In these days the Bovespa index (Ibovespa) is flirting with the threshold of 120 thousand points, a level never reached in its history.

It’s time to analyze the performance of the Brazilian stock market (Bovespa) in 2019 and try to understand what to expect in 2020.

After the election of Bolsonaro to the presidency of the Republic, many (myself included) expected substantial growth in the Brazilian stock exchange in 2019 and in fact there was growth and also very substantial.

Immediately after the election of Bolsonaro (end of October 2018), XP Investimentos had published the following forecasts for 2019:

  • Bovespa: has ample room for improvement and could reach 125 thousand points in an optimistic scenario at the end of 2019. In a moderate scenario, the estimate is that it can reach 105/110 thousand points
  • Dollar: after an initial period of devaluation, 2019 should close between 3.70 and 4.00 reais
  • Recommended actions for the purchase: all state-owned, in particular Petrobras, Cemig and Banco do Brasil

Bovespa closed 2019 with 115,645 points, recording a 30% increase in the year; at the end of 2019 the dollar was quoted R$ 4.08 Petrobras grew by 21% in the period considered: Cemig remained unchanged and Banco do Brasil grew by 11% (all below the Ibovespa average).

Let’s say that XP Investimento didn’t get much …

But let’s see the performance of the Bovespa Index (Ibovespa) from January to December 2019:

+ 30% of the value expressed in reais

+ 28% in euros

+ 19% in dollars

Bovespa’s performance was very positive in terms of local currency, even net of inflation (around 4% in the period considered).

However, it is clear that the devaluation of the euro and the real against the dollar influenced the result in dollars. During 2019 the European currency suffered a devaluation close to that suffered by the real, which explains the excellent performance of the Brazilian stock exchange in euros.

Here is a comparison of the performances of Bovespa, Dow Jones and FTSE Mib (Milan stock exchange) in 2019:

  early 2019 late 2019 Change in US$ Change in Euro
Ibovespa 91012 118573 19% 28%
Dow Jones Index 23346 28538 22% 32%
FTSE MIB 18330 23836 20% 30%

Those who invested 10 thousand dollars in the Brazilian stock exchange in January 2019, at the end of the year found themselves, gross of the various commissions and taxes, about 11900 dollars. Good investment, but not as much as if he had invested on the Dow Jones stock exchange, which in the same period gained 22%.

bovespa 2019 eng

I remember that the value of the basket of shares that constitutes the Ibovespa is strongly concentrated on some blue chips very sensitive to political events and to the change in macroeconomic factors:

Itau (Itausa and ItauUnibanco): 14.23% of the index

Petrobras (ON and PN): 11.45%

Bradesco (ON and PN): 9.90%

Vale (ON and PN): 5.80%


Four years of growth

In 2019, Bovespa essentially “surfed” the growth wave of international stock exchanges. The Brazilian economy, which grew by only 1% annually, did not give investors much optimism, so much so that foreign investors (which represent about 50% of the value of the deals) have made a significant exit from the Brazilian market.

estr bov english

The data in the graph refer to the secondary segment only (existing share transactions); considering also the primary one (IPO and new share issues), the negative balance of 2019 drops to -8.45 billion reais.

Growth in 2019 was therefore supported by the Brazilian domestic market, also due to the lowering of the discount rate, which made the maintenance of traditional low-risk investments, such as certificates of deposit and public debt securities, very unattractive.

The balance, however, continues to be very positive, if we think that in the last 4 years Bovespa has grown by 180%.


What to expect from the Brazilian stock exchange in the coming months?

Here is what XP Investimentos wrote ( on its website at the end of 2019:

“2020 begins with great optimism, Real appreciates against the dollar and Ibovespa is at historic highs, exceeding our forecast of closing at 115 thousand points. The Selic discount rate was reduced to 4.5% per year in December, the lowest level in its history.

 Our expectations are still very positive, especially for the stock market, as companies are the main beneficiaries of lower interest rates. Loan premiums are still high.

In front of us, the horizon is clean and open. The necessary preparations have already been made and now Brazil is ready to take off. “

Even though more substantial GDP growth is expected (+2% compared to 2019), 2020 certainly holds many unknowns and unconditionally supporting the extremely optimistic vision of XP Investimentos could reserve unwelcome surprises for investors.

The economic recovery is still very precarious and there are no signs of a substantial recovery in private investment, both domestic and from abroad. Public investments in infrastructure have been practically zeroed in the Bolsonaro management, in order to rebalance public accounts.

In order to attract new investments, it is necessary to ensure greater legal certainty regarding compliance with public contracts. The auction for oil fields that went deserted in November 2019 is a clear example of lost opportunity.

The government does not have a solid parliamentary majority and the approval of the tax and administrative reform is in the hands of the true political articulator of the moment, the president of the Chamber of Deputies, Rodrigo Maya. The other government projects, necessary to give impetus to Brazil’s economic policy, also depend on the ability to negotiate with the so-called “centrão” parties.

To conclude, I therefore suggest caution regarding possible investments in the Brazilian stock exchange in the early months of 2020.

Note: anyone interested in the historical trend of the daily prices of the Bovespa index, real / euro exchange rate and real / dollar exchange rate of the last four years, can receive it free of charge in excel format by requesting it at: