According to the Fisher equation, the real interest rate is approximately the nominal interest rate minus the inflation rate. While this equation is criticized for not holding in the short term, it does give a clear idea where attractive level of real interest rates could be found.
Considering together interest rate forecasts and Bloomberg CPI forecasts for 2010, the below table makes a quick and dirty calculation of the real interest rate for these emerging markets:
|EM||Nominal Interest Rate Forecast||CPI Forecast
|Real Interest Rate Forecast|
Brazilian economy has shown resilience and will be among the first countries that will be out of the recessionary context. Besides from a stable and strong government, the country has also benefited from being a commodity based economy. Moreover, FDI flows had been quite strong in 2009 as well as portfolio flows. The country's strength has been recognized by rations agencies with a BBB- rating.
Needless to say, there could be events such as inflationary surprises; sharp correction in commodity prices or political turmoil;etc; regardless of any negative surprises, the expected real interest rate of 5.85% has enough room to absorb any of these surprises.
Disclosure: No mention of stock
Disclosure: BRL TRY ZAR PLN