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Should you invest in Brazil?

December 7, 2009

The million-dollar-question, these days, is what to do in 2010 with what’s left of your hard-earned money, right? And you have been bombarded by info that points at the so-called BRIC countries (Brazil, Russia, India and China) as the new Mecca for investors. Have I got your attention? Well, this blogger will give you some updated data on how the Brazilian Economy is evolving. I hope you will have enough information to make up your mind about future investments.

Let’s be clear about one thing: I am no financial adviser, just an observer. What I offer is an overview of important tendencies that might help your decision-making process. 

So, without further ado, let’s go. 

Growth – The Organization for Economic and Development Cooperation (OECD), which congregates wealthy countries, estimates that the Brazilian economy will experience a robust growth in 2010 and 2011, in the range of 4.5% (in 2009, the country had a zero growth). 

Stock Market  – Bovespa, the country’s stock exchange, based in São Paulo, grew almost 80% since the beginning of the year and almost recovered the losses of the former year.  Banco Central (the Brazilian equivalent of the American Fed) informs that the volume of foreign investments in Brazilian stocks in October was the highest ever. The net investment was close to US$ 15.5 billion, almost twice the former record, registered in December 2007.

Foreign capital – Big corporations are heavily invested in the country and this seems to be a growing tendency. Volkswagen will invest US$ 3.6 billion between 2010 and 2014, with the expectation that 4 million cars will be sold in the country in 2014. Ford announced the largest investment ever made in the country, US$ 2.3 billion.

Consumption  – The Economy minister, Guido Mantega, said this Monday that consumption is so intense that many products will be scarce in the market by Christmas. Just one example: by the end of the year, 3 million vehicles will have been sold in the country – a historic annual record.

Infrastructure –  The country still has a very high “custo Brasil” (it is costly to operate in the country due to corruption, lack of good roads and railways, insufficiently trained workforce and so on). According to a study just produced by the Instituto de Logística e Supply Chain (Ilos), the country has one of the worst infrastructures among the Bric countries and definitely behind the US and Canada. Brazil has less paved highways (only 212,000 km), way less railroads (29,000 km) and pipelines (19,000 km). In terms of waterways, Brazil is the second worst (14,000 km), because Canada has only 600 km.

Human Development Index – The United Nations Development Program (UNDP) just released their study that compares countries according to three criteria: income, education and life expectancy. Brazil improved its index (from 0,807 to 0,81 in a scale between 0 and 1) but it is still in the 75th position (182 countries were evaluated). Among the BRIC countries, only Russia is ahead of Brazil. 

Analysts – Foreign analysts offer a mix of euphoria and caution when evaluating Brazilian economy. A few days ago, Paul Krugman, awarded last year with the Nobel Prize in Economics, visited the country and said that Real, our currency, is overvalued and, in his opinion, that is dangerous; that the world should calm its enthusiasm for Brazilian economy; that maybe there is a financial bubble building up. On the other hand, “The Economist”  just published a 14-page special with a very positive tone (“Brazil Takes Off”).  It discusses the growth of the middle class, the strength of the banks and several commodities, and Brazil´s quick financial recovery. You choose your side. Personally, I tend to stick with the British magazine.

I hope this summary might be helpful in your decision-making process. Please, give me some feedback, because I intend to publish this type of report every couple of months.

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2 comments

  1. Great blog, first time I’m reading it, and the topic is great, though I am not an investor yet, I am one deciding on taking part on the making of the great new Brazil. I’m planning on moving to Brazil this year, and hopefully work in the international-trading area. Hopefully all works out for the best, but you can never know until you try, right? Well anyways, keep up the good work on the blog, congrats.


    • Thanks, Vitu. I wish you the best of experiences in Brazil. Who knows, maybe I could interview you in six months on your experience as a fresh immigrant?



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