Mark Mobius dismisses negative impact of coup acts on investments in Brazil

Dubbed the “guru of emerging markets”, American megainvestor Mark Mobius says that the coup attacks on Sunday (8) could help President Luiz Inácio Lula da Silva (PT) to break with the political polarization that Brazil is experiencing.

In an interview with Sheet made by email, the manager stated that the acts of violence and vandalism promoted by supporters of former president Jair Bolsonaro (PL) were “a shocking event” and should be seen as an attack on Brazilian democratic institutions.

However, he considers that the episode comes from “a violent minority” and attitudes are not predominant among Bolsonaro’s followers.

“On the contrary, many right-wing politicians were quick to distance themselves from the events. I think that, at the very least, these attacks can help bring the country closer together and help Lula in his stated mission to pacify a very polarized country,” he says.

As soon as the coup acts began in Brasilia, representatives of the Three Powers, companies and civil society associations came to public to condemn the movement. The former president, on the other hand, limited himself to saying on social networks that depredations and invasions of public buildings “run away from the rule” of democracy.

Bolsonaro has been criticized, including by Lula, for having instigated coup acts over the past few years. Datafolha research indicates that 55% consider the former president responsible for the coup attacks.

The survey —conducted this Tuesday (10) and Wednesday (11), with 1,214 people spread across the country— also shows that 87% of Brazilians believe that the episode will damage Brazil’s image.

Mobius thinks differently, at least in terms of investor appetite in the country. According to him, there is no risk of capital flight.

“When we last visited Brazil, we found a strong belief in fundamental checks and balances, the powerful and free media landscape and the independence of the judicial system and the Central Bank. responsible for the attacks,” he said.

In the manager’s view, Brazil is an attractive market for investors, with “highly innovative and well-managed” companies. However, he points out that 2023 is likely to be a difficult year, with higher financing costs, high inflation and subdued growth.

“The stock market has priced this accordingly and is now offering valuations [valuations] reasonable. But what I would say is investors are going to want to see sound fiscal policy. I think the increase in the spending cap, for example, needs to be watched carefully,” he says.

Mobius’ assessment is close to what other foreign investors have said about the impact of coup acts on the market. For analysts, economists and managers interviewed by the Sheet in the second (9), the attacks are less of a concern than the directions that Lula’s government may take in the economic agenda, especially in its fiscal aspect.

A reflection of this can be seen in the main financial market indicators, which practically did not react to the invasions in Brasília at the beginning of the week.

It is not uncommon for the stock market to steer clear of large protests and violent acts. The day after the Capitol invasion, in January 2021, the main US financial indices were also high.

At the time, TV presenter Jim Cramer asked: “It was a horrible day for democracy, but was it a horrible day for capitalism?”.