Brazilian homebuilder Gafisa ( GFA) is now suffering from what U.S. homebuilders saw a few years ago. Demand for housing was very hot until a few quarters ago, when rising interest rates made it much tougher for people to secure new mortgages. Gafisa's stock, which traded in the mid-teens in 2010, has been in freefall and now trades below $6. The company began construction on 60% fewer homes in the fourth quarter of 201 than it did in 2010. (And 20% fewer on a full-year basis).

But the tide may turn in coming quarters. The Brazilian central bank has now cut interest rates in four straight meetings, and has signaled intentions to bring rates down further in coming quarters. Rates peaked at 12.5% last summer and could end up in the high single digits by the end of the year. (Brazil's fears of inflation will always keep this number high: it only got as low as 8.75% in 2009 at the depth of the economic crisis).

Don't expect a quick pick-up in Gafisa's business, but analysts spot an upturn beginning in 2013, when sales and profits should gain grow at a double-digit pace. That's a trend that can be sustained for an extended period in light of the powerful tailwind in place for the Brazilian economy. Shares trade for about six times projected 2013 profits, a clear bargain for those focused on the long-term.

To see these stocks in action, check out the Brazil Long-Term portfolio on Stockpickr.


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At the time of publication, author had no positions in stocks mentioned.

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