THE “NEW GLOBAL COMMODITY ORDER” CREATED BY RUSSIA AND UKRAINE’S ABSENCE IN THE MARKET BENEFITS BRAZIL

The several sanctions imposed on Russia as retaliation against the invasion of Ukraine, which include the suspension of Russian imports from several countries, opened a hole in the global supply chain that is slowly being filled whole by commodity-exporting countries, says the Bank of America (BofA).

According to the US bank, the countries benefiting the most from the global supply imbalance are in Latin America, with Brazil being the market that saw the most gains from the situation.

BofA assesses that as Russia and Ukraine lose their status as predominantly global producers, Latin American countries have a chance to play a leading role in the “new global commodity order,” as they export similar products.

Latin America accounts for 55% of global crude soy oil exports, as well as 42% of global lead ore exports.

Copper, iron ore, corn, frozen fish, barley, precious metals, wheat, and wood are also among the commodities that the region exports the most.

In the case of Brazil, BofA believes that the country benefits from a confluence of factors:

• almost no exposure to Russia in terms of trade (except for fertilizers);
• high commodity prices leading to favorable trade deals;
•  benchmark Selic base interest rate at its highest;
• substantial exposure to commodities (44% of the equity market).

BofA believes Latin American equities are on track to begin an upward trend given the exposure to commodities. Moreover, analysts believe that discounted valuations and competitive exchange make the scenario appealing.

Source: Money Times