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Investing in Brazil

Brazil is currently in the midst of an economic boom of massive proportions. The Brazilian economy is roaring, following eight years of economic growth under President Lula da Silva and his predecessor Dilma Rouseff. In the past seven years the Brazilian real has roughly doubled in value against major world currencies such as the dollar, euro, and pound.

Goods and services are comparatively costly in Brazil, especially in major cities, while the stock market and real estate have reached stratospheric heights. For someone interested in investing in Brazil, these factors beg the question: Should I invest in Brazil, and if so, when and how?

Real Estate

It is no secret that economic growth brings inflation, driving up prices. Brazil, riding a commodities boom, has been markedly been affected, with inflation clocked at 6.5% last year. Real estate has reached almost otherworldly prices for an economy where the GDP per capita is only $12,800 .

That being said, Brazil could very well experience even further growth. Whether you should invest in Brazilian real estate depends on your time frame and your motivation. Do you want to live in Brazil for a lengthy amount of time. Or are you viewing it as an investment/rental property. It is impossible to predict whether the skyrocketing real estate market will crash back down to earth, or continue soaring. If you are planning on buying Brazilian real estate, invest with caution, as it has been rated by economists as one of the most over-valued markets in the world.

Investing in the Stock Market

Brazil’s stock market soared from 2003 to 2008, and then crashed back down to earth. Lately it has been moving more or less sideways. However, investment experts have praised investments in mining, energy, and agriculture as savvy bets with regard to Brazil’s economic priorities and statistics. Additionally, particularly with the upcoming World Cup and Olympics, investing in infrastructure, communications, or tourism is likely to pay off well.

A simple way to add Brazilian exposure to your portfolio is to invest in Exchange Traded Funds (ETFs). The iShares MSCI Brazil (NYSE:EWZ) is a broad-based option, while the EG Shares Brazil Infrastructure ETF (NYSE: BRXX) is a good way to invest in infrastructure, with exposure to telecoms, utilities, and road building sectors.

If you’re interested in investing in individual companies in Brazil, you’ll almost certainly take a look at Brazil’s economic giants Petrobras (petroleum) and Vale (mining). However, many experts suggest that better opportunities can be found in Brazilian companies with a more domestic focus. such as Gol Airlines, Brasil Foods, and Gafisa. All can be openly bought and sold on US exchanges through ADRs (American Depositary Receipts), and provide full financial information and disclosure in English on their websites. Gol Airlines has emerged as something of a Brazilian Southwest Airlines, offering low-cost fares throughout the nation.

Bra sil Foods, meanwhile has an impressive growth record, having cornered the markets in high-margin areas such as packaged and frozen foods. Gafisa is a large home builder, offering basic apartments to luxury villas and everything in between. They have posted revenue growth rates of 60% over the past five years.

Towards the Future

If you’re interested in investing in Brazil, log the hours doing the research, and most importantly of all, go and see this marvelous country for yourself. While it’s certainly true that investing in Brazil is not cheap, the demographics and statistics for Brazil look favorable as a long-term investment option. Whether you’re considering buying real estate, investing in Brazilian businesses, or even starting a business of your own, in the long-run, Brazil is certain to grow over the coming decades.