulated increase of 39% in the year, gasoline pushes inflation to the highest rate since the Real Plan ::

Amid rising fuel and staple foods, and double-digit inflation for the first time since 2016, Jair Bolsonaro said last Friday (8) – criticizing social isolation once again – that the Brazilian economy is one of the least suffered in the pandemic.

international context

Faced with the recession imposed by the covid-19 pandemic, many rich countries have adopted state investment policies to purchase assets and reduce interest rates.

The United States has played a leading role in the most significant of these stimulus packages, with its Central Bank (the Federal Reserve) committing, so far, purchases of assets of US$120 billion a month.

At the Brics – a bloc that brings together five major emerging markets in the world and of which Brazil is a part – the effects of these expansionist policies were varied. While stocks in India and Russia rose (23.98% and 11.68% respectively), South Africa fell 9.82%.

China also faced a drop, with a 5.42% drop in the Shanghai stock exchange. The slowdown in the Asian country – destination of most of the commodities produced in Brazil – is an important part of the explanations for the downturn in the Brazilian stock market.

With restrictions on steel production, China has imposed a drop in iron ore prices, directly affecting the shares of mining company Vale.

expectations

International and national factors that, overlapping, resulted in the fall of the Brazilian stock market while the New York trading sessions reached double digits, do not present great expectations of changes.

The Extended National Consumer Price Index (IPCA), used to measure inflation, has already exceeded the 3.75% target that had been stipulated by the government. In August, it accumulated an increase of 5.67%.

Meanwhile, rising unemployment and hunger are reaching alarming numbers. There are already 14.4 million Brazilians out of work.

On September 23, the São Paulo Stock Exchange was occupied by the MTST (Movimento dos Trabalhadores Sem Teto) and the Frente Povo Sem Medo. The act denounced the consequences of the economic policy of the Bolsonaro government for the Brazilian population.

:: MTST and Frente Povo Sem Medo occupy Stock Exchange in protest against hunger ::

Edition: José Eduardo Bernardes

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