Index records, foreign liquidity and the challenge of building a domestic investor base
No economy can develop without infrastructure. Roads, energy and technology underpin production, entrepreneurship and wealth creation. In capital markets, however, there is a less visible – yet equally essential – form of infrastructure that remains persistently underestimated: investor financial literacy.
Without investors capable of understanding risk, interpreting disclosures and assessing corporate governance, markets cannot achieve depth, liquidity or resilience. What emerges instead are short-lived cycles of euphoria followed by contraction. If Brazil aims to consolidate a functional, inclusive and sustainable capital market, investor education must be treated with the same strategic priority as logistics, energy or digital connectivity.
In recent years, the number of retail investors in Brazil’s equity market has grown significantly. While this expansion is welcome, it has not translated into greater diversification or deeper market structure. Liquidity remains heavily concentrated in a small group of large-cap companies, while most listed firms face low trading volumes, elevated volatility and a high regulatory compliance burden.
The result is an increasingly evident paradox. Market indicators continue to post successive all-time nominal highs – in January 2026, Brazil’s benchmark equity index once again reached consecutive record levels – even as the primary market remains virtually shut. The country is experiencing its longest drought of initial public offerings in decades, a clear signal that the challenge is structural rather than cyclical. There is an insufficiently prepared investor base to support new issuers over time, particularly small- and mid-cap companies that require consistent liquidity and a competitive cost of capital.
This imbalance is also reflected in the composition of market liquidity. In 2025, non-resident investors accounted for the majority of trading volume in Brazil’s cash equity market. Foreign trading activity exceeded R$2.8 trn in equities over the year and surpassed R$3.5 trn when including other exchange-traded instruments such as BDRs, ETFs and real estate investment funds. Over the period, non-resident investors represented roughly two thirds of the total traded value.
These figures underscore the extent to which Brazilian market liquidity remains anchored in international capital, inherently more sensitive to global risk cycles, external monetary policy and cross-border capital flows than to domestic structural fundamentals. The absence of a broad, informed and resilient local investor base amplifies volatility, restricts market access for new issuers and raises the cost of capital, particularly outside the narrow group of large, highly liquid companies.
In mature markets, compelling investment theses attract capital during both economic expansions and downturns. In Brazil, market participation remains overly dependent on cyclical optimism. Democratizing capital, therefore, is not merely about attracting new retail accounts; it requires ensuring that investors understand risk, monitor corporate performance, demand sound governance and remain engaged even outside periods of market exuberance.
This challenge becomes even more pressing in light of alternative pathways to market access. Structures such as so-called ‘reverse IPOs’ are legitimate tools of corporate reorganization and can play a constructive role in market dynamism. Risk arises when these mechanisms are treated as permanent shortcuts, particularly with respect to governance. No corporate structure can substitute for transparency, robust internal controls and a firm commitment to minority shareholder protection.
Market credibility is not determined by the route to listing, but by the quality of governance established after it. Preserving this balance requires investors who are capable of understanding both the opportunities and the risks presented to them. At this point, financial education ceases to be ancillary and becomes critical market infrastructure.
Financial literacy must be addressed as a continuous and cross-cutting public policy. Brazil has long recognized formal education as a driver of development and national sovereignty. The same logic must apply to financial education. Integrating personal finance, investment fundamentals and capital markets concepts into secondary and higher education curricula is essential to fostering economically resilient citizens and more sophisticated investors.
Coordinated initiatives involving public authorities, regulators and market institutions – leveraging digital platforms, plain language and outcome-based metrics – are effective tools to broaden the reach of investor education. Free learning pathways, combined with regulatory sandboxes that encourage innovative approaches to retail investor communication, can accelerate progress without requiring fiscal subsidies or public expenditure.
A pragmatic agenda to revitalize Brazil’s capital markets can be structured around three complementary pillars. The first is financial education, the foundation of the system. The second is the promotion of smart liquidity, through clear market-making policies, explicit volume and spread targets, and incentives aligned with actual performance. The third is reducing the cost of market access, particularly for smaller investors, via simplified structures, broadly diversified products and fee frameworks consistent with financial inclusion.
None of these measures requires institutional disruption or additional public resources. They require coordination, regulatory predictability and a long-term perspective. Above all, they require recognition that trust cannot be mandated by regulation alone: it is built through the quality of disclosure and investors’ ability to interpret information effectively.
In this context, the investor relations professional plays a strategic role. Beyond reporting financial results, IR translates strategy, shapes the corporate narrative and mitigates information asymmetry between companies and the market. In environments marked by volatility and digital transformation, IR serves as the connective tissue between governance, risk and credibility.
Strengthening Brazil’s capital markets depends on measurable variables: education, transparency, liquidity and compliance costs. Yet the decisive factor is governance perception. Governance transforms markets into trust, trust into liquidity and liquidity into economic development. This perception can only become widespread when investors have access to the knowledge required to make rational, informed, long-term decisions.
Financial education is not a complement to capital markets. It is their invisible infrastructure. Without it, there is no sustainable cycle – only transient movements.
André Vasconcellos is a member of IR Impact’s editorial board and a specialist in corporate law and capital markets
