Brazil Riots Sap Investor Sentiment After Rocky Start to Year

(Bloomberg) — Fears of social unrest and political instability in Brazil will weigh on investor sentiment after supporters of former President Jair Bolsonaro on Sunday invaded the country’s top government buildings, challenging the leadership of President Luiz Inacio Lula da Silva just a week after he took office.

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Brazil local assets already had a bumpy start to the year, slumping in the first two sessions of 2023 amid concerns over the country’s public debt trajectory. Lula called the protesters “true vandals” and announced a federal intervention to bring security under control.

Brazilian markets open at 9 a.m. local time on Monday. Here’s what investors are saying so far:

Jeff Grills, head of emerging markets debt at Aegon Asset Management in Chicago:

“Investors expected this after the election, but nothing happened for a while. The surprise is it came now versus earlier”
Increased political noise “won’t be good” for Brazilian markets
“The riots will likely drive most of the weakness on the currency but I expect USD bonds and local bonds to get hit too”

Dario Valdizan, the head of buy-side research at Credicorp Capital Asset Management in Lima:

Ray Zucaro, the chief investment officer at RVX Asset Management in Miami:

Further political noise “doesn’t help investor sentiment” at a moment of fiscal slippage in Brazil
“Brazil was an outperformer last year, but those that thought Lula would be different this time have been proved wrong. And now this. More social tension.”

Malcolm Dorson, a portfolio manager at Mirae Asset Global Investments in New York: