NEW YORK ( TheStreet) -- Brazil reported earlier this month a better-than-expected second quarter GDP growth of 8.8% year over year and a seasonally adjusted annual rate (SAAR) of 5.1%, outstripping expectations.

The strong growth rate prompted Roubini Global Economics to revise its 2010 growth forecast to 7.5% from 7.25% to 7.75%. However, growth has cooled from 9% year over year and 11.3% SAAR during the first quarter of 2010.

According to the Brazilian Central Bank, the country will record economic growth of 6.3% this year and 4.5% in 2011. Playing host to the 2014 FIFA World Cup and the 2016 Olympics, private and public sector spending in Brazil is bound accelerate beginning this year.

In terms of investments, banking stocks such as Itau Unibanco Holding ( ITUB), Banco Bradesco ( BBD), and Banco Santander ( BSBR - Get Report), and food & beverage stocks such as Brasil Foods ( BRFS - Get Report) and Companhia de Bebidas das Americas(Ambev) ( ABV) hold potential for the remainder of the year.

Since July, banking stocks have generated returns of 20% to 25%, while Ambev has gained 14%. This compares to a 14% increase in iShares MSCI Brazil Index ( EWZ - Get Report), and a 6.6% increase in the S&P 500. Banking stocks were discussed in our report on July 14.

According to Will Landers, portfolio manager of BlackRock Latin America A fund, Brazil's burgeoning middle class, with higher disposable incomes, is driving the loan market. Mortgage penetration as a percentage of GDP is 2% in Brazil, as compared to 73% in the U.S. and 70% in the U.K.

In an interview with Barron's, Landers said he expects Itau Unibanco, the country's largest private-sector bank, will benefit from offering a relatively new financial product: the long-term mortgage. On Ambev, Landers said, "Brazilians like their beer because the weather is so hot. As your purchasing power increases, you want to drink better beer."

During July, Landers' fund increased exposure to Brazilian equities from 68.7% to 72.1% month on month, while reducing in Mexico to 8.7% from 18.2%. The fund increased focus on Brazilian banks and cut exposure to Mexican telecommunications, which helped post a return of 11.9%. The fund yielded a 29% return during the past one year.

Karvy Global Services (, a subsidiary of the Karvy group (, provides specialized research in asset classes including stocks, mutual funds and insurance to leading Wall Street firms.