“Javier Milei’s dollarization and fiscal austerity proposals overlook the complexities of modern economies, ignore lessons from historical crises, and open the door for accentuating already severe inequalities.”

Brazil’s 2026 election may be a breaking point for the country’s markets and policies. Fiscal rules, interest rates, and asset returns all depend on who wins. Despite potential health problems, President Lula has hinted in July at the possibility of seeking a fourth term. Meanwhile, conservative figures such as Tarcísio de Freitas and Michelle Bolsonaro are emerging as clearer potential contenders.

Globally, yields on high-quality assets feel thin once adjusted for inflation and tax. Corporate balance sheets look sound, yet spreads are tight and carry is limited. Under such circumstances, emerging market debt offers a clear payoff profile. There is income and promising potential for capital gains through policy easing, currency strength, and credit improvement. The asset class is broader and deeper than a decade ago, with stronger institutions in many countries and a larger local investor base. That mix supports resilience through shocks.