The year 2025 is shaping up to be a period of remarkable opportunities for emerging markets, and Brazil, in particular, is emerging as a leading player in this scenario. What is being observed is a kind of “perfect storm” for investments, driven by significant external stimuli despite persistent domestic weaknesses. This dynamic raises the crucial question: is it time to bet on Brazil?
The outlook for emerging markets is optimistic, as noted by Michael Hartnett, Chief Investment Strategist at Bank of America. He predicts that emerging market equities will outperform all other asset classes in 2025, fueled by a weaker dollar and a Chinese economic recovery. The MSCI Emerging Markets Index (excluding China) has already demonstrated this strength, rising 20% in the last month (April–May 2025), reaching valuation peaks previously recorded in 2007, 2021, and early 2024.
Within this landscape, Brazil stands out, though not always by its own merits. Benjamin Souza, Managing Director and Latin America Strategist at BlackRock, maintains a neutral-to-positive view of the country. He emphasizes that despite macroeconomic challenges, the value generated by Brazilian companies cannot be ignored. Souza projects that once Brazil begins its interest rate cut cycle, it will be among the few emerging markets with lower rates and inflation below 10%. This combination, he argues, will create an attractiveness gap, driving capital inflows into the country.
Several factors contribute to Brazil’s current appeal. On the trade front, the new U.S. trade policies under President Trump imposed only 10% additional tariffs on Brazilian products — a remarkable contrast to the 25% or higher tariffs applied to other traditional trading partners, and even over 200% in some cases. This lower tariff barrier currently favors the Brazilian economy as a source of certain imports.
Domestically, Brazil experienced a currency devaluation and a decline in the Ibovespa during the final months of 2024, a result of fiscal instability and political noise linked to concerns about potential fiscal expansion by the government. Paradoxically, this has made Brazilian assets cheaper, creating a window of opportunity for investors.
Additionally, Brazil engaged in a cycle of real interest rate hikes to contain accelerating global inflation. This high level of real rates has been crucial to support the currency, control inflation, and attract short-term capital. Although JPMorgan predicts that the Central Bank of Brazil will raise the Selic rate by another 25 basis points to 15% before starting cuts in December — with a projected reduction to 10.75% — the bank believes that the decline in interest rates will benefit the stock market. Despite these challenges and economic slowdown, Brazilian listed companies continue to perform strongly, with 20% growth in net income (in BRL) year over year.
What makes Brazil even more distinctive? Besides being in a region less affected by U.S.–China tensions and other sources of global instability, the country stands out as Latin America’s largest economy, boasting the most developed financial market in the region and major financial institutions without European or U.S. headquarters. Compared to other emerging markets such as Russia and Turkey, Brazil has lower inflation, which is a major attraction since inflation erodes asset value. Moreover, while Brazil still operates with high real interest rates, Mexico, another emerging economy with closer U.S. exposure, is in a rate-cutting cycle, illustrating a divergence in monetary policy among emerging markets. This interest rate differential influences country risk and capital flow attractiveness.
However, the sustainability of this “perfect storm” will depend on several domestic catalysts and risks. The start of the rate-cut cycle remains uncertain — while high real rates attract capital, rate cuts are awaited to further stimulate the stock market. Another decisive factor is the 2026 presidential election. Brazil has a history of political volatility that directly affects economic indicators such as exchange rates and inflation. Market reaction to the election’s outcome will be crucial, with JPMorgan highlighting the importance of monitoring President Lula’s approval ratings and potential center-right successors.
Moreover, the recent trade truce between China and the U.S. may reduce Brazil’s advantage, as the 10% tariff gap may not hold for long. The rise in financial indices has not yet translated into a sustained increase in commodity prices, Brazil’s main economic driver. Finally, China’s economic growth has slowed and is increasingly focused on domestic consumption, which could delay a lasting recovery for Brazilian assets.
In summary, Brazil stands at an inflection point — supported by favorable external momentum and attractive asset pricing. However, the realization of a true “perfect investment storm” will depend on how domestic vulnerabilities and global political-economic developments are managed.
Trust Insight closely monitors these global market trends, providing you with the competitive edge you need. We connect your company with a select network of executives and thought leaders, delivering strategic expert calls across emerging markets, major financial hubs, and high-growth industries — ensuring your decisions are always the most informed and assertive.