Earlier this month, Brazilian shares jumped as many traders believed the country is moving past a political gridlock that could lead to changes in the government and potentially kick-start the stagnate economy, Bloomberg reported.
The Brazilian rally went into high gear after former President Luiz Inacio Lula da Silva was detained, adding to speculation that support will grow to impeach his successor, President Dilma Rousseff.
“The market has been held hostage by corruption and incompetence,” James Gulbrandsen, the chief investment officer for Latin America at NCH Capital told Bloomberg. “The rally in Brazil is merely a glimpse of the gains that are possible with a reversal in the overwhelming incompetence that has dominated Brazil over the last decade.”
Traders have been selling off Brazilian assets over the past year as Rousseff failed to stimulate the economy prevent credit downgrades.
iShares MSCI Brazil Capped ETF