Details Cookies
United Kingdom
Important margin product information

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs, FX or any of our other products work and whether you can afford to take the high risk of losing your money.

Cookie policy

This website uses cookies to offer you a better browsing experience by enabling, optimising and analysing site operations, as well as to provide personalised ad content and allow you to connect to social media. By choosing “Accept all” you consent to the use of cookies and the related processing of personal data. Select “Manage consent” to manage your consent preferences. You can change your preferences or retract your consent at any time via the cookie policy page. Please view our cookie policy here and our privacy policy here

Macro Dragon Reflections: Brazil, Commodity Rich, +210M pop, +$1.4T GDP, Hawkish BCB, 2022 Political Elections & Consistently Punching Below its Weight. Love it! Macro Dragon Reflections: Brazil, Commodity Rich, +210M pop, +$1.4T GDP, Hawkish BCB, 2022 Political Elections & Consistently Punching Below its Weight. Love it! Macro Dragon Reflections: Brazil, Commodity Rich, +210M pop, +$1.4T GDP, Hawkish BCB, 2022 Political Elections & Consistently Punching Below its Weight. Love it!

Macro Dragon Reflections: Brazil, Commodity Rich, +210M pop, +$1.4T GDP, Hawkish BCB, 2022 Political Elections & Consistently Punching Below its Weight. Love it!

Macro 8 minutes to read

Summary:  In this latest edition of Macro Reflections, KVP revisits his long contrarian bullish play on Brazil from late 2020, early 2021. This was a miss on the currency, yet a hit on the equities. We tune back in to an accelerating Hawkish Brazilian central bank in the BCB, that just hiked by +75bp last wk to 4.25%. Inflation is on fire (+8%) as the country faces its worst drought in close to 100yrs. We also take a look at the underperformance of Brazilian Equities (EWZ) vs. the rest of the Emerging Markets (EEM) and touch on the potential complications of Covid, as well as the 2022 presidential elections. VALE & PBR are also touched on.

(These are solely the views & opinions of KVP, & do not constitute any trade or investment recommendations. By the time you synthesize this, things may have changed.)

Macro Dragon Reflections: Brazil, Commodity Rich, +210M pop., +$1.4T GDP, Hawkish BCB, 2022 Political Elections & Consistently Punching Below its Weight. Love it!  



  • Brazil the country that seemingly has everything:
    • 5th Largest country in the world at c. 8.5M square km, including some of the most fertile agricultural lands, as well as priceless tracts of the Amazon (c. 60%)
    • Over 210M people, with an economy of over $1.5T & one of the better run, independent central bank in the BCB
    • Rich in commodities, from oil to iron ore to agricultural products ranging from soybeans, coffee, sugar to beef & more
    • Amazing beautiful people, rich in culture & heritages from all around the world (Europe, Africa, Asia, LatAm)
    • World Class Footballers for those into their sports
  • Yet at the same time not all as it seems, as its plagued with a number of things – all likely linked to the paradox of plenty (resource curse):

Earlier This Year...

  • The Macro Dragon was calling for a contrarian long Brazilian exposure at the end of 2020 & start of 2021, both through the Brazilian Real (USDBRL ndfs, or BRLUSD futures) & Brazilian equities (Either Bovespa futures or EWZ country etf, as we are playing the blob here – like any good Macro gal or guy 😉).
  • This was off the ‘Worst is in’ Thesis on the view of, “it just cannot get any worse, its about as contrarian as Trump paying taxes, the downside is capped on Brazil given maximum pessimism & we likely are about to embark on a hiking regime from the BCB”.
  • This did not work out as envisaged on the Brazilian Real (USDBRL) which failed to break the pivotal 5.00 range, KVP’s timing was off here…

    BZ 10
  • …yet did play out on the equity side with the EWZ etf continuing to grind higher & after some risk-off around the end of 1Q, we are breaking out to new highs as the back end of May…

    BZ 20

Checking Back-In... BCB at 4.25% post a +75bp hike, with another +75-100bp potentially on Aug 3

  • We now have a hawkish central bank that has hiked 3x this year, with the latest hike from last wk being +0.75% to 4.25%.
  • They are expected to hike by at least another +0.75% in their next meeting, as we now have Brazilian inflation running hot at +8.1% in May & +6.8% in Apr. Its also worth noting next year is a presidential election year & the BCB likely wants to get all their tightening in by year-end so as not to be accused of any political meddling in 2022 (hikes/cuts would be considered a move against/for the incumbent).
  • BCB’s next meetings for 2021 are: 4 Aug, Sep 22, Oct 27, Dec 8
  • Plus 6 more CPI prints left for 2H21: Jul 8, Aug 10, Sep 10, Sep 9, Oct 8, Nov 10, Dec 10
  • The weekly long term chart on the real, shows that if this is a real break of the pivotal 5.00 lvl, the ‘easy’ move is to 4.80, then 4.50 from these 5.00 lvls. With the longer-term move of 4.00 to 3.50 subject to future commodity growth demand, election results in 2022 as well as the monetary policy of both the BCB & the Fed. 

    BZ 3
  • On the equity side, one needs to pull back a 10yr monthly chart to really see the potential of where we could be going with this break-out higher.

BZ 4


  • Its also worth noting that EWZ (Brazil) has vastly underperformed vs. EEM (EM) for the last decade, with EEM up to 140, vs. Brazil down to c. 73. That’s a +70% underperformance

    BZ 5
  • If one standardizes to the start of 2020 (pre-Covid) there is still a +35% outperformance to EM’s favor (124 vs. 89), leaving KVP considering whether being long EWZ vs. EEM may make sense as a play for the lag in Brazil, proxy to the commodity secular green-tech/infra. cycle, as well as better value, as well as contrarian play

    BZ 6
  • Naturally risks as always remain: New virus mutation that complicates the pathway out of covid for the country, corruption, 2022 presidential elections, stronger USD given Fed pivot from the Jun 16 meeting (with Jackson Hole late Aug, to Sep 15 expected as next indication of Fed taper).
  • For those looking for purer stock plays, there are a number of blue chip names (with ADRs in the US) like Vale [VALE, iron ore player] & one of the best Brazilian Macro Minds that KVP knows whispered something about energy player Petrobras [PBR] – which can give one a proxy to long-term oil exposure, Brazil + EM exposure, +30% FCF Yield & at c. $11-12 stock price is still -30% to -25% from its pre-covid lvls of $16.



Start<>End = Gratitude + Integrity + Vision + Tenacity | Process > Outcome | Sizing > Position.

This is The Way



The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (
- Full disclaimer (

Saxo Markets
40 Bank Street, 26th floor
E14 5DA
United Kingdom

Support Centre
For existing clients, please click here to request support via the Support Centre.

Have a question about our products, platforms or services? Visit the Support Centre to find answers for our most frequently asked questions. If you are still unable to locate an answer to your question, you will also find contact details for your local Saxo office to speak with a representative.

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo Markets assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.