Too Soon for a Rally: Brazil’s Long Road Ahead by Monica de Bolle published by PIIE (3/2019).
“Markets tend to swoon in times of political crisis. It is therefore odd that they are rallying strongly in Brazil by assuming that any change in government would be better than the status quo. Much as one might be tempted to buy into this notion, markets are most likely wrong. When things can’t seem to get worse, they often do anyway.
The stock market is up 16 percent since early January, with the sharpest increase (nearly 20 percent) occurring between February 26 and March 4, the day that former President Luiz Inacio Lula da Silva was forcibly detained for questioning by the Brazilian Federal Police. Reasons for such optimism are neither abundant nor well grounded. They stem from slightly improved prospects for commodity prices, as well as from a general perception that President Dilma Rousseff may not finish her term in office…”
