Ibiuna prefers little involvement with local resources wary of ‘new government, old ideas’

Ibiuna Investimentos, which has former central bank directors among its partners, has decided to maintain a cautious stance and low involvement with Brazilian assets for now, citing fragile fiscal fundamentals, which combine high debt, low potential growth and high interest rates. real interest.

“New government, old ideas. Everything we have seen in the economic area during the transition period points to a similar guideline as implemented by the PT government in 2011-2015 with widely known results,” he said in a letter to clients. , with prospects for the first month of 2023.

As a “small sample,” the manager lists a sharp expansion in current expenditure, an increase in the tax burden, the pursuit of growth through state intervention, the reversal of privatization, the return of soft credit, attempts to reverse or weaken important legal frameworks, among others. .

“It is difficult to see how this agenda will boost the productivity of the economy and translate into stronger growth,” he said, noting the sharp rise in risk premia and further significant tightening of financial conditions, accentuating the Brazilian’s cooling trend economy in 2023.

This environment, he says, justifies continuing a cautious, low-involvement stance with Brazilian businesses at this time. Despite high risk premia, the manager sees, fiscal fundamentals are fragile, combining high debt, low potential growth and high real interest rates.

“It is certainly a vulnerable combination in the face of a government that was elected promising a large spending program, is in an urgent need to spend but does not appear to be in a hurry to advance in defining a coherent tax regime”, assesses Ibiuna, who believes management of just under 38 billion reais.

Abroad, notably in the US and Europe, the manager, who staffs former BCs Rodrigo Azevedo and Mário Torós, is skeptical of rapid disinflation and expectations of higher terminal interest rates in the current cycle than in those currently priced by the markets.

“On the periphery of the G10 and in the emerging world, the high cycles appear to have pushed interest rates to a more restrictive level, creating the conditions for its downward trajectory to be more consistent after inflation peaks,” he added.

For Ibiuna, a major risk on the radar is the potential inflationary impact via commodities of a rapid and substantial reopening of China.

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Source: Terra

Camila

Camila Luna is a writer at Gossipify, where she covers the latest movies and television series. With a passion for all things entertainment, Camila brings her unique perspective to her writing and offers readers an inside look at the industry. Camila is a graduate from the University of California, Los Angeles (UCLA) with a degree in English and is also a avid movie watcher.