$EWZ

Brazil has the world’s 2nd largest REE reserves after China (around 21M tons). But there’s a key investor trap here: even though Brazil is #2 in reserves, it’s still far behind in production (in 2024 it was only 20 tons and ranked 13th). 2026 could be the breakout year. Serra Verde is expected to reach full capacity in 2026 (5,000 tons per year). That could make Brazil one of the most strategic non-China suppliers.
The EWZ ETF is mainly made up of iron ore, oil, and banks. The REE story won’t show up directly on EWZ’s financials yet, but it can support BRL by accelerating strategic capital inflows into Brazil. So REE is a macro-story catalyst, not an individual-stock catalyst.
Brazil is a net commodity exporter. When metals rise, more dollars flow into the country, which makes the stock market look cheaper in USD terms and attracts foreign investors. On the other hand, higher commodity prices can fuel inflation inside Brazil. That could force Brazil’s central bank to keep rates high. High rates are good for banks yes, you heard that right because Brazil’s banking system (and the banks inside EWZ) is very different: it’s almost monopolistic in structure and mechanics.
Brazil’s banking sector is extremely concentrated (Itaú, Bradesco, Banco do Brasil, Santander). With limited competition, when the policy rate is 11%, banks might pay ~10% on deposits but charge 100%+ rates on credit cards or consumer loans. They have some of the highest net interest margins (NIMs) in the world. When rates rise, they lift loan rates much faster and by a larger amount than deposit rates, which can explode net interest income.
Normally, high rates are poison for the real economy and credit quality. But Brazilian banks can turn that poison into an antidote via very wide spreads. So a commodity rally in a high-rate environment can make EWZ a “dividend monster.”
The risk: 2026 is an election year in Brazil. The Lula government has a high risk of boosting spending (loosening fiscal discipline). Election uncertainty often triggers sharp selling in the Brazilian real. Since EWZ is USD-based, even if the Bovespa rises, a weaker BRL can erode returns in USD terms.
On top of that, Trump wants the Lula government out. You know what he’s capable of. Trump absolutely wants Bolsonaro (or someone he endorses) to return in the 2026 election, so he won’t hesitate to use economic pressure (the tariff stick) to squeeze Lula’s government. In mid-2025, when Trump tried to “check” Brazil, Lula used it very well domestically “Brazil is nobody’s colony, we won’t let our sovereignty be crushed” and rallied public support behind him. Even though Trump ideologically hates Lula, as a dealmaker he had to come back to the table. Still, in 2026 he will likely support the other side quietly.
Brazil is currently at the center of the hard asset rotation. If the West’s decoupling from China accelerates, Brazil’s REE and strategic minerals could make it the new favorite ally. A commodity supercycle would lift Vale and Petrobras.
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