Political Risk Latin America Blog @PolRiskLatam

Brazil Positives and Negatives: Five ETFs Offering Exposure

Posted in News and Articles, Political Risk by politicalrisklatam on November 24, 2010

by Tom Lydon for Seeking Alpha, November 24th, 2010.

Brazil has become a magnet for foreign investors. Is exposure to the country right for you?

The Good. Brazil’s macroeconomic changes are setting up the country with economic responsibility and international credibility, writes Cinthia Murphy for IndexUniverse. The country’s taxes are among the highest in the emerging markets, which is keeping the government flush with cash. Inflation is under control, with a target of 5% for 2010. The benchmark lending rate, the Selic, is 10.75%.

Economists put Brazil’s growth at more than 7% for the year, reports Luciana Lopez for Reuters. Brazil’s debt-to-GDP ratio is 41%, yet government spending to pander to the voting masses instead of infrastructure projects has drawn criticism to the ruling party.

President-elect Dilma Rousseff will maintain market-friendly policies such as a free-floating currency, inflation control and fiscal discipline, reports Raymond Colitt for Reteurs. Rousseff will also keep a strong government presence in banking, petroleum and energy, but private companies will not be crowded out. She has also wants to lower interest rates, which are among the world’s highest.

The Not-So-Good. Brazil still has a long way to go. About one-third of Brazilians lack adequate housing, potable water and live with less than half the minimum wage, and around 10% of the population is illiterate. Additionally, most of the country’s infrastructure is severely inadequate.EGShares Brazil Infrastructure (NYSEArca: BRXX) is a direct way to play this growing need; it’s up nearly 30% in the last six months. (continue reading… )

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