Can Brazilian Stocks Benefit from Milei’s Victory? Safra Highlights Key Opportunities in 2025
- How Milei's Political Win Ignited Argentine Markets
- Why Marcopolo (POMO4) Stands to Gain
- The Export Growth Engine
- Short-Term Catalysts vs. Long-Term Risks
- Broader Sector Implications
- Historical Context Matters
- Investment Considerations
- Alternative Plays
- FAQ: Brazilian Stocks and Argentine Politics
Argentina's recent legislative elections have sent shockwaves through regional markets, with Brazilian capital goods companies—particularly auto parts exporters like Marcopolo—poised to capitalize on the political shift. Here's why analysts are bullish on cross-border growth prospects.
How Milei's Political Win Ignited Argentine Markets
When Javier Milei's La Libertad Avanza party secured decisive victories in Argentina's midterm elections last October, the Merval index skyrocketed 20% in a single trading session. The rally continued throughout the week, breaching 3 million points for the first time ever on October 31. This wasn't just a local phenomenon—Brazilian firms with Argentine exposure caught the tailwinds too.
Why Marcopolo (POMO4) Stands to Gain
Safra analysts Luiza Mussi and Lucas Melotti identify Marcopolo as a prime beneficiary, with 22% of its net profit tied to Argentina. The bus manufacturer derives 10% of international operating income and 12% of Brazil's total exports from its southern neighbor (second only to Chile). "Argentina has been crucial for Marcopolo's revenue and margins," notes the Safra team, adding that postponed orders may now rebound post-election.
The Export Growth Engine
Despite Q3 2025 results missing market expectations (though matching Safra's estimates), international sales showed resilience. Domestic performance dipped, but overseas operations—fueled by Argentine demand—provided solid compensation. The bank maintains a "Buy" rating with a R$12 target price, implying 19% upside from Thursday's close at R$8.82.
Short-Term Catalysts vs. Long-Term Risks
While Safra anticipates order book recovery through 2026, they flag potential slowdowns should Argentine uncertainty persist. Investors should monitor: 1) Export volume sustainability 2) Chilean market performance 3) Domestic demand fluctuations. The analysts emphasize that Marcopolo's current backlog provides visibility through year-end.
Broader Sector Implications
Beyond autoparts, Brazil's capital goods sector could see Ripple effects across: Industrial machinery, Agricultural equipment, Energy infrastructure components. TradingView data shows Brazilian industrials outperforming LatAm peers since the election results.
Historical Context Matters
This isn't the first time Brazilian exporters benefited from Argentine political shifts. During the 2015 market-friendly reforms, cross-border trade grew 18% YoY. However, currency volatility remains a persistent challenge—the peso has swung 30% against the real this year alone.
Investment Considerations
Key metrics for evaluating exposure: Export concentration ratios, Currency hedging strategies, Local partnership networks. As one fund manager quipped, "Investing in Argentina requires both a spreadsheet and a crystal ball."
Alternative Plays
For investors seeking diversified exposure: Embraer (aerospace), Weg (industrial motors), Rumo (logistics) all maintain significant regional operations. BTCC market analysts suggest watching copper producers too, given Argentina's mining sector potential under Milei.
FAQ: Brazilian Stocks and Argentine Politics
How significant is Marcopolo's Argentine exposure?
Argentina accounts for 22% of net profit, 10% of international operating income, and 12% of Brazil's total exports for Marcopolo.
What's Safra's price target for POMO4?
R$12 per share, representing 19.1% upside from its October 30 closing price of R$8.82.
Could Milei's policies negatively impact Brazilian exporters?
While pro-market reforms could help, currency volatility and potential trade policy shifts remain key risks to monitor.
