Brazil is in fashion. The designation as host of the Olympics and World Cup 2014 are just two new developments that add to the list of hits that builds the country in recent months. But in addition, outside sporting events, this nation has become much more important merit in the economic field. In less than a decade, has managed to clean up your bills and reduce debt and inflation.

Investing in Brazil, the incentive of the Olympic Games

Brazil is in fashion. The designation as host of the Olympics and World Cup 2014 are just two new developments that add to the list of hits that builds the country in recent months. But in addition, outside sporting events, this nation has become much more important merit in the economic field. In less than a decade, has managed to clean up your bills and reduce debt and inflation. Just weeks ago announced that for the first time in its history, became a creditor of the International Monetary Fund to decide to buy bonds from the institution for a total of 10.000 million. The Spanish investor has three ways to approach this market: through specialized investment funds, with Brazilian stocks listed on the market Latibex (Latin American stock index in Euros) or by purchasing securities of companies in our country with significant interests in the region, such as Telephonic, Santander and Repsol.

The main issue underlying the attraction of Brazil as a tempting market for investors, both individual and institutional, is its economic strength. It also seduces her ability to overcome the crisis in a more graceful than neighboring countries and, above all, that the major developed economies. There is political stability, its growth is sustained, has a healthy financial system, a central bank that follows a conservative and a wealth of raw materials like oil. The head of emerging markets at Thread needle, Julian Thompson, also highlights the efforts of this economy to address the crisis. In his view, will have negative growth in 2009 but is expected GDP growth of 4.5% in 2010. Brazil has been the strongest economy in the region and has the capacity to continue at this pace over the next five years. The credit market begins to take off now and is confident that the consumer is still alive. He agreed with that assessment Alberto Ades, chief Latin American economist at Citigroup, who estimates that Brazil is the Latin American country with better prospects. In September was revised upward the growth of this market, along with Argentina, Venezuela, Colombia and Costa Rica. The country has benefited from the significant shift in the international context, improvement of activity in industrialized economies and the high level of liquidity.

Although it will have negative growth in 2009, it expects a GDP growth of 4.5% in 2010

Public expenditure has increased due to fiscal stimulus programs were launched in late 2008 to avoid a crisis, but is in good shape. Its fiscal deficit not exceeds 3% of GDP in 2009, its debt will be below 40% of GDP and inflation has moderated to a level of 4%.

In the shadow of the Olympics

the Olympic Games represent a further incentive for this recovering economy. Although it is not reasonable to exaggerate its importance, the Games will provide economic boost to Brazil. The effort to invest in sporting facilities and transport, security and communications, housing, hotels and various services will be felt in the rhythm of activity. Direct investments are estimated close to 4,000 million dollars, but the impact on the rest of the economy could represent between 0.2% and 1% of GDP in the two or three years. A direct investment must be added the effect on the country’s image and service sectors: tourism, finance, trade fair, sports and real estate.

With these perspectives may be advised to diversify a portion of the portfolios of investors with positions in Brazil. One option is to use specialized funds, but you can also take advantage of the potential of the nation Rio bid if Spanish stocks with heavy investments in the Latin American market.

Investment funds

to exploit the potential of the region you can hire one of many investment funds that are traded on the Spanish market. Between domestic and foreign managers in our country are distributed around 50 investment funds in Brazilian equities, investing in listed companies. Their average earnings are around 43%, although some products are more profitable.

Among the best, is the HSBC GIF Brazil, rising by 123% so far this year? It follows the bottom of Credit Agricola Funds CCAM Brazil, with an appreciation of 110% since January. Other marketed in Spain earning over 100% are the BNY Mellon Brazil Equity, manager of BNY Mellon, the Brazilian Santander Equity, the manager of the Banco Santander and Credit Suisse Brazil Equity Fund at Credit Suisse. The DWS Brazil, the manager of Deutsche Bank DWS, rises a 101.18% so far this year.

The funds available for the small investor can subscribe with minimal amounts around $ 300. The management fees range between 1.5% and 2%. As a more diversified choice also marketed in Spain called BRIC, which invests in Brazil, Russia, India and China. An appropriate choice through investment funds specializing in Latin America based in the region or the BRIC group of countries, instead of investing in shares traded on the Sao Paulo Stock Exchange.

In any case, is a high risk option, only suitable for aggressive investors in profile and to diversify a small portion of the portfolio? Should not invest all assets in a fund of this type.

Latibex Actions

another way to invest in Brazil is through the underwriting of the companies listed on Latibex, the Latin American market in Euros. The weight of Brazilian stocks is very representative of the index, accounting for around 60% of the total. The rest is made up of Argentine companies, Peruvian, Chilean and Mexican. The economic outlook of the Brazilian market is excellent (low debt, high growth potential, strong companies traded on multiples. ), much lower than other emerging markets like China or India, and its companies are generally well managed. The Carioca’s are less indebted firms than those of developed countries and an increasing proportion are multinationals with significant weight in the overall context of the industry in which they operate. One of the largest companies, with more optimistic outlook for investment is Petrobras, which has signed agreements with the Spanish Repsol to jointly exploit oil fields in the Latin American country.

In Latibex listed other major firms such as industrial services Aracruz, Banco Bradesco or mining Gerdau, Usiminas and Vale Do Rio Doce. With the pull that the country can live thanks to the Olympics, especially the sectors of construction, materials, services and real estate, banking, transport, telecommunications and consumer could benefit. However, as is the case with equity funds specializing in Brazil, investing in shares is an option Latibex risk, only suitable for aggressive investors of Profile.

Spanish stocks with interests in Brazil

but the Spanish investor has more about certain actions of the National Stock Exchange, whose businesses are flourishing in Brazil for several years. Among others, include Telephonic, Santander and Repsol.

The Spanish telecommunications operator has launched a tender offer (public offer of shares) on the Brazilian carrier GVT, for what could become a leader in telephony in the region. Santander operates in the country with Santander Brazil, one of the largest banks in the market. The oil company Repsol, meanwhile, has in this country one of the areas that can provide more growth in the coming years, in July discovered new oil wells. Other less-capitalized companies in the Spanish Stock Exchange but with a presence in Brazil are the private security company Prosegur, the builder OHL, the insurer Mapfre and technology firm Indra information. The latter is now awarded a contract for the implementation of toll systems in major Brazilian highways.

Investment in these shares is risky, but being strong companies, it is less than that involves taking stakes in Brazilian investment funds or shares in Latibex. The volatility of these shares is lower than that of the funds and companies that market.

Beware the risks

Brazil is a growing economy, but not without risks. The global recovery is fragile and creating uncertainty. In addition, there will be elections in 2010 and, although politics is not a factor in investment decisions in the country, change is possible in economic tactics. If there are pressures on the type of modification may be affected the export-oriented sectors.

The main problem would be a shift towards a more expansionary fiscal policy which is considered necessary for an economy that is recovering well. Occur, would generate inflationary pressures in a difficult situation the Central Bank. You can not jeopardize debt sustainability, but generate an accentuation of the cycle and force to raise rates more than desired.

Brazil also faces the possibility that the global economy to contract again, or not recover. But it is not unique. High growth in China may not materialize, raw materials could suffer punishment and increased risk aversion funds would precipitate the departure of Latin American capital market