Brazil's Next Growth Catalyst: The Middle Class
Would you like a nice cold beer with that steak? How about AmBev (ABV)?
And home purchases are also picking up, so how about looking at middle-market homebuilder Gafisa (GFA)?
Let me share an anecdote that exemplifies my opinion that we are tapping into the big consumer engine. On my recent trip, I spoke with several friends and acquaintances about the state of the Brazilian economy. Outside of the typical platitudes, one example stood out.
A good friend's family owns and operates factories that make retail products and clothing (sweaters, pants, shirts, etc.). For many years, their business mostly came from outside of the country (U.S., Europe, Canada). But now, 100% of their business is domestic. The factories are operating at full capacity, and they say that they have demand for 50% more than they can handle. This is the first time that the demand is coming completely and solely from the domestic consumer.Investing in Brazil does not begin and end with Petrobras and Vale. Think bigger. Think about the new Brazilian middle class and consumer who is ready, willing and able to spend like Americans in the 1990s. I am very bullish on Brazil, but in no way do I want to give the impression that Brazil is the perfect investment opportunity. In fact, it is far from perfect. In my final installment, I will detail a personal encounter with the institutionalized crime and corruption that plagues this emerging economy. This was originally published on RealMoney on June 26, 2008. For more information about subscribing to RealMoney, please click here.
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