While the U.S. military operation in Venezuela has spurred concerns around the world over international law violations, global financial markets have appeared unaffected by the developments , even stocks right next door in Latin America’s largest economy. Earlier this month, the U.S. conducted a large-scale attack on Venezuela, during which Venezuelan President Nicolás Maduro and his wife were captured and flown to New York, where they have since pleaded not guilty to drug trafficking charges . But investors in close proximity to the event haven’t seemed rattled by it. On Jan. 5, the first trading day following the attack, the main stock index of Latin America’s biggest equity market – Brazil’s Bovespa – advanced nearly 1%. In tandem with key indexes in other countries, the index has only risen further, climbing nearly 3% from that session through Friday’s close. Similarly, the iShares MSCI Brazil ETF (EWZ) — a U.S. fund that tracks Brazilian stocks — has gained around 3% since the attack. .BVSP line 2026-01-05 Bovespa index since Jan. 5 “In the case of Brazil, I don’t see this being a big issue – I don’t see the high risk of aggressive intervention there,” Amr Abdel Khalek, emerging markets strategist at MRB Partners, told CNBC. “Inflation and interest rates, that’s really what the market is focused on,” he said. Rate cuts in the cards? After months of aggressive tightening last year by Brazil’s central bank, the country’s benchmark interest rate – known as the Selic rate – has stood at a near two-decade high of 15%. Recent inflation data, however, has reaffirmed hopes that monetary easing is near. Just last week, the Brazilian Institute of Geography and Statistics (IBGE) reported that annual inflation slowed more than expected , coming in at 4.26%. That was 0.57 percentage points lower than 2024 and below the National Monetary Council’s inflation target of 4.5%. That also marked the lowest cumulative figure for the year since 2018. “Unemployment is at a record low and inflation is going down, so if you’re an ordinary Brazilian, then you’re not completely satisfied – of course you’d like to make more money or you don’t think that your life is really changing – but you’re doing better than you had been a few years ago,” said Silvio Cascione, Eurasia Group’s director for Brazil. To be sure, rate cuts could complicate an economy that’s “still severely imbalanced with a big fiscal problem,” he added. “What’s keeping the economy running are high interest rates, because that will also help you bring foreign money into the country and also keep inflation controlled, even with all the stimulus that is flooding [the economy] from the government,” Cascione continued. “Investors, they want to see some stronger action to correct some of those imbalances, to reduce fiscal expansion, to encourage more savings and investments, to have the economy growing on a different basis.” Pablo Echavarria, portfolio manager at Thornburg Investment Management, anticipates that rate cuts are likely to start at some point in the first half of 2026, though the path for cuts in the back half of the year and beyond could be affected by the outcome of the country’s general elections in October. Brazilian President Luiz Inacio Lula da Silva getting re-elected would likely lead to fewer rate cuts, Echavarria said. But if he lost, his opponent may bring “more fiscal prudence,” which means that ultimately a “more controlled” fiscal situation would allow the central bank to cut rates “a little bit more aggressively,” he added. More rate cuts could result in more than just a “pretty significant” impact on companies’ earnings, Echavarria said. The portfolio manager pointed out that a lot of domestic investors aren’t invested in equities due to the level of returns they receive in the fixed income market. BR1Y 1Y line Brazil one-year bond yield in the past year “To the extent that interest rates do come down, you should see more domestic participation in the equity markets,” he said. “If Lula loses the elections, the market will take that very positively.” Seeking more stability Though the Venezuela attack might not have put pressure on stocks or be a factor that will sway Brazilian voters’ decisions in the elections, it could still have regional implications, especially given that Lula has said he’s working directly with other countries such as Mexico and Colombia to improve stability in Venezuela following the U.S. operation. That’s according to Thea Jamison, managing director at Change Global. “This narrative of investment in Venezuela, foreign capital, openness, opportunities for the Venezuelan people, all of this is going to be meaningful going to the Brazil elections,” she said to CNBC. “Latin America has a huge potential for [foreign direct investment] going forward if they square away this political and economic mismanagement.” Brazil has already been seeing significant amounts of foreign capital coming in. Between January and November of last year, foreign direct investment came in at $84.1 billion , the highest the country has seen since 2014. Still, Jamison thinks that this level of investment in Brazil as well as in Latin America is not where it should be, saying that there has been “quite a bit of divestment over the past couple of decades by Spanish companies” particularly in both oil and banking. Oil has been top of mind regarding Venezuela seeing that it has the largest proven crude oil reserves globally , and President Donald Trump has said that oil companies will spend at least $100 billion for rebuilding the country’s energy sector with U.S. protection. Elizabeth Johnson of TS Lombard said there have been concerns that if Venezuela begins producing more oil, it could pose a threat to Brazil in its efforts to attract more investment to its oil and gas industry by way of opening up the so-called equatorial margin off its northern coast. Nonetheless, the managing director still believes the country is positioned favorably for any volatility in that area. “When we look across Latin America, there are a lot of countries that have oil and gas wealth,” she said, citing Bolivia, Venezuela and Argentina as examples. “But those countries … have had ups and downs in terms of how their governments manage natural resources and their oil assets, whereas Brazil has had the steady opening and very clear rules about its oil and gas sector that really make it an attractive market for international oil companies.” Even if Brazil’s energy sector were adversely affected as a result of developments in Venezuela, it offers multiple commodities: The nation is a top exporter of beef, coffee, iron ore and soybeans. By having a diversified economy and taking into account Lula’s focus on attracting foreign investment, Johnson views the country as being rather insulated. “If the oil price tanks, Brazil’s economy is not going to crumble,” she said. ‘Not new’ It’s also possible that Brazilian equities weren’t rattled by the Venezuela attack because the Trump administration had been applying pressure on Latin America well before it took place, MRB Partners’ Abdel Khalek pointed out. “The key point here is that this is not new,” he said in an interview, highlighting that a key risk for not only Latin American countries but emerging markets more broadly in 2026 is U.S. intervention in those countries’ domestic politics to get them to “align more closely” with its national interests. Trump imposing a 50% tariff on Brazilian goods last year was essentially that, Abdel Khalek said. Viewing the impact of the event in Venezuela as having been pretty limited overall, the strategist raised the question: Is this an instance of market complacency? “Perhaps,” he responded. “But I would take the other view and say, ‘We don’t really know exactly.’ It’s hard to predict what the U.S. is going to do next.”
Unshaken: Why Brazilian stocks have looked past the Venezuela attack