As Brazilian voters go to the polls, an investment manager has said it remains positive on the prospects for growth in the major emerging market.
Luiz Ignácio Lula da Silva began his successful run as Brazilian president in 2002, with a vote to determine his successor taking place on 3 October.
Dean Newman, head of emerging market equities at Invesco Perpetual, said Lula da Silva’s period in office had ‘universally been deemed a resounding success’.
As Lula da Silva cannot be re-elected for a third term on constitutional grounds he has endorsed his former chief of staff Dilma Rousseff to be his successor – the favourite to win the election.
“Brazil is a country with a growth rate rivalling China, drawing support from a buoyant domestic market that looks set to benefit further from a fast growing middle class band of consumers with money in their pockets to spend,” Newman said.
He believes that the centre-left government’s efforts to spread the benefits of growth across different areas of society has been ‘a boon for domestic demand’.
Dilma Rousseff is expected to continue to promote the policies of the Lula administration, such as government support for low-income housing, financing of student loans, inflation targeting and limiting public sector debt.
“From a macro perspective we expect a Rousseff administration to continue to implement reforms and adjustments necessary to satisfy financial markets,” Newman added.
Rousseff’s nearest rival, according to polls, is a centrist candidate José Serra, with the third most popular candidate Marina Silva, a former environment minister running for Brazil’s green party.
This week, manager of the Global Emerging Markets Fund at Barings Asset Management, James Syme, said the case for investing in emerging markets was ‘compelling’.
Syme said: “The domestic story is arguably one of the most important themes contributing to emerging market growth. These regions are no longer dependent on exports to developed markets, but rather, on the spending power of their own expanding middle classes.”
As well as this, Syme said there was improved sustainability in emerging markets as a result of market reforms in the 1990s, with low valuations offering attractive entry levels for those seeking market exposure.
Syme said Brazil was ‘an attractive medium-term position’ but he would continue to monitor Brazil ‘to see how the market responds to the elections’ on Sunday.
© Fair Investment Company Ltd