Brazil is the economic powerhouse within Latin America with a GDP roughly the size of the rest of the investable region combined. Despite a sharp decline in industrial production and GDP growth in the latter half of 2011, growth should pick up incrementally in 2012.
Interest rates in excess of 10% throughout 2012 will keep drawing foreign capital and put upward pressure on real-denominated assets.
Brazil is no stranger to capital and investment controls. Although global economic weakness should keep both inflation and exchange rates in line, beware renewed punitive taxes on foreign investment in the latter half of the year.
While opportunities for investment and excess returns within specific companies exist, investors may want to take a neutral position relative to other countries in the region.
Companies in the consumer goods sector held up extremely well despite the broader market sell-off. Brasil Foods (BRFS), and CIA de Bebidas Das Americas (ABV), both in the consumer space, increased 14.2% and 18.0%, respectively.
Tim Participacoes (TSU), a large provider of telecom services, was on track to post an increase until the downturn in July devastated the Bovespa. The stock is now off about 24.7% over the past year but should rebound once global uncertainties dissipate.