The iShares MSCI Brazil Capped ETF (NYSEArca: EWZ) is up 12.1% over the past 90 days, but the fund’s one-month performance paints a different picture as the largest Brazil ETF is off 8.4% over that period.

Slack GDP estimates and a tumbling real are among the downside catalysts pressuring Brazilian stocks and EWZ. Brazil’s planning ministry attributes a major portion of the turn to the projected depreciation of about 21% in the real currency against the U.S. dollar. The ministry expects the real to end 2015 at R$3.22 from R$2.66 at the end of 2014. The real is already traded at a high of about R$3.29 back in March. [Brazil ETFs Brace for Slowdown]

Reflecting the deteriorating economic conditions, the country’s unemployment rate hit 6.4% in April, its highest in four years. Inflation is expected to rise to 8.26% at the end of the year and has also breached the central bank’s upper band of 4.5% plus or minus 2 percentage points.

Inflation in Latin America’s largest economy is also stubbornly high at 8.47%, nearly double the government’s target rate of 4.5%. That means Brazilian interest rates, already among the world’s highest at 13.75%, could easily move to 14%. However, that could also represent the end of the selic rate’s rise.

“And rate-sensitive stocks, from banks to consumer-discretionary names, do well as interest rates fall. Indeed, Morgan Stanley studied 15 interest-rate-sensitive Brazilian stocks that declined 60% over the past two years of monetary tightening. As the cycle reverses, select rate-sensitive names including airplane maker Embraer (NYSE: ERJ) could start to outperform,” reports Dimitra Defotis for Barron’s.

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