Brazil has seen quite a bit of political turmoil over the past decade, and it has been heightened by more recent corruption. But the corruption scandal and the seemingly weak political structures that have historically inhibited growth in Brazil are turning.

Specifically, both elected members of congress and the current administration, however weak, are aligned in their desire to pass meaningful economic reforms prior to national elections, which are scheduled to take place in October.

President Michel Temer is not in the role to be a viable candidate in the next election; he is there to be a caretaker, pushing through the reforms that are necessary.

At the same time, the perils of economic mismanagement that the country has endured under previous administrations have been laid bare, so the current administration has incentive to move forward with reforms. Indeed, reform is the only reason the current administration is even in place.

Specifically, President Michel Temer is not in the role to be a viable candidate in the next election; he is there to be a caretaker, pushing through the reforms that are necessary to meaningfully bring down the structural rate of inflation, enable monetary policy interest rates to be cut significantly, and to ultimately enable economic growth to come through in time for October’s election.

It’s an interesting way to think about geopolitical alignments and risks and their impact on current and potential economic activity.

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Any statements or opinions expressed are those of the author as of the date of publication, are subject to change without notice as economic and markets conditions dictate, and may not reflect the opinions of other investment teams within William Blair Investment Management, LLC or the Investment Management Division of William Blair & Company, L.L.C.

This content is for informational and educational purposes only and not intended as investment advice or a recommendation to buy or sell any security. Investment advice and recommendations can be provided only after careful consideration of an investor’s objectives, guidelines, and restrictions.

Factual information has been taken from sources we believe to be reliable, but its accuracy, completeness or interpretation cannot be guaranteed. Investments are subject to market risk. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be interpreted as investment advice, as an offer or solicitation, nor as the purchase or sale of any financial instrument. Statements concerning financial market trends are based on current market conditions, which will fluctuate.

William Blair does not provide legal or tax advice. Please consult your tax and/or legal counsel for specific tax questions and concerns.

Distributed by William Blair & Company, L.L.C., member FINRA/SIPC.

Copyright © 2019 William Blair & Company, L.L.C. "William Blair” is a registered trademark of William Blair & Company, L.L.C. No part of this material may be reproduced in any form, or referred to in any other publication, without express written consent.

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