Canadian research note describing ex-president Luiz Inacio Lula da Silva as a potential "savior" for Brazil's lagging economy has sparked a discussion in financial markets over increasingly bullish foreign investors anticipating Lula's comeback. In a note issued this week, BCA Research analysts upped their rating on Brazilian stocks and sovereign debt to "overweight," citing "increasing probability" of Lula winning the presidential race in October.
"Lula's current policy proposals and his agenda following the election will be moderate, providing a positive impetus to financial markets," BCA experts, led by Arthur Budaghyan, Chief Emerging Markets Strategist, released a note titled "Is Lula Brazil's Savior?" The forecast comes as foreign investment in Brazilian financial markets has soared to $9.5 billion this year, strengthening the local currency by 7% versus the dollar and the benchmark Bovespa stock index (.BVSP) by 8%.
Much of this is due to foreign investors' assumption that Lula, who has a double-digit lead against right-wing President Jair Bolsonaro in recent polls, would adopt a pragmatic approach to policy, as renowned Brazilian hedge fund managers pointed out at a recent event. While many local investors lament the failure of a reform program that Bolsonaro promised when he took office, international investors are comforted by recollections of Lula's traditional economic policies early in his government from 2003 to 2010.
Written by: Lucas Scala
Edited by: Anna Kissajikian