Investors look abroad amid doubts about fiscal policy
The market jitters caused by doubts about what Brazil’s fiscal policy will look like as of 2023 left everything cheaper, from stocks to long-term fixed-income bonds to the local currency. But instead of taking advantage of low prices, some investors are moving part of their funds abroad, especially after the runoff vote held on October 30. A novelty is that investors have sought U.S. Treasuries, which are widely seen as safe havens, despite the fat premium offered by similar assets in Brazil.Avenue, a U.S.-based asset management company, saw the number of account openings grew three times above pre-election averages, while remittance volumes more than doubled, reaching on some days more than five times the average of previous quarters, said Roberto Lee, the platform’s founding partner. He declined to reveal the numbers because of the sale of the business to Itaú, which was agreed earlier this year and still depends on the approval of regulators.Mr. Lee expected this move to end five or six days after the election, but it is still in place. "It is a phenomenon that doesn’t happen only in Brazil. Investors usually wait for the results [of an election or other event] to decide whether to send 20% or 40% [of their portfolios]."In his view, this is not a capital flight, but Brazilians figuring out that it is worthwhile having part of the portfolio in hard currency.What draws attention, however, is the destination of this money - short-term Treasury bonds, the more traditional U.S. fixed-income alternative and an asset almost as liquid as cash, which is now remunerating at a level not seen in the past. "That shows that it’s an alternative for capital protection, safety reserve," said Mr. Lee. "It makes perfect sense, because it’s a broader market that has the safest securities."In this type of remittance, the amounts are larger than those destined for the stock market, he added.In the last two weeks, after the runoff vote confirmed that Luiz Inácio Lula da Silva will be Brazil’s president again from 2023 on, the interest in sending part of the portfolio abroad gained steam, said Thiago de Castro, a partner and CEO of the wealth management company Tag Investimentos. "Investors think that in this new term he [the president-elect] won’t follow the basics of what was the first Lula administration. They see an angrier Lula focused on social policies, as he has always been, but without the fiscal responsibility seen in the past. They expect him to rule...
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