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If for no reason other than the scantily-clad revelers adorning the floats in its Carnival parades, Brazil is certain to gain some investor attention now that its annual pre-Lenten festivities are at hand.

But aside from the images permeating TV and computer screens this time of year, how about the investment climate in Brazil?

For someone not already invested in Brazil, there doesn't currently seem to be any compelling need to immediately get into the market

Worldwide, current markets generally present above-average risks to any stock investor, and extreme caution is needed to navigate through these uncharted waters. The depth and duration of any impending U.S. or worldwide economic downturn is still largely unknown. Hence, a prudent investor is most likely to remain on the sidelines at least until the end of the first quarter of 2008 and let the market go through its gyrations.

There is not yet an overwhelming mass of evidence that a significant economic and market correction has already occurred in Brazil.

The Brazilian market's Bovespa index, like most of the world's stock market gauges, fell victim to selling in January. It skidded to a closing low of 53709.11 on Jan. 21 from its all-time high of 65790.81 set on Dec. 6 of last year. But within a week, it had recovered to near the 59000 level. The brief setback could hardly be described as a bear market, especially in emerging-market terms.

Even at the trough of its January downward spike, the Bovespa held at levels no lower than four months earlier.

So when considering that nation's current economy, the logical conclusion is that failure to invest in Brazil at current levels doesn't necessarily mean missing a great buying opportunity. There will very likely be plenty of time for investors to find bargains in mid- to late 2008 and beyond.

Brazil's economy has undergone some much-needed changes that could set the stage for more sustained growth and less volatility than in the past. Changes such as paying down its debt levels and keeping a lid on spending are exactly what emerging markets should be doing in times of prosperity. If the global expansion slows, it will affect Brazil's economy in no uncertain terms, as commodity demand accounts for 50% of all of the nation's exports.

However, with a cleaner national balance sheet and policies that have attracted foreign investment, Brazil is in the best position it has ever been in to tackle the challenges of a global downturn.

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Brazil's economic growth in 2007, as can be seen in the accompanying table, came in at 5.3%, more than double its most recent 10-year average of 2.5%. This has resulted in an uptick in inflation and has strained infrastructure resources such as roads, ports and electricity. So a global slowdown may be just the tonic to get Brazil's growth rate back to more sustainable levels.

Additional investment in infrastructure is needed for Brazil's future economic expansion and international competitiveness. The prospect of a healthier national balance sheet will attract additional foreign investment to funds, likely boosting the nation's securities markets.

A glance at the high-double-digit returns in the accompanying table of funds with portfolio exposure of 20% or more in Brazil is likely to give pause to anyone tempted to jump in at current levels. The returns through the end of December seem to be discounting a lot of growth without providing much latitude for economic disappointment.

Commitments to funds with significant exposure to Brazil are more likely to turn profitable if made during periods of market weakness.

The table was created by searching Ratings fund database for open-end mutual funds, exchange-traded funds and closed-end funds with at least 20% of portfolio value in Brazilian-domiciled investments.

Most recently available portfolio data indicates that 806 U.S. open-end funds hold positions in 187 Brazilian investments worth an aggregate $76.9 billion. Twenty-three ETFs hold a combined $15.7 billion in 74 Brazilian companies, and 44 closed-end funds have positions in 50 Brazilian firms with a cumulative value of $831 million.

A nearby table lists the 10 favorite investments of U.S. funds, sorted by combined value of holdings of open-end, closed-end and exchange-traded funds.

The standard time-test principles of investing should be worth careful consideration when looking at Brazilian investments at current levels, namely: Capital preservation should overrule all else. Capital preserved in safe money market funds and the like are tantamount to bullets in a gun -- cash, the bullets, allows you to go hunting when the time is right.

Investment in emerging markets such as Latin America is an opportunity to keep in mind. An emerging-market component to any well-diversified and conservative portfolio of funds can prove a "kicker" for returns. The risks are higher. However, if the core of a fund portfolio consists of large-cap multinational funds as well as international holdings in mature economies, then an emerging market such as Brazil balances out the portfolio nicely.

Richard Widows is a financial analyst for Ratings. Prior to joining, Widows was senior product manager for quantitative analytics at Thomson Financial. After receiving an M.B.A. from Santa Clara University in California, his career included development of investment information systems at data firms, including the Lipper division of Reuters. His international experience includes assignments in the U.K. and East Asia.