How important are commodities in the Brazilian economy and market?
The Brazilian market has been a rare bright spot in 2022 thanks to its commodities exposure as prices of food, metals and energy have surged across the world.
The country is a major commodities exporter and according to the most up to date breakdown available from the OECD (covering 2018) agriculture, forestry, fishing and industry (including energy) accounted for more than a fifth of Brazil’s GDP.
The country’s stock market is dominated by the resources space with 42.9% of the MSCI Brazil Index made up by the energy and materials sectors combined.
That doesn’t mean the Brazilian population is immune to the world’s current inflationary pressures with the country’s central bank having recently lifted interest rates to their highest level since 2017, to more than 11.75%, amid a soaring cost of living.
How to modernise the economy, with the technology sector accounting for less than 1% of the MSCI Brazil Index, could be a key part of the debate ahead of presidential elections in October 2022.
The country ranked 57th out of 132 overall in the World Intellectual Property Organization’s Global Innovation Index 2021, behind other big emerging economies including China, Vietnam and India.
Right-wing incumbent Jair Bolsonaro and his left-wing predecessor Luiz Inácio Lula da Silva are the main players in the election campaign, with Lula currently enjoying an advantage in the polls.
This outlook is part of a series being sponsored by Templeton Emerging Markets Investment Trust. For more information on the trust, visit here