Is Brazil One of the Best Places to Invest?

The Summer Olympics are in full force. Even though they are happening during Brazil’s winter.

Against all odds, the opening ceremony went off without a glitch. And it was a clear celebration of the Brazilian way and its people.

The ceremony worked with a low budget, around GBP 3 million. A much lower figure than London’s extravagant GBP 27 million budget in 2012. Yet it was no less spectacular.

The organisers had to be creative. And armed with the famous Brazilian ‘jeitinho’ — that is to make something without many resources — they managed to draw the approval of the international press.

Cariocas — people from Rio — enjoy nature, sports and partying. It’s not surprising that the ceremony included all these elements. Coupled with warnings on deforestation and climate change.

And by having an athlete from every country plant a seed, they sent a clear message. These are not just Brazil’s problems, but everyone’s problems.

The South American giant even took advantage of the occasion to start up an old debate. That is the one between the Wrong…I mean the Wright brothers and Santos Dumont.

You see, Brazilians consider Santos Dumont the ‘true’ father of flight. The Wright brothers may claim that they flew a plane three years earlier than him. But they achieved the feat with help from wind and a hill. Santos Dumond was the first person to achieve flight without the help of any elements.

Brazilians kept the ceremony well away from any political or economic debate. Brazilian acting President Temer’s appearance was minimal. Just enough to draw some boos.

And once the music and samba schools started, they stole the show. And wiped away most of the criticisms that Brazil has been enduring for the past few weeks. That is, hazardous Olympic villas, protestors, dirty water.

But the opening ceremony is not the only Brazilian subject amazing the world. The Brazilian market is too.

Investing In Brazil?

According to a recent article by The Wall Street Journal, Brazil is one of the best places in the world to invest right now. Even with an economic crisis, Dilma’s pending impeachment and the threat of the Zika virus.

According to the article:

The MSCI Brazil stock index is up 60% year to date, at the top of 165 country indexes tracked by financial-data company MSCI Inc. The J.P. Morgan Emerging Markets Bond Index Global Diversified index for Brazil has returned 24%, the third-best performer among 66 countries, and Brazilian corporate bonds are ahead 22%.

The real is getting stronger against the dollar. And that’s not all. Brazil has one of the highest interest rates in the world, 14.25%.

Compare this number to the low or negative interest rates in most of the developed countries. It’s no surprise Brazil is attracting investors from all over the world.

Brazil has recently seen an economic recuperation. Some investors believe the country has touched the deep end and is now bouncing back. Others fear there will be a reversal if it is not followed by political reform.

But the macroeconomic data coming out from Brazil is not great. There may be a high interest rate. But there is also high inflation, a high debt to GDP ratio, and rising unemployment.

Yet developed economies are not doing much better. They are experiencing low interest rates, low inflation and low growth.

So is it that Brazil’s market is that attractive. Or is it that it’s the best of a bad lot?


Selva Freigedo,
For Markets and Money

PS: Selva recently joined the Port Phillip Publishing team as our macroeconomic analyst. She works closely with Markets and Money editor Vern Gowdie on his advisory service,The Gowdie Letter.

Selva Freigedo is an analyst with a background in financial economics. Born and raised in Argentina, she has also lived in Brazil, the US and Spain. She has seen economic troubles firsthand, from economic booms to collapses and the ravaging effects of hyperinflation, high unemployment, deposit freezes and debt default. Selva now writes from her vantage point here in Australia. She is lead Editor at the daily e-letter Markets & Money. And every week, she goes through each report and research note produced by our global network of trusted advisors to find the best investment opportunities for you in Australia and overseas. She packages these opportunities for you in Global Investor.

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