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Brazil's ethanol and sugar producers on Thursday despaired at the imposition of new 25% tariffs on Brazilian goods by the U.S. government, lamenting a rollback in cooperation between the two countries.
Brazil's Agriculture Ministry has adjusted export controls for meat and derivatives to meet European Union antimicrobial usage requirements, aiming to prevent a suspension of shipments to the bloc starting in September.
Brazil expects to raise 50 billion reais ($9.92 billion) in what will be the most ambitious auction yet under its Eco Invest program, focused on developing advanced sustainable technologies in strategic sectors, Rogerio Ceron, executive secretary of the Finance Ministry, told Reuters.
I reiterate my buy rating on the iShares MSCI Brazil Small-Cap ETF, citing a compelling cyclical opportunity. EWZS trades at 7.5x earnings, with a historical re-rating to 9x offering a potential 20% upside. Falling Brazilian interest rates provide a significant tailwind for leveraged small caps, improving financial results and economic conditions.
Brazil's benchmark Ibovespa fell about 1% on Friday, slipping below the 179,000 mark as investors recalibrated expectations in response to a more cautious tone from central banks and escalating geopolitical tensions in the Middle East. The decline reflects a broader reassessment of monetary policy trajectories, particularly as rising energy costs revive concerns about inflation.
Strong foreign capital inflows into Brazil, supported by one of the highest real interest rate differentials globally, have been a key driver of the recent rally in Brazilian equities. As monetary policy begins to shift toward easing, domestically exposed small caps could become the next leg of the Brazil trade. EWZS provides diversified exposure to Brazilian small-caps that act as direct proxies for the domestic economy, unlike Brazil's commodity-heavy large caps.
Brazil's economy has improved since 2022, especially in controlling inflation, but faces slower GDP growth through 2026. The Finance Ministry cut its 2025 growth forecast to 2.2% after weak Q2 results, with projections below 2% for 2026 and 2027. The Central Bank's cautious monetary policy, keeping rates at 15%, supports inflation control but limits economic expansion.
iShares MSCI Brazil Small-Cap ETF is analyzed for its potential to deliver higher long-term returns than its large-cap counterpart. Focus is placed on the ETF's underlying holdings, emphasizing valuations, business quality, and growth rates over macroeconomic predictions. Short-term market noise and macro forecasts are intentionally disregarded to provide a clearer view of EWZS's investment prospects.