Invest In Brazil

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Brazil has for a long time also been synonymous with corruption, general bad government, and poverty. It is in fact a true rising power in the world. It is the “B” in BRIC. That is Brazil, Russia, India, and China. It is a potential nuclear power, with an increasingly dynamic economy. The 21st Century looks bright for the largest country in South America.

One way to invest in the Latin behemoth  is through mutual funds. There are dozens to choose from. Some funds are specific to Brazil and others are “emerging market” or “BRIC” funds. Though there are some winners in this area of mutual funds, I generally do not like mutual funds Brazilian or otherwise. They are expensive. Typically one pays a “load,”  read commission, to one’s broker that can be as much as 5% off the top. Add that such funds have internal fees that on average run 1.5%,  we are  soon talking real money.

A better way to invest is in individual Brazilian companies. There are a huge number of these, some of which have been highly profitable in recent years. There are opportunities in ethanol, timber, oil, telecommunications, and many other areas of the world economy.

Stocks however are subject to the risks we are all so familiar with. Management can run a company into the ground. A company can find itself on the wrong side of regulation, or it might just outlive its business model.

I personally prefer ETFs, or exchange traded funds. Like mutual funds ETFs spread risk across economies, but unlike mutual funds there are no loads, (though there are commissions to your broker.) ETFs can be “shorted,” and are also traded through the day like stocks unlike mutual funds that are traded at the end of the day.

Brazil has a particularly good ETF, which seeks to follow the Bovespa Stock Index (The Brazilian Stock Exchange), the Ishares MCSI Brazil ETF, EWZ. If you think things are bright for Brazil, EWZ is the easiest way to make this bet.


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