Top Brazil Investors Shun Local Assets as Recession Threat Looms
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Brazil’s largest independent hedge funds have grown wary of local assets after the nation moved to ease its fiscal rules, fueling fears of a sharp increase in interest rates and a potential recession ahead.
Firms including Itau Unibanco now predict Brazil’s economy will contract next year after policy makers raise the benchmark rate to over 11%, the highest since 2017. That could crimp an economy already struggling in the wake of the global pandemic, which hit Brazil hard. But analysts say it will be needed to keep a lid on inflation as President Jair Bolsonaro pushes to boost public expenditure ahead of elections set for next year.