The rise of Brazil’s middle class over roughly the past decade is nothing short of remarkable.
Central bankers in Brazil reduced the cost of borrowing in reais by 50 basis points today, their fourth rate cut in a row in order to stimulate the local economy and ensure that Europe’s currency crisis does not spread to Latin America.
Concerned by signs of an economic slowdown, the Brazilian government has cut taxes on a wide range of financial transactions from investments to pasta, effective immediately. This should give leading retailers like Companhia Brasileira de Distribuicao (CBD, quote) an edge and the small-cap sector in general (BRF, quote) a broader lift.
The central bankers in Brazil took a more conservative approach than many traders would have liked today, cutting local interest rates by 50 basis points. What does this tell us?
Brazilian stocks have retreated a full 30% from their November peak of 73,100 at this point. While we would like to think all the angst has worked itself out, there are still downside levels to watch.