iShares MSCI Brazil Small-Cap ETF

EWZS

Valor de mercado US$ 321 mi

Brazilian equities, tanker shipping, utilities, cybersecurity and cloud computing ETFs led last week's winners. Here's what fueled their gains.

Budget deficits close to 10% of gross domestic product have pushed Brazil's central bank to maintain high interest rates.

Markets priced in a more disciplined fiscal path as Bolsonaro's lead came with strong conservative Senate and governor results. Rates should fall regardless of the winner, but how far depends on a credible fiscal plan.

Brazilian ETFs like EWZ and FLBR surged 12-13% after the pro-market election result, but I reiterate my hold rating. Short-term gains are driven by capital flows and euphoria, not structural improvements; Brazil's market remains fundamentally weak.

EWZS caught the first wave of Brazil's rally, but foreign money mostly parked in Petrobras, Vale, and the big banks. Selic cuts looked bullish on paper, while the five-year yield quietly moved the other way and kept the cost of capital painfully high. At less than 8x earnings, EWZS looks dirt cheap—until Brazil's 14% fixed-income alternative walks into the room.

The bank's monetary committee cut the Selic benchmark lending rate to 14% from 14.25%, but indicated that uncertainty around its inflation projections remains higher than usual.

South Korea and Taiwan are grabbing the majority of financial news headlines when it comes to international exposure, but a peek inside Latin America reveals potential opportunities. Brazil, in particular, could be offering investors ample value in both equities and bonds beyond those aforementioned countries already benefiting from the artificial intelligence (AI) buildout.

Brazil's ethanol and sugar producers on Thursday despaired at the imposition of new 25% tariffs on Brazilian goods by the U.S. government, ​lamenting a rollback in cooperation between the two countries.

Brazil's president called the levies “a lamentable milestone” in the relationship between the two most populated countries in the Americas.

The U.S. plans to impose a 25% tariff on most imports from Brazil starting next week. A separate U.S. probe into forced-labor enforcement has also proposed an additional 12.5% duty on Brazilian goods that would stack on top of the 25%, with a decision due within days.