Brazilian stocks rallied, along with the nation's currency, as investment prospects brighten on the news that Rio de Janeiro will host the 2016 Summer Olympics, making the Bovespa the world's best-performing major index last Friday.

The victory was heralded by some as signaling Brazil's arrival as a major economy. Despite worries about Rio's high crime rate and lack of infrastructure, the chance to bring the Olympics to a continent that had never hosted the Games obviously worked in Rio's favor.

The B in BRIC

Brazil is the B in BRIC, a term first coined by Goldman Sachs (GS) in 2001. The main distinction is that "Chindia" has been developing a gigantic appetite for natural resources – energy, metals and agriculture, etc. to fuel their growth. In contrast, Brazil and Russia, are two of the very few resource rich countries capable of supplying these increasingly valuable commodities to the growing Asian economy.

Brazil's credit rating was raised to investment grade recently by Moody's Investors Service after the country built record foreign reserves and averted a prolonged recession amid the global financial crisis with a 1.9% GDP growth rate for the first quarter, powered by domestic demand. This growth by domestic consumer demand makes Brazil look very attractive to investors right now.

Growth Prospect

Based on Credit Suisse`s latest forecast, Brazil's economy will grow 0.2% this year and expand at a 5% rate in 2010. The Bovespa index has surged 57% in 2009 (see chart) on speculation that record low interest rates (currently at 8.75%) and rebounding prices for Brazil's commodity exports will bolster economic growth without fueling inflation.

The World Bank is predicting Brazil's economy would be the fifth largest in the world by 2016. The Olympics, together with the discovery of oil in the pre-salt area and the hosting of the 2014 World Cup soccer championship, will boost Brazil's global stature and add about 3% to 4% of gross domestic product in the coming years.