Gavea’s Fraga Cool on Brazil Equity

There are few signs indicating unequivocally that the Brazilian equity market will recover this year, says Arminio Fraga, founding partner of Gavea Investimentos, the Rio-based asset manager. The former central banker’s cautious tone bucks the predictions of many sell side shops that are call for a bounce in Brazilian stocks. Itau Securities, for one, sees the Ibovespa rising some 75% by year-end. Asked Thursday in New York if the Bovespa could rise in 2009, Fraga suggests there is room for further stress. “There’s still a lot of uncertainty [in the market.] I’d rather not risk making such a prediction,” he tells LatinFinance. “Let’s face it, we were in a bubble,” he adds, referring to the local market’s frothy valuations that crested in May 2008 before embarking on a prolonged descent, in line with other global indices. In the 12 months through January 15, the Bovespa has fallen 38.9%, while year-to-date it is up 1.1%.