Brazil’s President Michel Temer is alleged to have condoned bribery and is now engulfed in a political scandal that may affect his tenure. Brazil’s government bonds and currency—the real—sold off on the news, but most emerging markets weren’t significantly affected by what appears to be a contained development.
This recent development may have a short-term impact on Brazil’s political leadership—specifically the remainder of President Temer’s tenure—and could also delay the enactment of state reforms. However, since these reforms are widely recognised as essential, we believe they will eventually take hold.
We also believe that the macroeconomic forces at play in emerging markets remain strong—and that the fundamentals underpinning Brazil’s recovery will likely not be swayed.
In conclusion, our medium and long-term view on Brazil and emerging markets at large has not changed.
For more information, watch our video above outlining the investment implications of recent developments.
Fixed income investing entails credit and interest rate risks. When interest rates rise, bond prices generally fall, and a fund’s share prices can fall. Below-investment-grade (“high yield” or “junk”) bonds are more at risk of default and are subject to liquidity risk. Foreign investments may be volatile and involve additional expenses and special risks, including currency fluctuations, foreign taxes, regulatory and geopolitical risks. Emerging and developing market investments may be especially volatile. Currency derivative investments may be volatile and involve significant risks.
The mention of specific countries, currencies, securities or sectors does not constitute a recommendation on behalf of any fund or OppenheimerFunds.