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Equity Markets in Brazil Resist Rising Unemployment, EWZ Up 0.08%

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Depreciating real boosts equity markets in Brazil

The stock markets in Brazil, as measured by the IBOVESPA index, were up about 0.50% on April 28 despite a rise in the unemployment level reported for March. The Brazil-tracking iShares MSCI Brazil ETF (EWZ) was up 0.08%.

The sliding real against the US dollar (UUP) has benefited non-commodity exporters in Brazil such as JBS (JBSAY), BRF (BRFS), and Fibria Celulose (FBR). Itaú Unibanco (ITUB) recorded a 0.61% gain on April 28. Among the commodity companies, Vale (VALE) and Petrobras (PBR) were down 5.06% and 0.11%, respectively.

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Brazil’s economy faces several issues

We previously explored the issues affecting Brazil’s economy. We’ve discussed why Brazil is attractive to investors among the emerging markets (EEM), while mentioning points of caution in our earlier series, “Is Brazil’s economy as strong as its soccer team?

Economic growth is sluggish in Brazil, while low productivity and inadequate investment in infrastructure and housing remain key roadblocks to growth. The rising unemployment rate is another key pain area for this South American economy.

Brazil’s unemployment rate climbs to its highest level in three years

The rising unemployment rate in Brazil seems to be challenging President Dilma Rousseff’s governance. Rousseff’s win had partly banked on the continuance of Brazil’s low unemployment rate from her previous term. According to the April 28 report released by the Brazilian Institute of Geography and Statistics, the unemployment rate in Brazil climbed to 6.2% in March, versus an expected 6.1% and February’s 5.9%. March’s jobless rate marks the highest level reached in three years.

You may also want to read our recent analysis, Some Ingredients are Missing for a Turnaround in Brazil.

Stay updated on our latest analysis on the US (SPY) (IVV), the Eurozone, and the world (ACWI) macro environment by visiting our Macro ETF Analysis page.

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