Following the weakness of the dollar and the reallocation of part of the capital from the United States, the Brazilian stock market actually corrected to the 45% level, but this was not a movement limited to Brazil and based on fundamentals, but rather a phenomenon that favored many emerging markets. But in the future, there is “very much room for interest rates to fall” in the country, and the cost of capital to become cheaper, which will benefit growth and capital market activity, “equity value,” according to Reuters. Alexander BetamioGlobal Co-Head of Investment Banking Bank of America (BofA).
Participating in an event at G4 Educação, in São Paulo, the banker said his view is that interest rates “will fall significantly next year”, in a relatively healthy economy. As an emerging country, Brazil should be growing more, but at least it is not slowing down. Given some tax advantages, residents may consume slightly more than they would otherwise.
“This helps a little, but it is temporary. You will only be able to solve and unlock value if you face the structural problems. The elections will generate debate, and it is an opportunity for us to listen and think about who we want to make the necessary changes. It could be the current government, or another government, but we have a sovereign financial crisis due to debt.”
With a debt of R$8-9 trillion, and a nominal deficit of around 9%, the debt-to-GDP ratio, at around 80%, is not what is scary – the US has 120% of GDP, Japan 230%, Betameu said.
“The problem is not the size itself, although it is not healthy, the problem is the cost of carrying it. If the country has a debt that is growing at 15% a year and the economy is at 3%, you are broke, and you do not need to do a lot of calculations to know that this bill ends up not being paid.”
The executive stated that if the government, whatever it may be, signals measures that address the underlying issues of this deficit, the market quickly corrects it, “pricing it in advance, following expectations, not reality, and anticipating what will happen.” “Therefore, as a result of the debates (between the presidential candidates), there could be a very interesting moment for Brazil next year.”
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