Brazil's Next Growth Catalyst: The Middle Class
Editor's note: This was originally published on RealMoney. It is being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.
By now, we all know the recent investment-grade status of Brazil's sovereign debt, the large oil discoveries by Petrobras (PBR), and the vast mineral reserves held by Vale (RIO). But, there is so much more to this upside story.
In my opinion, the next growth catalyst will be the Brazilian consumer and formation of the Brazilian middle class.
Many investors in Brazil think that the opportunity begins and ends with commodities and minerals. This is much too short-sighted. I believe that Brazil is now entering the next leg of growth -- domestic demand.China Watch: Brazil's One Way In (Video) One way to get in on the action with China is to play Brazilian companies with Chinese connections. Patrick Schultz reveals how we can play one emerging market to play another. To watch the video, click the player below:
As the average Brazilian household begins to accumulate wealth and real disposable income, the next phase will kick in. We are starting to see it now. Think of Petrobras and Vale as the appetizers, with the creation of the middle class as the grand feast or, more appropriately, "churrasco" (Portuguese word for the fabulous Brazilian-style barbeque that I highly recommend). The formation of a Brazilian middle class will be a powerful generation-long boom cycle, not just the few years of a typical economic cycle. Think of Brazil as America in the post-World War II era -- massive construction, massive consumer consumption and massive optimism. How powerful is the consumer in the economy? In the U.S., the consumer accounts for roughly 70% of GDP, in Brazil, they account for roughly 60%. To take advantage of this new road to profits, invest with the new middle class in mind. Brazilians are just starting to save and invest. Credit growth is rampant. How about Banco Bradesco (BBD), Banco Itau (ITU) or Unibanco (UBB)? Brazilian consumerism is on the upswing -- how about a retail play like Companhia Brasileira de Distribuicao (CBD)? They are eating higher quality foods, how about some nice juicy shares of Perdigao (PDA) or Sadia (SDA)?
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
24/7 market commentary from Jim Cramer and 20+ veteran Wall Street gurus. Get access to the latest trading ideas on stocks, options, and ETFs as well as a real-time forum to see the pros exchanging their investment ideas.
- Jim Cramer + 20 Wall Street pros
- Intraday commentary & news
- Real-time trading forum
- Actionable trade ideas
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV