Here are some eye-catching stats about Brazil:

  • 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%.

I don't hold Pollyanna notions that Brazil is the perfect investment scenario (does such a thing exist?), as crime and corruption are rampant. The corruption is systemic and institutional and is so corrosive that it must be acknowledged and confronted, or all of these potential opportunities will be ephemeral. This overriding concern on the Brazilian economy and society is the linchpin of a bright future or a doomed repeat of history.

In my opinion, Brazil as a whole currently represents a much better investment environment than does the U.S.

Warren Buffett seems to agree with me, to at least some degree. For some time, Buffet held a mystery currency position that was later revealed to be the Brazilian real. In a Financial Times interview in February, Buffet said:
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.
Patrick Schultz is a research associate at TheStreet.com. He has previously obtained securities licenses under the NASD's Series 7, Series 24, Series 52 and Series 63 exams and has worked in the financial markets on various trading desks in addition to trading for his own account. Schultz holds a bachelor's degree in applied economics from Cornell University.

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