The probable deceleration of inflation on a global scale expected for 2023, as a result of the monetary tightening process by the central banks of developed markets, has already contributed to the flow of foreign investors towards the Brazilian market in recent months.
The assessment is by Robin Brooks, chief economist at the Institute of International Finance (IIF).
According to him, the devaluation of the Brazilian currency over the second half of the year did not have as its main catalyst domestic issues in Brazil, but rather the surprises with higher-than-expected inflation in the United States, which forced the Federal Reserve (North American central bank ) to increase the pace of monetary tightening from 0.50 percentage points to 0.75 points.
More recently, with the market’s expectation that the ongoing process of raising interest rates by the Fed will be able to cause a deceleration of inflation in the United States in the coming months, the same force that made the real lose strength may now start to act in the direction opposite, Brooks said.
“We are seeing a flow to emerging markets quite strong at the moment, in anticipation of the weakening of the inflationary shock”, said the chief economist of the IIF, during an event promoted by Itaú this Thursday (8).
The chief economist at the IIF said that he has a fair price projection for the real of around R$4.50, which corresponds to a drop of 13.5%, compared to the close of R$5.20 on Wednesday. -Friday (7).
Data from B3 indicate that the flow of foreigners on the Brazilian stock exchange totals around R$ 20 billion from mid-October to December 5.
He added that the invasion of Ukraine by Russia could also be a factor favoring the flow of capital to the Brazilian market in the coming months.
In Brooks’ assessment, the war in Eastern Europe has made global investors begin to question the allocation of resources in non-democratic countries, which may help explain the outflow of resources from China in recent months.
“We are seeing a large outflow of resources from China this year, something that has not happened in the last 10 years,” he said.
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