Brazil’s Economy is Bouncing Back
October 28th, 2009 at 11:20 am Posted by The Dean
The Dean recently came across an interesting write-up from FORTUNE which suggests that investors may be turning to Brazil, instead of China, for cheaper investments in developing nations.
The article from financial writer/reporter Mina Kimes claims that Brazil’s once troubled economy has bounced back from the global economic crisis much quicker than many other countries. In fact, Brazil earned an investment-grade rating from Moody’s for government debt last month.
Brazil’s unemployment rate is much lower than its high back in March and the Bovespa index, Brazil’s equivalent to the Dow Jones Industrial Average, is up 77% this year.
Back on September 12th, The Dean profiled Brazil as part of the Wide World of Dean Series because he believed the country had investment potential in the global economy’s gradual return to normalcy—and this article seems to confirm that.
Reporter Mina Kimes suggests that, much like China, Brazil has recovered quickly because of fast paced growth in its domestic economy. More than a month ago, The Dean suggested that Brazil had investment potential as a producer of natural gas and Kimes adds that such exports account for less than 25% of the country’s gross domestic product (GDP). Kimes referenced Pedro Martins, an analyst at Bank of America Merril Lynch Latin America, who said that Brazil “is isolated and domestic-driven,” leaving room for many additional types of opportunities.
With that being said, The Dean believes that investors looking inside Brazil will find such opportunities are cheaper than in developing powerhouses like China and India.
The article also suggests that Brazil’s economy will grow at a rate of 3.5% in 2010 which could have companies there seeing at least 26% growth in earnings.
The Dean thinks this article is a great read for all of his students and, should they be interested in Brazilian stocks, they could consult resources such as BlackRock Latin America (MDLTX) or the Market Vectors Brazil Small-Cap ETF (BRF), which invests in more than 50 small-cap stocks.
The Dean wants to call the CollegeStock Community‘s attention to potential opportunities like those in Brazil but, as always, The Dean suggests that all of his students do their homework first.
