Business confidence in Brazil has reached multi-year lows due to political uncertainty, structural headwinds regarding production bottlenecks, and a poor commodity price outlook.
Moreover, the index has dropped to GFC levels, which is a reflection of Rousseff's popularity among Brazilian and international investors, given that, even though this giant economy has fallen short of expectations, macroeconomic figures do not paint a recessional picture.
Business Confidence vs. Bovespa Index
Source: Bloomberg, BICE Inversiones
All the same, Brazilian companies have been witnessing shrinking profits for some time now, which ultimately have translated in a Bovespa underperformance in comparison with other relevant emerging markets. Therefore, Dilma, in a last effort to improve her popularity, has come up with a full-measure package aiming to support Brazilian corporate sector. This, in my view, has the potential to boost investors´ confidence regarding Brazilian assets and governability, which, after several years of under-performance, could put the commodity giant under international investors' radar once again.
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