The iShares MSCI Brazil Capped ETF (NYSEArca: EWZ), the largest exchange traded fund tracking Brazilian equities, is up about 10% this year as the Brazilian economy looks to keep climbing its way out of what has been a lengthy recession.

Brazil’s central bank as been actively cutting the selic rat to help prop up the Brazilian economy, Latin America’s largest. While there can be no guarantees of more rate cuts in Brazil, some traders are betting on more coming later this year. Brazil’s central bank slashed rates earlier this year and many market observers believe it is a foregone conclusion more rate reductions are coming. Those expectations come as Latin America’s largest economy resumes growing this year.

“We lower our 2017 GDP growth estimate, to 0.7% y/y from 1% following the worse-than-expected Q4 2016 GDP release – which increased the negative statistical carry-over into 2017 to more than 1% y/y. However, we increase our 2018 GDP growth estimate to 2.0% from 1.5%, on the back of an expected lower terminal rate for the BCB’s easing cycle and our overall positive assessment of policy making in the next two years,” according to a Nomura note posted by Dimitra DeFotis of Barron’s.

More rate cuts could be a possibility because the Brazilian currency, the real, has been a solid performer among emerging markets currencies. The WisdomTree Brazilian Real Strategy ETF (NYSEArca: BZF) is one of this year’s best-performing currency exchange traded funds. BZF is higher by almost 7% year-to-date.

Brazil’s “economy contracted 3.6% y/y in 2016, following a similar drop in 2015, and leading to a reduction of over 7% y/y in real GDP in the last two years … factors that call for a better performance in 2017 growth are not based on a positive view on the country’s long term growth outlook, but rather on a (more cyclical) combination of: lower interest rates, higher confidence indicators, lower risk measures and some recomposition of inventories,” according to the Nomura note seen in Barron’s.

In addition to commodities prices (Brazil is a major oil, iron ore and coffee producer), other issues facing the economy there consumer debt and the strength of the country’s banks. Brazilian banks look mostly solid now, but some market observers have voiced concern over rising consumer debt.

For more information on the Brazilian markets, visit our Brazil category.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.