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Health & Fitness

International Investing - Brazil

The world is a big place – there are over 190 countries and 7 billion people in the world, which really boggles the mind if you sit down and think about it. In addition to being an interesting intellectual exercise, this fact can also have broad implications for your investments and your financial future. It is easy to stay focused on U.S. firms, news, and events during the day-to-day grind, but it is always important to be aware of your surroundings – especially when it comes to your investments. With that in mind, this series of articles will focus on countries and investment opportunities outside the United States that you might not usually hear about.

As always, be sure to consult a financial services professional familiar with both the potential investment and your unique financial situation before embarking on any investment program.

Update: With the World Cup kicking off today/tonight it seemed appropriate to revisit the economic outlook for the host nation, Brazil. With abundant natural resources, growing trade ties with China, and status as one of the four (4) BRIC nations, Brazil has many positive attributes that make it an attractive investment option. As the World Cup preparations have shown, however, Brazil does face many challenges as it continues to advance economically. Corruption, bureaucracy, and a lack of coordination have led to numerous delays and cost overages on many of the projects due to be unveiled, at least at this point.

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Brazil

Since being dubbed one of the BRIC economies in the late 1990s by Jim O’Neil, former head of Goldman Sachs Asset Management, Brazil has justified the markets estimation of its growth potential. Led by China more recently, the BRIC economies and other emerging market areas helped carry the global economy out of the doldrums it was in as a result of the 2007-2008 financial crisis. In light of improving post-industrial economies, lower commodity prices, and outflow of foreign investments, it is reasonable to ask whether there is still opportunity left for investors.

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There are certainly some opportunities that are in Brazil that make it an investment option for investors looking to put money to work overseas. Brazil is rich in natural resources, which has helped it become energy independent with regards to oil and natural gas. Demand from China for these and other natural resources have also helped fuel economic growth. Favorable demographics and a government that is firmly committed, with both rhetoric and financial assistance, to improving the infrastructure of the country are two more powerful drivers behind the opportunities and economic potential present in Brazil.

When looking at investing in Brazil, there are two primary ways to go about it – ADRs or direct purchases. An ADR is basically a certificate held by a U.S. banking institution that represents a certain number of shares in the foreign company, and is held by the U.S. institution. This helps to cut down on the administrative fees and other costs that would otherwise be incurred. For more direct exposure, you can also purchase shares directly from Brazilian stock exchanges if your broker offers those services to its retail investor base (you and I).
Some of the largest firms in Brazil that are available include Petrobas (the oil & gas giant), Vale (a mining conglomerate) and Itau (one of the largest and fastest growing banks in South America). As mentioned above, the economy overall and market indices are heavily weighted towards commodities and natural resources, so that an additional item to take into consideration. Some of the commonly used ETF’s include iShares MSCI Brazil Index ETF, iShares MSCI Brazil Small Cap Index ETF, Global X Brazil Consumer ETF, Global X Brazil Financials ETF, and Global X Brazil Mid Cap ETF.

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