RIO DE JANEIRO, June 7 (Reuters) - Renowned Brazilian fund manager Luis Stuhlberger warned Brazil’s economy is at risk of suffering a new lost decade, saying recent efforts to balance its finances are not enough and that growth will remain lackluster until at least 2018.
In an interview with magazine Veja, Stuhlberger said without the political will for serious reform Brazil was likely to trap itself in a vicious circle of tax increases and lower corporate investment, resulting in rapid inflation as soon as consumer demand picks up.
For Stuhlberger, such a scenario could be reminiscent of the 1980s, referred to as Latin America’s “lost decade,” when low growth and high inflation dominated the region. A spokeswoman for Verde Asset Management confirmed Stuhlberger’s comments.
“I can guarantee that there will not just be tax increases this year, but next year, the year after that and the year after that,” said Stuhlberger, whose principal Verde hedge fund has 22 billion reais ($7 billion) under management. Verde is Brazil’s largest hedge fund.
Brazil is in the process of trying to cut back spending in a bid to convince investors that President Dilma Rousseff is committed to saving the nation’s investment-grade rating.
Last month the government agreed to reduce spending by 70 billion reais, an amount that Finance Minister Joaquim Levy said was adequate although he expressed concern about falling revenue.
Stuhlberger has become one of Brazil’s most closely followed investors after a series of high profile wins, including predicting a devaluation of the real in 1999 that netted a 63 percent return in a single month.
Verde Asset was created this year after Stuhlberger and Credit Suisse Group AG agreed to spin off the management of hedge fund Verde and a number of stock and global hedge funds from the latter’s private banking unit in Brazil. Credit Suisse remains a partner in Verde Asset Management. (Reporting by Stephen Eisenhammer; additional reporting by Guillermo Parra Bernal in Sao Paulo, editing by David Evans)
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