BRL: Positive Outlook Amid Fiscal Focus and Successful ESG Offering

BRL: Focusing on the fiscal

The Brazilian real is having a slightly better week. Its $2bn first-ever ESG offering has gone well, where the seven-year note was priced at a yield of 6.5% - close to an investment-grade country, according to Finance Minister Fernando Haddad. (Brazil's sovereign rating is actually three notches below investment grade on S&P's rating scale). Additionally, there seems to be some hope that Fin Min Haddad can push back some of those in the Lula administration who want to soften the nation's fiscal rule, where currently a zero deficit primary balance is the provisional target for next year.

In our 2024 FX Outlook, we do slightly prefer the Mexican peso (loose fiscal, tight monetary policy) to the Brazilian real next year. But for the short term - in listless markets - the real should perform OK.