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This is the biggest concern about the threat of the US President to slam 50% tariffs on imports from investor Latin American veteran.
“I am most worried that what happened will help Lula a lot,” the portfolio manager said the third -term Brazilian leader for the local loan of the emerging markets in Thirdobel Asset Management. “That’s why I am alert on the market.”
Equity investors clearly agree. The Ishras Brazil Exchange-Treded Fund has sold 5% since the announcement of Trump last Wednesday.
Brazil’s property has been on tears for most of this year’s time. Stocks are about a quarter above. The best currency has climbed 12% against the real dollar, the best currency outside Russia’s thin trading rubles.
One reason is a low early point, Malcolm Dorson said, “Stock has increased by 35% in 2024: Malcolm Dorson said in Global X ETF.
Another expectation is that 79 -year -old Lula will be out of the job after the election in October 2026, with the approval rating to be reduced by 30%. “When Lula underwent brain surgery in December, the market increased by 5% in an hour,” Dorson said.
Trump’s announcement less than a week earlier, the left -wing looks like a political manna for the leftist veteran.
Brazil is relatively low to financially fear Washington’s anger. Compared to 30% for Mexico, exports were calculated, exporting to US account for less than 2% of GDP. And top export – coffee, crude oil and iron ore – can be sold elsewhere.
Trump’s tariff letter only mentioned business in ancestral manner. Their main demand was that the Brazilian courts abandon their prosecution- “Witch Hunt”, as he placed it in former President Zayer Bolsoro, who was inspired to plot violently in the 2022 election in February. Bolsono lost to Lula by less than 2 percent.
Brazilian voters have high relations for their judiciary, Duncan Wood, a senior advisor to the inter-American dialogue, said a senior advisor of a US-based think tank for Western Hemispere issues.
“Traditionally Brazilian courts have a high level of faith,” Wood said.
It has enabled Lula to respond as a protector of national sovereignty. Trump’s move was “a total lack of respect”, Lula told local journalists. “I have nothing to talk about him.”
Lula 3.0, in fact, has seen more deadlock and muddle-through than the leftist revolution, said Sara Glandan, Latin America’s senior sovereign analyst in Colombia Threadedal Investments.
A more conservative Congress has bottled Lula’s signature populist initiative, which ends income tax for any person earning real 5,000 ($ 899) for any month or less.
Many fiscal challenges of Brazil, such as profit and many wages indexes, are inherent in the constitution of the country. This means that any government will struggle to reduce loan payments, which eats 30% government revenue, or to keep inflation under control, Glandan said.
“It is not necessary that the fiscal situation would be better without Lula,” he concluded.
On the other hand, Brazil’s credit is not in a moderate period crisis, with 95% loan issued in local currency.
Nevertheless, investors are gaming the next 15 months of complex political calculus.
Dorson said that Brazilian election is more on charismatic personality than parties. Lula, prominent to the left, is logging a new run despite his age and health, which has no clear successor if he steps on one side.
Bolsoro has been banned from running, even if he stays out of jail. But he remains the “The Puppet Master” on the right, Dorson Sis.
Markets are hoping that Bolsono Tarisio de Freetas, a center-authority, who has scored high marks as the Governor of Brazil’s largest Sao Paulo State.
Dorson predicted, “Freetas can release the mother of all rallies for selected Brazil.”
Bolsono can also name his son Eduardo, who is advocating Trump for him in America, or as a stand-in to wife Michelle.
For inter-American dialogues, which is clear that Trump’s latest Salies has reduced the US reboot expectations with Latin America, which was as the Secretary of State by the appointment of Marco Rubio. Rubio is the son of Cuba migrants and speaks Spanish.
Trump twinned his threat to Brazil with a promise of 50% tariff on copper, which would strike two more southern neighbors, Chile and Peru’s economic lifeline. The President set his week as August 1 by setting 30% tariff on Mexican imports.
“At the beginning of this administration, it was really expected,” Wood said.
Instead, leaders from all over the region are weighing other geopolitical options.
“It’s not that we can’t live without America,” Lula told an interviewer from Brazil.
Their political existence may also seem better.
write to Editors@Barrons.com
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