The rally that made Brazilian assets the world’s best performers in 2016 is losing momentum as investors’ euphoria over prospects for change in government gives way to pessimism about how hard it will be to pull the country out of an economic malaise no matter who is in power.
The Ibovespa equity gauge, Brazil’s currency and its bonds have soared in the past two weeks as traders bet that the country’s biggest ever corruption scandal is getting closer to President Dilma Rousseff and her party, creating an opening for new leadership that would focus on pulling the country out of its worst recession in a century. As analysts cut forecasts for the economy week after week, a ballooning budget deficit has prompted warnings from ratings companies that Brazil’s debt load could become unsustainable.
The market advance last week was smaller than the week before, and the real and stocks slipped Monday even after millions of anti-government protesters staged some of the largest demonstrations in the country’s modern history over the weekend. Goldman Sachs Group Inc. and Banco Mizuho do Brasil SA say that for a fresh rally to take hold, there needs to be a solid indication that Brazil is on the path to recovery.
Brazil Energy Insight 
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