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According to news sources, Brazil's government debt has been upgraded. This had been expected in the second half of this year. So, this announcement caught investors off guard and pleasantly surprised.


By raising the rating to investment grade, Brazil's cost of capital will almost certainly decline. Additionally, the upgrade opens the door for more capital that is restricted to investment grade only.

Recently, news regarding the large oil fields off the Sao Paulo coast of Brazil had stimulated much investor excitement. This excitement was tempered with comments regarding questions as to the size of the fields (as high as 40 billion barrels - Tupi and Sugarloaf/Carioca fields combined) and the complexity extracting the oil (up to six miles deep, among other factors).


Investment Strategy Implications

One of the investment positions in the Model Growth Portfolio is iShares S&P Latin America 40 Index (NYSEARCA:ILF) - Latin America 40, which is comprised predominantly of Brazilian issues, some Mexican issues (mostly energy), and a smattering of other Latin American companies.

More on this story as details become better known.

Disclosure:  Accounts managed by Blue Marble Research hold positions in ILF and EWZ (Brazil ETF). Neither Vinny Catalano nor any member of his family hold positions ILF or EWZ.

Source: Brazilian Government Debt Upgrade Good News for Latin American ETFs