Brazil is sexy and not just for obvious reasons (don't you dare click to enlarge photo). While I've been a long time Brazilian bull, we are starting to see it more and more in the popular press. Which is beginning to get me nervous. The more something turns into a consensus, the more crowded a trade becomes (in the near term). The long term does not change of course...
There are a limited amount of ways to play Brazil for American investors. We have energy giant
Petrobras (PBR), mining giant
Vale (formerly CVRD) (RIO), 2 major steel makers
Gerdau (GGB) and
Companhia Siderugica (SID), 2 major banks
Bradesco (BBD) and
Banco Itau (ITU) (
no subprime I promise), homebuilder
Gafisa (GFA), and a few regional consumer related names, along with an airline. Or
iShares Brazil (EWZ) if you want the country ETF (but its top heavy in PBR and RIO)
Now compare that to China where we are flooded with a hundred companies of all shapes, sizes, and hype. With that said, as I keep saying, Americans are very inward looking people with belief that if it does not happen "here", it does not matter. That's a quite arrogant/narcissistic attitude that is coming home to roost. And if said attitude continues it will consistently hurt us more and more, as many other parts of the world grow, evolve, and prosper. Much of it happening with our dollars, as our massive debt/consumption finances their upswing in lifestyles. (
Jan 21: A Tour Through the Middle East) With eyes closed to it, it can only hurt more.
Here are two stories just in the past few days
Wall Street Journal: Brazil Joins Front Rank of New Economic Powers
- For much of the decade, slow-growing Brazil seemed out of its league lumped in with the dynamic emerging economies of Russia, India and China in the so-called BRIC group.
- But slowly and without great fanfare, Brazil's economy has turned a big corner. Already a global power in agriculture and natural resources, Brazil has added a key ingredient that had long eluded it: a currency with staying power. (we used to have one of those) In turn, that's helping unleash the greatest burst of prosperity the country has witnessed in three decades, attracting foreign investors by the score and providing a growth engine for a flagging global economy.
- Brazil has enough money lying around that Monday it announced it would follow other booming countries like China and Persian Gulf oil states in setting up a sovereign-wealth fund, worth between $10 billion and $20 billion, to invest its excess cash. (money lying around?... interesting concept - we don't believe in that here)
- Brazil's newfound stability has elevated millions of poor Brazilians into the middle class, making it the largest population bracket in a nation long known for having only haves and have-nots. (as opposed to some countries going in the opposite direction....)
- On April 30, another piece fell into place for Brazil when Wall Street ratings firm Standard & Poor's upgraded Brazil's debt to "investment grade" -- making Brazil the last of the BRIC nations to have its creditworthiness win that coveted seal of approval.
- The nation of 190 million inhabitants hasn't shed all its economic perils.
