Brazil Hedge Funds Tell Government to Talk Less, Do More

The lack of progress in economic reforms has two of Brazil’s most-renowned hedge fund managers growing wary with the country’s debt trajectory.

“I need more concrete facts rather than just words,” Rogerio Xavier, one of the founders of SPX Capital, said in a webcast on Wednesday. “I’m very skeptical about Brazil finding a solution to its fiscal problem and see no will from politicians and the executive power to move forward with this agenda.”

Brazil Hedge Funds Tell Government to Talk Less, Do More

Xavier, who manages about 34.3 billion reais ($6.5 billion) at SPX, has been betting rates will rise in Latin America’s largest economy. He warned that political discussions have been leaning toward more spending -- especially when it comes to the emergency aid to informal workers, which is set to expire by year-end.

The government should keep in mind big advances in reforms usually take place in the first stage of the administration, Xavier said. That’s when approval rates are high -- which is the case right now with President Jair Bolsonaro, who saw his popularity surge with the pandemic-driven spending. Bolsonaro is halfway through his four-year term.

Read More: Hedge Fund Powerhouses Sound Alarm on Brazil’s Spending Spree

Economy Minister Paulo Guedes was also the target of some criticism at the hedge fund panel. Though Guedes has been calling for a prompt return to austerity and resuming of Brazil’s reform agenda, the economic team should focus on providing timetable and concrete measures, said Carlos Woelz, a founding partner at Kapitalo Investimentos.

“I’ve been closely monitoring all the recent remarks, searching for a light, a plan,” said Woelz, who helps oversee 18.9 billion reais at the Sao Paulo-based asset manager. “I haven’t seen a positive answer.”

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