ETF Spotlight: Brazil

November 13th at 9:45am by Tom Lydon

The market in Brazil has been impeded by consumer debt and regulation in the commodity sector. Focused exchange traded funds can give investors targeted exposure to the country while cutting the risk of single companies and regulatory hurdles.

“During that last decade the benchmark Brazilian Bovespa Index was up more than 300%. The future prospects are generally bright as Brazil has a lot of stuff in the ground the world needs, offering the promise of a more prosperous society,” Roger Nusbaum wrote for The Street. [Infrastructure ETFs for the Long Haul]

The success of Brazil’s economy has also equated into more government regulation and more consumer debt as the middle class has multiplied. For numerous other reasons, Brazil’s government is facing a cash flow problem. Politicians recently voted to take $2 billion in oil royalties to help close the gap on the $13.5 billion needed to update the infrastructure and transportation project needed to facilitate the 2014 World Cup and 2016 Summer Olympics, reports Benzinga on Nasdaq.

Various ETFs can give investors the bottom-up exposure to the rapid growth that will take place in the next few years. Despite the bottleneck cash flow problem now, the economy still has much to offer for the long term. EG Shares Brazil Infrastructure ETF (NYSEArca: BRXX) will capture the growth that is anticipated to take place if there is enough seed capital invested to get projects off the ground. The ETF is focused on utilities, industrials and materials, sectors that will grow as the economy does. BRXX is down 5.6% this past year, and has a 4.7% yield. [Brazil ETF Options Beyond EWZ]

The iShares MSCI Brazil Index (NYSEArca: EWZ) is a much larger fund, with more of a slant toward commodities. Analysts say there is more upside potential for the ETF, as valuations for Brazilian equities look cheap. About $2.3 billion has been put into Brazilian equities over the past few months, reversing the trend of outflows seen earlier in the year. EWZ is down 8.1% year-to-date. [Brazil ETF Still Raking in the Cash as Job Market Stays Strong]

EG Shares Brazil Infrastructure ETF

 

Tisha Guerrero 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.

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