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Brazil Macro Commentary

The beginning of 2023 has been tough for Brazil's stocks, mostly because of losses with state-owned companies.

The images of Bolsonaro supporters storming the Brazilian parliament are not likely to ease top-down concerns weighing on the Brazilian equity market since the election. 

The table below shows several structural issues and key uncertainties to address when forecasting Brazil’s macro scenario.

 

Top players in the lithium market (2)

 

As seen in the table, Brazil’s growth struggled in the past few years. For 2023, growth is again expected to be low.

Considering Brazil’s capital markets depth and breadth - It is exactly times like this when interesting opportunities are created – buying an excellent business from a bottom-up perspective while paying a discounted price considering the geography this business is located in. Focus remains on private sector names, where the uncertainty is much lower.

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2023 Theme Investment | Lithium

Lithium is an area to watch in what seems to be a challenging year to come.
Simply put, the volume and pricing outlook appears promising considering tight supply
conditions and growing demand mainly from electric vehicles.

Pricing outlook

Lithium prices have risen tenfold to $75,000 a ton since the start of 2021. Tight supply and demand in lithium indicate support for lithium markets in the coming years.

Top players in the lithium market

HubSpot Video
Top players in the lithium market (1)

We are getting quite a bullish signal on lithium given that out of the five lithium companies selected, three are considered BUY ratings, and Livent is highly rated as HOLD (with an overall score of 78).

Among the buy-rated names, SQM’s value score and Albemarle's cash flow score stand out. Sigma, a smaller lithium player, has an underperform rating with value and cash flow scores as negative highlights.

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