iShares MSCI Brazil ETF

EWZ

Market cap $9.1B

The iShares MSCI Brazil ETF (NYSEARCA:EWZ) is the reflex trade for U.S.

I reiterate a buy rating and strong preference for the Franklin FTSE Brazil ETF over iShares MSCI Brazil ETF. FLBR offers greater diversification, a higher dividend yield (5.77% vs. 3.78%), and a lower expense ratio (0.19% vs. 0.59%). FLBR is more aligned with the Brazilian equities thesis: commodity exposure, hard asset sensitivity, and attractive valuation (8x earnings vs. EWZ's 8.5x).

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.

The United States accused the country of unfair trade practices. The tariff will replace ones that the Supreme Court struck down.

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Brazil's Agriculture Ministry has adjusted export controls for meat and derivatives ​to meet European Union antimicrobial usage requirements, ‌aiming to prevent a suspension of shipments to the bloc starting in September.

Although not uniform across the region, a number of Latin American equity markets have outperformed the S&P 500 year to date (YTD). Emerging markets in Peru, Colombia, Brazil, and elsewhere have all beaten the S&P's 9% YTD returns, thanks to a combination of factors, including higher prices for certain commodities, growing AI-related demand for outputs such as copper, lithium, and nickel, and favorable company valuations.

I reiterate my buy rating on Brazilian equities, specifically EWZ, FLBR, and Petrobras (PBR), driven by upcoming political catalysts. The Donroe Doctrine's influence in Latin America, with Brazil as the next target, could trigger a significant rally in Brazilian equities.