Francisco Campos-Ortiz, Lead Economist, Latin America, Global Macroeconomics Research Team, Cathy Hepworth, Co-Head, EMD Team, and Matt Duda, Portfolio Manager, EMD Team
Jair Bolsonaro’s victory and the reshuffle in congress reflects the underlying anti-establishment sentiment that characterized Brazil’s latest general election. The Bolsonaro administration will likely push for an overall market-friendly agenda that includes addressing Brazil’s pressing fiscal shortcomings. However, questions about Bolsonaro’s true commitment to orthodox policy prescriptions and governability conditions pose potential downside risks. Various metrics, particularly those capturing the economy’s external stance, will likely maintain Brazil’s creditworthiness in the short term. On a longer-term horizon, Brazilian financial assets could become reliable alpha-generating alternatives if the incoming administration is able to alleviate supply-side constraints and further correct macroeconomic imbalances.