Brazil: The Good, The Bad & The Opportunity

Modern governments have many tools to help regulate the natural ups and downs of economic cycles, but they cannot completely eliminate a free market from volatility. History has shown us that volatility will always exist, especially in periods of instability, driven by human fear of the markets. And as we know, with volatility comes an opportunity for the savvy investor which is why we are here today to discuss Brazil, the eighth biggest economy in the world and ripe for trading opportunities.

The Brazilian economy was off to a bit of a shaky start in 2017, coming off eight consecutive quarters of decline since 2015. Struggling from corruption and political unrest during and following the impeachment of President Dilma Rousseff, this recession marks Brazil’s worst on record. Further, with the more recent opening of corruption investigations into new President Michel Temer we can expect to see continued uncertainty and resultant volatility in the region. While this may scare away some from setting up infrastructure and trading in Brazil, let’s not forget that volatility is a ripe opportunity for traders and that always, with valleys come the peaks.

The second quarter has already been showing signs of new life for Brazil, with many indicators pointing towards a steady increase throughout 2017. Brazil’s central bank has reduced interest rates to the lowest level in two years, encouraging institutional lending and consumer spending and paving the way for increased investment, both nationally and from international sources. One strong example of this is Britain’s strengthening partnership with Brazil. Britain played a large role in the development of Brazil’s economy back in the 1800s and it continues to support the nation’s exports today. As we expect post-Brexit Britain to further open its doors to global investment, Brazil is aligned very nicely to be on the receiving end of such opportunity. This is already manifesting itself in manufacturing, with Jaguar Land Rover recently opening its first auto manufacturing plant in Latin America outside of Rio, and Brazil’s oil and gas industry, with Shell serving as the largest single foreign investor in any area of the Brazilian economy and over 200 British suppliers or equipment and services involved in the sector.

The recently rebranded national exchange, B3, is positioning itself to maintain its place as one of the world’s top Exchanges and further opening its doors to foreign investors. While continuing to rely on the PUMA matching engine developed in partnership with the CME, the exchange is investing heavily in infrastructure. Over the second half of this year, the exchange will be launching its new colocation facility and will allow for a multitude of options when it comes to connectivity, colocation and time services for existing and new participants. With these kinds of international partnerships, clear government support in cracking down on corruption and continued investment in technology, the stars are aligning for a strong 2017 and beyond.

 

Learn more about LiquidPath Brazil.