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The US isn't in the only game in town when it comes to important elections this year. In fact there's another election that ETF investors may want to keep an eye and that's Brazil's October 31st presidential run-off. It can be argued that the battle between the current administration's preferred successor, Dilma Rousseff and the more centrist Jose Serra should be over, but in the first round of voting earlier this month, a third party candidate pilfered enough votes from Rousseff that a run-off was forced.

Recent polls show Rousseff with a five-point lead, but you're probably wondering why you should care about this election. Well, if you own a Brazil-specific ETF like the iShares MSCI Brazil Index Fund (NYSEARCA:EWZ) or an emerging markets ETF that is heavy on Brazil exposure such as the iShares S&P Latin America 40 Index (NYSEARCA:ILF), you'll want to know the result of Brazil's election before enjoying Halloween festivities.

For months, pundits have been saying that the real issue with Brazil's election is will the winner continue the economic policies of the current president, Luiz Inacio Lula da Silva, commonly referred to as "Lula." Lula is widely credited with helping transform Brazil into a titan on the global economic stage. Hey, this is China's largest trading partner we're talking about.

Investors should be careful what they wish for with Brazil's election and here's why. Lula has spent heavily on social programs. We've seen here in the US, it's hard to stop that spending once it starts and once those programs have been around for a few years, it's even harder to do away with them.

Beyond that, the Economist ran a great piece earlier this year that said many of Lula's spending programs to support Brazil during the financial crisis are now becoming permanent fixtures and "lax fiscal policy" is making it harder for Brazil's central bank to control inflation.

I'm not sure Rousseff should be in the lead if she'll extend these types of policies and it has been documented that Serra is the preferred candidate for those want to see in some fiscal restraint in Sao Paulo. This is all wonkish stuff, so I'm going to boil the Brazil election issue down even further and focus on owning an ETF like EWZ of ILF that large-cap focused. One word for you: Petrobras (NYSE:PBR).

This is one of the largest oil companies in the world and it's also controlled by the Brazilian government. Petrobras is usually the largest or among the largest holdings in ETFs that feature big Brazil exposure. The company recently sold $70 billion in new stock to fund its exploration budget and that sale helped the government INCREASE its control of the company.

Somehow, Brazil-specific ETFs have been able to fight-off the Petrobras doldrums this year. EWZ and ILF are up XX% while Petrobras is the worst performing integrated oil stock in the world in 2010. That's right. Even BP (NYSE:BP) has done better. Petrobras's tumble underscores why owning an emerging markets ETF is often a better choice for may investors than trying to stock-pick in countries they're not intimately familiar with. Look at it this way: Almost everyone knows that Brazil's economy is on fire right now, but not everyone (plenty of brokers included) knows the devilish details about Petrobras.

The Other Election ETF Investors Need To Watch

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Beyond the $70 billion dilutive offering, Petrobras has said it will sell $60 billion in bonds over the next few years. Add that up and we have a company that will have issued $130 billion in new securities in about five years. That's a lot. Put another way, that's selling two Occidental Petroleum's (NYSE:OXY) worth of securities.

The outcome of Brazil's election probably won't be a "buy" or "sell" alert on November 1st, but I would actively monitor positions in a fund like EWZ if Rousseff does win.

Disclosure: No positions

Source: Brazil: The Other Election ETF Investors Need to Watch