Opinion – Marcos de Vasconcellos: No soy or oil; Brazil’s destination in 2022 is to export Selic

“Haven of rentiers and hell of entrepreneurs”, as the former super minister (now only minister) of Economy Paulo Guedes referred to the country whose economic destiny seemed to be in his hands, in 2019.

Three years after taking office, our interest rate gallops into double digits. A horse ridden by rentiers trampling entrepreneurs along the way. After all, expensive money is good for those who lend and bad for those who need it.

Inflation is global, of course, as is the pandemic and the need to stimulate the economy. And fighting it involves increasing the Selic. The problem is how the increases are not helping to fight painful inflation.

The reason is what, in the market, they call a fiscal disaster. The scenario is so bad that even the institutionalization of default is commemorated, with the PEC dos Precatório. As much as wrapped in glossy paper, it is a formalization that the government will not even pay its debts — recognized and, until then, guaranteed by the Judiciary.

This week, the decision of the US central bank (Fed) to drastically reduce stimulus to the economy in January was included in this account, with the prospect of three increases of 0.25 percentage points in the interest rate in 2022.

As this will make money more expensive (and attract rentiers) over there, there is more lashing of the Selic horse here.

As soon as lending money in the US becomes an interesting option for the owners of large coffers, investing in emerging markets, such as Brazil, becomes less attractive. Thus, the dispute for investors willing to take more risks is intensified, with countries like Chile, Peru and South Africa…

The ideal, of course, was to have a government willing to bet on increasing institutional security and making commitments, but, on the eve of a presidential election, the simple — and ineffective — solution already expected is to increase the Selic. Therefore, the next increases are already foreseen by the market, or, in the technical term, are already “priced”.

With this pricing, the fixed income investor is able to find interesting opportunities. Last year, a good debenture (private company debt) paid IPCA + 4%, which means getting your money back adjusted for inflation plus a rate of 4% a year, when the bond matures. Today, there are good companies offering IPCA + 6%.

For those who want to get into fixed income investments now, our political chaos is even a good scenario. For those who already have inflation-linked or Selic-linked securities in their portfolio, the advice is to hold the papers, as selling in advance, for now, will charge a high penalty.

For those looking for gains on the Stock Exchange, the best thing is to have a good check-up with the cardiologist this end of the year. With more difficulty in attracting foreign money to emerging markets, the tendency is for us to see an even more volatile market, that is, with large ups and downs.

The expectation is that we spend more time “exporting” Selic, as a true paradise for renters.