A lower interest rate environment in Brazil will drive "profound changes" in domestic capital markets, BTG Pactual Asset Management SA CEO Eduardo Guardia said, according to a Diário Comércio Indústria & Serviços report.
The executive, who previously was Brazil's finance minister, said that a record low Selic rate will result in decreased returns on fixed-income securities, which in turn will push investors' risk appetite higher and toward equity markets.
"The investor has no alternative (but to) increase the term and take on risk to gain profitability," Guardia was quoted as saying during a speech.
Guardia claimed it was the local investor who drove the recent rise in the stock index Ibovespa, while the foreign investor stood back awaiting additional signs of "comfort" to invest, pointing to full passage of the pension overhaul.
Guardia also addressed concerns on sluggish global growth, stating that the current scenario will not contribute to growth in Brazilian GDP, but rather have "zero" impact or a "slightly negative" one.
Regionally, however, Guardia noted a 0.2% negative spillover effect on GDP from the Argentine crisis.
