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.Brazil has been a much-discussed topic in investing circles for some time now, and having just returned from a recent trip there, I am eager to share with RealMoney subscribers my "boots on the ground" notes and perspective. It was instructive and fascinating to be a front-and-center spectator not only of the vibrancy of Brazil's blossoming economy and free market, but also of its captivating and energetic culture. Contrary to what Charles de Gaulle of France once wryly described as "not a serious country," the largest nation in South America, with a population more than 190 million people, is quickly becoming not only a regional powerhouse, but a major player on the global stage. In this multipart look at Brazil, my aim is to shed some light on where we are in the Brazilian growth cycle; to break down my trip, with regard to the many investment opportunities available; and I'll finish with a personal anecdote summing up the overwhelming challenges of its ugly legacy of crime and corruption. 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:
|Two years ago||Year to date||Last close||Two-year return%||YTD date %|
|Brazil -- Ibovespa||34,399.00||62,815.00||64,613.79||46.80%||2.90%|
|India -- BSE Sensex||9,884.51||20,465.30||14,293.32||30.80%||-30.20%|
|China -- Shanghai Composite||1,574.47||5,261.56||2,760.42||43.00%||-47.50%|
|Russia -- RTS Index||1,329.87||2,296.56||2,342.75||43.20%||2.00%|
- It has the world's largest farm-trade surplus at $27.5 billion -- compared with the U.S.' $4.5 billion, for example.
- Brazil's GDP went from $1.340 trillion in 2003 to $1.838 trillion in 2007, for growth of 37.1%.
- Since early 2003, the Brazilian real currency has returned over 50% against the greenback, which is now trading at R$1.63 (ouch for me on this trip).
- Brazilian interest rates in early 2003 hovered around an incredible 26.50% but are now vastly lower at 12.25%, allowing for additional capital and credit formation.
- Brazil's trade surplus rose to $4.08 billion in May, its highest level so far this year. Brazil is now a net creditor that paid back IMF loans early. In fact, the government has started on launching a sovereign wealth fund to invest capital surpluses.
- The country reached complete energy independence in 2006. In 2007, renewable sources of energy represented 45% of total production, compared with a world average of 14%.
The only currency we hold now is the Brazilian real. If you grew up like I did, then having a holding in Brazilian currency, you would have been committed someplace. In the last five years, the Brazilian real has doubled in value against the U.S. dollar, so if you were a Brazilian and you put your money in the American dollar, you lost half your net worth in your home country. And the outstanding thing about that is that during much of that period the Brazilian central bank was supporting the U.S. dollar.This is but one example of how things have changed for Brazil over the past several years. The story of Brazil is exciting, and in my opinion, it all starts with two companies, Petrobras ( PBR) and Vale ( RIO), both of which which I will discuss in the next installment. This was originally published on RealMoney on June 24, 2008. For more information about subscribing to RealMoney, please click here.