Wall Street tends to take a very myopic view of the world – the view that the entire financial universe revolves around them and the United States. And that what goes on in other countries is unimportant.
It’s why many Wall Streeters have missed one of the greatest rags-to-riches stories in global economic history – Brazil. Brazil’s economy has gone from a “basket case” to being as solid as a Brick.
Brazil has made huge strides from the very debt-ridden, bureaucratic country of the past. Years ago, the country restructured its finances and has resisted the temptation to use economic crises, such as in neighboring Argentina, as an excuse to default on its obligations.
Yet, many on Wall Street still think of Brazil as a backwards “third-world” country that goes crazy every year, four days before Ash Wednesday for Carnival.
Perhaps Wall Street could use someone like Nicholas Copernicus. Copernicus was the famous Polish astronomer who – in 1543 – showed that the Earth was not the center of the universe.
Until Wall Street adopts a Copernican view of the financial universe and realizes that they are not the center of the financial cosmos, informed investors can take advantage of the many international opportunities they’ve ignored. Here is what you need to know about Brazil’s economy and some easy ways to invest in it.
Brazil’s Economy: A Success Story
Brazil has made great strides under current President Luiz Inacio Lula da Silva, commonly known as Lula. Lula took office on January 1, 2003 and he has, since being in office, run a very orthodox fiscal policy. The country has maintained fiscal and trade surpluses for the better part of his presidency.
Brazil’s highly capable central bank has followed a very strong monetary policy. They have maintained high levels of real interest rates, which prevented the economy from overheating and creating an over-expansion of credit – unlike the policies of others like the Federal Reserve.
In late April, the Brazilian central bank cut their interest rate from 11.25% to 10.25%. This leaves them plenty of room to cut interest rates further, if necessary, to stimulate Brazil’s economy. Again, this distinguishes the Brazilian central bank from the Federal Reserve and others, who have left themselves virtually no room to cut interest rates further.
Also, Brazil has long pursued a strategy of achieving energy independence from foreign oil. Brazil started its own ethanol program – based on its rich sugar crop, and offshore oil exploration using deep-sea drilling methods.
