Bulls Reign in Brazil as Reform Push Overshadows Graft Scandal

BloombergIt’s hard to find a pessimist among Brazil investors these days, even though there’s plenty to be worried about.

Traders who pushed the real and Ibovespa stock index to some of the world’s biggest gains over the past year see a rosy outlook for President Michel Temer’s chances of pushing through pension, labor and tax reforms that are needed for Brazil to regain investment-grade status. They’re ignoring signs of a sluggish economy, chaotic politics and a new chapter in a corruption scandal that threatens to paralyze the government.

That investors are turning a blind eye to Brazil’s problems is all the more surprising considering just how recently its markets and economy seemed to be in free fall. The currency plunged to a record in 2015 and stocks sank to a seven-year low amid the worst recession in a century and political turmoil that ended in the president’s impeachment. But all was forgiven when Temer took over with a plan to revive growth and shore up the budget, while the central bank pledged interest-rate cuts to help revive the economy. …

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