What Brazil’s ETF Has that Others Don’t

Brazil’s economy has turned a corner, according to the country’s president. If that’s true, its ETF could continue to enjoy the handsome performance it’s been delivering year-to-date.

President Luiz Inacio Lula da Silva announced that Brazil’s economy is showing signs of a recovery on all sides, thanks to a host of measures the country implemented to mitigate the effects of any recession.

• Employment and industrial activity are strong and on a growth pattern, and interest rates are at historic lows, says Ana Nicolaci da Costa and Ana Paula Paiva for Reuters.

• Foreign capital continues to pour in and the country is on track to be one of the first countries to officially exit the recession.

• Jason Simpkins for NuWire Investors reports that Brazil’s GDP likely grew 2.2% in the second quarter, and the Prime Minister is calling for economic growth by 4-5% this year.

• The gap between the country’s richest and poorest denizens has stopped growing and could even be shrinking thanks to tax breaks, increased consumer credit and cash transfers to the poor, explains Mac Margolis for NewsWeek.

Of all emerging markets, Brazil entered into the recession with a better prospect for recovery, as its solid banking system, low inflation and tight monetary policy allowed the government to prime the economic pumps with lower lending rates while other countries were practically giving money away.

• iShares MSCI Brazil Index (EWZ): up 73.3% year-to-date

Comments

[Paul Harper:]

The diversity on offer in Brazil regards export sectors is truly amazing, although EWZ is heavily reliant on commoditiy plays such as PBR & VALE.
I have been a long term holder of VALE & keep an eye on current affairs in Brazil as well (no expert). Lula has been doing a good job of managing the recovery, especially with regards to effective management of interest rates, but it also looks aas though he is taking a protectionsist stance.

www.bloomberg.com/apps...

Although this has not made me nervous (yet), it certainly makes one think. Petrobras is already state owned & controlled, re-nationalising VALE or any of the other large companies, would lead to investor flight, imo. This would have a detrimental effect on share prices in both PBR & VALE and ultimately EWZ too.

Aug 14 04:21 AM

[Alan Young:]

EWZ is too concentrated in a few commodities to properly reflect Brazil's economic health-- as today's dive illustrates (-2.6% as I write). BRF is the better ETF for Brazil's domestic market.

Aug 14 11:52 AM

[Mad Hedge F...:]

cvbn .Analysts having been paring back their negative forecasts for the Brazilian economy faster than a salsa dancer stoked with triple espressos, taking expected 2009 GDP growth from -2.5% to as high as 5% in mere four months. When last year’s commodity collapse knocked the stuffing out of the country’s exports, many feared a return to the serial crisis that plagued the home of the string bikini and the banana thong during the eighties and nineties. Remember all those sovereign debt defaults? Remember the generals? What a bunch a incompetents! Just because you can run a platoon doesn’t mean you can run a country. There is a lot more than just a commodity bounce going on here. Their banking system is now conservative and highly reserved, thanks to the draconian conditions we imposed on them 25 years ago. Too bad we didn’t follow our own advice! Once the bane of Brazilian planners, inflation is now down to a comfortable 4.5%. Now the government is cutting taxes to get the country back to its merry high growth, emerging market ways. Since I recommended Brazil at the beginning of the year, the Bovespa has soared some 77% ($BVSPA). Keep the ETF (EWZ) nailed to you short list, and accumulate on any substantial dips.

Aug 14 12:36 PM

[Nicholas1980:]

10 claps for mr. Mad Hedge F....great comment.
I'm amazed to see, hear and read that wall street or some i don't know what american investors thinks that Brazil is only in commodoties. I wonder if they have ever been there or when it's the last time they have been there. Brazil is a nation with diverse states, with plenty of natural recources, welcomes foreigners with warm hands ( if you forget the bureaucratie, what might change with a tax reform) and specially a young, dynamic, educated proud to be brazilian but still respect their background and a westernized population. I trully believe, by time with a tax reform, ( I think Brazilians will demand it by time) you can do anything in that country, and perhaps more than in the US. I also believe the 2014 world cup will wake up more foreigners to visit Brazil and where they will see the opportunities to stay and become a citizen. Brazil needs more highly educated foreigners who might not stay for the money, but more for the fun, new experience, and the beautiful people from different cultures who just make you stay. Of course money talks, don't get me wrong, but opportunities to teach other people something, those foreigners also exist.

Aug 20 02:47 PM

[jarco:]

BRF is a small/mid cp stock kluge of low visibiklity stocks. I'd prefer a managed mutual fund here with local ear to the ground presence ETF's don't bring. EWZ, while concentrated in Brazil's wheelhouse, are well know companies with transparency which is essential in any emmerging market.


On Aug 14 11:52 AM Alan Young wrote:

> EWZ is too concentrated in a few commodities to properly reflect
> Brazil's economic health-- as today's dive illustrates (-2.6% as
> I write). BRF is the better ETF for Brazil's domestic market.

Aug 21 11:45 AM

[Tom Lydon:]

Here are more reasons why Brazil's ETFs are worth looking at and another ETF to access the emerging market.

www.etftrends.com/2009...

Aug 21 12:13 PM