Executive says the currency’s surge reflects “fearful money” held by conservative investors
12/19/2024
Brazilians are increasingly transferring money abroad, even as the foreign exchange rate reaches record highs—a departure from historical patterns.
Roberto Lee, CEO of Avenue, a brokerage focused on facilitating international investments for Brazilians, notes that traditionally, a rising dollar dampens outflows. However, he observes a unique shift: the currency’s surge is mobilizing “fearful money” held by conservative investors seeking to protect their assets. These investors are favoring U.S. government bonds with short- and medium-term maturities.
“We’ve been attracting a different type of money that accelerates during heightened risk and carries greater value. The pervasive sense of risk has prompted conservative investors to realize, often reluctantly, the need for a structural portion of their investments abroad,” Mr. Lee explained.
Avenue reports unprecedented inflows compared to its seven-year history, with volumes in its international accounts already surpassing November’s total by mid-December. “We expect at least 20% more this month than last,” Mr. Lee added.
Similarly, XP has seen a 25% increase in international account remittances at the start of December compared to the prior month, while foreign investment expert fintech Nomad reports “consistent record-breaking growth, averaging a 7% rise in new investors,” says Investment Director Caio Fasanella.
According to Rodolfo Buim, head of product distribution at XP’s international division, the dollar’s peak and fiscal uncertainties in Brazil have driven clients to accelerate the dollarization of their portfolios as a hedge against volatility. “Diversification into the American market is also a key draw, offering more maturity and historically greater long-term profitability,” Mr. Buim explained.
Mr. Fasanella, from Nomad, attributes the surge to Brazilians seeking stability and recognizing opportunities in U.S. markets.
The current wave of international investment resembles a similar spike during President Lula’s election in November 2022. However, Mr. Lee points out that last year’s surge was fleeting. “This year, we’ve more than doubled assets under custody, with the increase heavily concentrated in the second half of the year,” he said.
*By Marília Almeida — São Paulo
Source: Valor International