Brazil is a growing economy, and the country is expanding its infrastructure to accommodate its rapid growth. The growth of Brazil’s economy, along with related exchange traded funds (ETFs), has been quite impressive, but the Central Bank is stepping in to keep the economy from burning out.
In addition to adding more infrastructure in anticipation of hosting the World Cup and the Olympics, Brazil will be expanding into the far reaches of its country for more efficient supply routes, adding around $14 billion worth of infrastructure in the coming years, writes Steven Simpson for Investopedia. [5 Infrastructure ETFs with Room to Grow.]
- EGS INDXX Brazil Infrastructure ETF (NYSEArca: BRXX) is a good play on the infrastructure build up in Brazil. The fund has 17% allocated to the metals space, almost 12% in independent power producers and more than 10% in transportation and electrical utilities.
According to a majority of analysts, Brazil’s Central Bank will likely raise its Selic benchmark rate 75 basis points to 11% to maintain sustainable growth and head off possible risks of inflation, report Andre Soliani and Iuri Dantas for Bloomberg. Inflation is 4.74%, which is above the bank’s 4.5%, and economists predict that inflation will surge to 5.42% before dropping to 4.8% next year. [6 ETF Plays for the Brazilian Economy.]
A recent survey of economists shows that Brazil’s economy is expected to grow 7.2% this year, with inflation exceeding the government’s target this year and the next. The Central Bank’s seasonally adjusted economic activity index dropped to 139.55 in May from 139.58 in April, indicating that the economy is slowing a little.
Despite Brazil’s rise in the world economy, bureaucracy and red tape is keeping the country from maintaining the potential that it could as regulations impede foreign direct investment, comments Stuart Grudgings for Reuters. However, larger states are making in roads to local bureaucracy, and a national “Super Simples” reform has unified some taxes for small companies. The next elected President will have to tackle the problems with bureaucracy at the federal level.
- iShares MSCI Brazil ETF (NYSEArca: EWZ)
- Global X Brazil Mid Cap ETF (NYSEArca: BRAZ)
- Market Vectors Brazil Small-Cap ETF (NYSEArca: BRF)
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.