Brazil is a gamble whatever the outcome of the election, says BlackRock

Regardless of the outcome of the 2022 electoral dispute in Brazil, BlackRock, the largest global asset manager in the market with around US$ 10 trillion (R$ 53.5 trillion) in assets, will continue with its plans to invest and expand its operations in the Brazilian market.

According to Karina Saade, president of BlackRock in Brazil, there is a “significant opportunity” to be explored by the investment company in the region, in the midst of structural trends that should continue to be present in the local market, whatever the winner of the presidential elections at the end of the year.

“When we think about the size we want to achieve in the Brazilian market, we really believe that there is a significant opportunity serving Brazilian investors. The biggest evidence of this is that we have been increasing our presence in the Brazilian market over the last year, when we launched 74 BDRs of ETFs global variable income”, says the executive.

The ETF BDR is a financial asset traded on the Brazilian stock exchange, B3, which replicates the performance of global stock indices, which can be focused on specific regions, such as the United States, Europe and Asia, or on investment topics, such as biotechnology or sustainability.

The BDRs of ETFs backed by BlackRock’s global funds originally traded abroad totaled approximately BRL 5.5 billion in equity in the Brazilian market in December 2021.

Karina adds that the manager is “very close” to launching the first BDRs of ETFs in Brazil that will replicate international indices of the fixed income market.

“When we started bringing ETF BDRs to Brazil, our goal was to offer investors a wide range of investment strategies to build international portfolios. We started with equity BDRs, because we understand that they are easier to understand, but we have always very open to the demand for new asset classes. And the next step in this evolution will be fixed income”, says the executive.

According to her, the new generation of Brazilian investors has increasingly demanded new investment alternatives through digital platforms and fintechs, in a process that was already happening and was accelerated by the pandemic.

“Many of these fintechs, such as Nubank, are now expanding their operations, starting to go beyond the services of an online bank and starting to offer investments, which is another channel through which the investor can have new options”, he says. the BlackRock executive, who also says that she has noticed a growing interest in the topic of investments from a younger audience in the country.

“These are structural trends that are already underway and that will not change depending on the level of interest rates or the outcome of the electoral dispute in the country. These are the reasons why we have invested in Brazil and which lead us to continue investing and expanding our presence. in the region”, says Karina.

“We will understand whatever decision Brazilians make regarding politics, and we will find, as we always have, the opportunities, also considering the risks”, says Axel Christensen, director of investment strategy for Latin America at BlackRock.

Christensen points out that, although a cycle of tightening monetary conditions is looming in the countries of the Northern Hemisphere, interest rates in these countries should still remain quite low, at levels likely to be lower than current inflation in the region.

In this sense, he says that some emerging markets, including Brazil, where interest rates are already at much higher levels, start to sound more attractive from the perspective of large global investors, such as BlackRock.

While acknowledging that emerging markets will naturally be subject to the volatility that will be brought about by the rise in interest rates by the Federal Reserve, the US central bank, the director understands that the US monetary authority may need to take a little off the accelerator.

The slowdown in the pace of economic activity due to higher interest rates may, in Christensen’s assessment, cause the US Central Bank to reduce its momentum in favor of a reduction in global liquidity in the markets.

“We believe that the Fed will have to take stock of its cycle of high interest rates, having, on the one hand, concerns about inflation, but, on the other, with the impacts that an economic slowdown could bring”, says the director of BlackRock, adding that more recent data are already beginning to indicate some decompression of US inflation, which could lead the Fed to reconsider part of its stance in favor of a tougher monetary policy tightening.

“Central banks are aware of the impact that the rise in interest rates will have on the level of economic activity and they want to be very careful not to overdo the pace of tightening, as many companies and jobs could be affected by their decisions. .”