While others were bogged down by the financial debacle, Brazil’s economy only dipped slightly below zero last year, and its related exchange traded fund (ETF) may show some solid growth this year. However, Brazil’s economy is still caught onto a couple of snags that keep it from achieving true prosperity.
Brazil is Latin America’s biggest economy, the 10-largest in the world and it may even jump to fourth place by 2050, reports Paulo Prada for The Wall Street Journal. For 2010, Brazil’s economy may expand by as much as 6%. [Brazil ETFs: Central Bank Targest Inflation as Economy Expands.]
Still, Brazil still has some challenges to meet:
- Corruption is widespread.
- Crime is rampant.
- The infrastructure system is in need of repair.
- Restrictive business labor laws are still in effect, which has spawned underground black markets.
- The government’s spending is a whooping 20% of GDP and debt is starting to creep up again.
That doesn’t mean Brazil is sitting idly by while the problems remain. Far from it:
- The Brazilian government will be announcing the second phase of its “growth acceleration program.” The original $342 billion infrastructure plan remains held up in bureaucracy, with only 11% of projects outlined completed and half yet to launch. [Play the Brazil-Mexico Rivalry With ETFs.]
- The government has its monetary instruments in strict control. The country’s fiscal prudence has provided the country with large cash reserves, which helped cushion the country from the downturn by providing quick credit flows.
- Brazil is a leading exporter of iron ore, steel, coffee, soybeans, sugar and beef, and they have just uncovered large new oil beds that are expected to increase output in the coming years. [How to Choose Emerging Market ETFs.]
Brazil has major impetus to get its affairs in order: in 2014, it will host the World Cup and in 2016, it will host the Summer Olympics in Rio. The country knows that the world will be watching, so they’re working hard to get camera-ready.
For more information on Brazil, visit our Brazil category.
- EGS INDXX Brazil Infrastructure (NYSEArca: BRXX)
- iShares MSCI Brazil (NYSEArca: EWZ)
- Market Vectors Brazil Small Cap (NYSEArca: BRF)
Max Chen contributed to this article.