Dear Friends,

The first month of Bolsonaro’s administration seems to translate well how it will all play out from now on: on the one hand, a radical positive change abandoning the logic of coalition presidentialism – where government posts were allotted to political allies – in favor of technically qualified names and, on the other hand, the confrontation of the tailings dams built in the last years, whose political and ideological practices and wastes are embedded in Brazilian daily life.

However, the momentum of this renovation movement was sparked by the demonstrations of June 2013 and has materialized in the last elections where 243 of the 513 seats of the Chamber of Deputies now belong to new lawmakers. In the Senate the change was even greater: of the 54 seats, 46 went to newcomers. The election of Bolsonaro allied to these two landscape changes in the House and the Senate amount to an unmistakable message by the Brazilian people that enough is enough. This cry for change, however, needs to be closely monitored, especially due to a built-in bias toward “old politics” that somehow still reins in several outcasts in Congress.

Anyhow the markets has understood and reacted quite well to all of this as the first steps of the “new policy” were taken. The Ibovespa rose more than 10% in January and the Dollar fell almost 6%. The Brazil risk, as measured by the 5-year CDS, closed the month at 165.73 points, while the returns to the most liquid interest rate contracts up to 2027 ranged below 9% and the longer NTN-Bs paid real interest rates short of 4.5%. What a feat! Thus, to paraphrase Neil Armstrong, last elections may have been a small step for us at this time, but a giant leap into the future of the next generations in Brazil.

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