Political Risk Drags on Brazil ETFs | ETF Trends

Brazilian equities and country-specific exchange traded fund are weakening as more grow skeptical over President Michel Temer’s ability to cut down government spending in the wake of ongoing corruption charges.

The iShares MSCI Brazil Capped ETF (NYSEArca: EWZ) declined 2.9% Tuesday and was down 5.3% over the past month.

Meanwhile, the ProShares UltraShort MSCI Brazil Capped ETF (NYSEArca: BZQ), which attempts to deliver two times inverse of the daily performance of the MSCI Brazil 25/50 Index, surged 5.7% Tuesday and gained 9.9% over the past month.

Wguke Finance Minister Henrique Meirelles said Temer’s pension overhaul plan, which is seen by investors as key to diminishing public debt, could be approved next year if there is no time this year, man investors remain doubtful given upcoming presidential elections and reduced chances of any real reforms, reports Bruno Federowski for Reuters. Some even anticipate lawmakers to dilute plans in order to guarantee passage.

“[Government] allies are rebelling and unwilling to leave their fingerprints in unpopular measures in the pre-election year, which embarrass the government regarding the fiscal adjustment,” the team of Lerosa Investimentos said in a report, according to Business Insider.