Will Brazil's economy continue apace?

The current market crunch is largely due to investor confidence. It's not like the investors don't have the money. They do, they're just unwilling to invest in several sectors, these investments are largely in commercial paper and mortgage-backed securities.



As many investors continue look abroad, the eye falls on Brazil and its potential.



Known for its vast resources, Brazil is only starting to get into its stride. Let's take a look at some figures.



The Bovespa index .BVSP has gained 43.5% this year alone. The Brazilian stock market comprises about 70% of the total investing done in all of Latin America. You can read about the Bovespa's history here.



Latin American mutual funds have been top performers, posting gains of 48-52% for the last 5 years, per annum. While the fund BlackRock Latin America I (MALTX) has a year-to-date return of 45.63%, the initial investment required is 2MM. However, for the rest of us,
the BlackRock Latin America A (MDLTX) fund has posted a year-to-date of 45.33%. The great news is that the initial investment is $1,000....this is more to my taste. (You'll notice both these funds have the same fund manager).



Let's take a look at the future resources Brazil has. They are the world's trendsetter for sugar-cane derived ethanol, used for biofuels. Read what one newsgroup says here. And, if that weren't enough, they have discovered what may be one of the worlds largest oil reserves. The Brasilian oil company, Petrobras, has discovered an oil reserve that would rival Venezuela and Saudi Arabia. You can find what the BBC News reports here. Apparently, Brazil isn't a member of OPEC....yet.



Lastly, the currency....is it for real? (this is the extent of my humour) The Brasilian REAL has posted gains of 20.8% year-to-date against the US Dollar. You can expect the demand for this currency to grow as Brazil's natural resource grow as well. People want to be associated with a country that has potential. The Real is here.



So, we have the following.



1. A Roaring Stock Market up 43.5% on the year

2. Latin American Mutual Funds performing 48-52% on average each year for the past 5 years

3. Strong in the Boifuels industry and if that tanks....we've got some serious oil here, folks

4. The currency is being gobbled up, and is up 20.8% year to date



Given these four factors, I'd say it's definitely a good investment strategy. However, someone should study a more developed country that's similar, and see what stage of that country's development Brazil would analogously be in...that might add some wisdom to this article.



I do believe one thing. As the credit market continues to feel the crunch, and as Central Banks across the world seek to add liquidity, we don't see this kind of news coming from Brazil. Sure, they're creating liquidity, but not as much (it would appear) as other central banks. Given this, they're a good investment.