Mention Brazilian supermodel and the name that immediately comes to mind is Gisele Bündchen.While Ms. Bündchen remains hopelessly out of our league, there is another supermodel far more accessible to us mere mortals. It's Brazil's stock exchange, the Bovespa (^BVSP).
Year-to-date, ^BVSP is up 56.5%. The 12-month gain for ^BVSP is 186.1%. And the five-year rise is 81.7%.
At the same time, our very own S&P 500 has suffered from a nasty bout of anemia by comparison. Year-to-date, the S&P 500 managed to squeeze out a 12.3% gain. But over the past 12 months, the S&P 500 actually fell 19.8%. The five-year return of the S&P 500 is an impressive 55.8%.
Brazil's economy is built on real products that fill real needs -- in particular oil and agriculture. (Another leading indicator that just made news shows even more promise. I'll tell you about it in a moment.)
Petroleo Brasileiro SA (NYSE: PBR), the national oil company, has been setting a furious pace for the country's economy. Going by the name of Petrobras, the stock bolted a blistering 189.7% over the past 52 weeks. Sure, the company is riding record-high oil prices. But at the same time, it's aggressively exploring new finds.
If you're a fellow believer in Peak Oil, Petrobras is a shining ray of hope.
Petrobras is now the world's biggest producer of bio-fuels. Petrobras already supplies 48% of Brazil's cars with its sugar-beet ethanol. It also exports bio-fuels to Nigeria, India, Venezuela and other emerging economies. Petrobras is building the world's first major bio-fuel pipeline. By 2010, Petrobras will spend $54 billion on its bio-fuel and oil production and distribution facilities.
Petrobras is critical to the overall expansion of the Brazilian economy. Brazil's GDP surpassed $1 trillion last year -- making it the 10th biggest in the world and the third in the Americas. With its vast debt retired and the military junta relegated to history, Brazil is finally fulfilling it's destiny as the "country of the future."
Brazil grew to become the world's biggest soy exporter, a distinction it took from the U.S. in 2006. The Brazilian agricultural juggernaut turned into the leading producer of ethanol, poultry, sugar, coffee, orange juice concentrate and tobacco. Brazil's farm exports grew an average of 20% per year since 2000, the USDA reported.
Fed rate cuts are contributing to Brazil's boom. Brazil's dollar-denominated commodities trade makes things seem like a bargain when paid for in shrinking greenbacks. Plus, as a hedge against the swooning dollar, many traders invest in commodities to shore up their portfolios.
For emerging-market bulls like me, Brazil is a textbook case of how you can make money by following an alternative path to profits. Sure, the Brazilian economy has had a rocky ride at times. But take a look at the U.S. economy and you'll realize that no place is safe any more. We're entering a new age of volatility where everyplace is a roller-coaster ride.
When it comes to emerging markets, we're at an inflection point where you have to accept volatility as a given, and then figure out which markets are less volatile than others.
A great measurement of volatility is called Foreign Direct Investment -- or FDI. It shows how much money foreign companies are willing to inject into an emerging economy. If you factor sentiment into volatility, a robust FDI indicates a favorable sentiment.
New data from the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) showed that Brazil replaced Mexico as the top recipient of FDI in Latin America. FDI to Brazil grew 84% to $34.6 billion, versus Mexico's 21%.
For the first time, millions of Brazilians are able to take out mortgages and buy cars.
Hmmm...sounds like the USA during the ‘50s. So if you want to turn back the clock to a great investment, check out Brazil.
--Irwin Greenstein
