Brazil’s policymakers’ fiscal and monetary actions enabled the country to regain its footing in the first half of this year. Leading indicators suggest that the there could be a speedy return to Brazil’s recent growth rates, reports Latin Business Chronicle. (Why this is just the start of the trend).

As the real has picked up its value, other countries and economies are not faring as well. Spain’s economy has lagged most of the other Euro nations, despite the return of investors. That’s despite Banco Santander raising $8 billion – more than three-quarters of which came from international investors – in early October when its local unit made its stock market debut. It was the world’s largest IPO this year. Read more on Spain here.

Brazil’s exports have been strong, thanks to demand from China for soy and iron ore. The improvement is also in part because of improved trade links with Asia and Africa. (Why ties like this are important for future growth.)

With the continued export diversification and active trade policy, along with a large and growing domestic market, the unique structure of Brazil’s economy could keep the country on top. (What else is shifting in Brazil to support economic growth.)

For more stories about Brazil, visit our Brazil category.

• iShares MSCI Brazil Index (NYSEArca: EWZ): up 118.4% year-to-date

• iShares MSCI Spain Index (NYSEArca: EWP): up 39.7% year-to-date

• SPDR S&P China (NYSEArca: GXC): up 64% year-to-date

• With a surge in domestic consumption bolstered by optimistic Brazilians, low unemployment and increased wages, Brazil’s economy is projected to grow 9% for the fourth quarter, comments Martin Denholm for Investment U.

• For the full year, Brazil’s GDP is projected to fall between 1% and 1.5% after a major blow to its export market, but the market has shown signs of revival. (Brazil getting lift from China).

• Deputy Trade Minister Welbar Barral expects foreign direct investment to grow 33% in 2010. Moody’s already brought Brazil’s credit rating to investment grade back in September. (Is there an emerging market bubble?)

• Labor Minister Carlos Lupi stated that Brazil’s economy added 230,956 payroll jobs in October, bringing the number of jobs added to more than 1 million this year, reports Isabel Versiani for Reuters. He also expects the number of new jobs will rise to 2 million in 2010. (Brazil’s growing middle class)

• Lupi projects the economy will grow 2% in  2009 and 7% to 8% in 2010 while analysts estimate growth of 0.2% in 2009 and 5% in 2010.

For more information on Brazil, visit our Brazil category.

• iShares MSCI Brazil Index (NYSEArca: EWZ): up 121% year-to-date

• Market Vectors Brazil Small Cap (NYSEArca: BRF): up 35.1% in the last three months

Max Chen contributed to this article.

Chinese factory output growth surged to a 19-month high in October. China, the world’s third-largest economy and a voracious commodities consumer, is widely considered a driver in a global economic recovery, reports Luciana Lopez for Reuters. The numbers gave investors the confidence they were seeking to move toward greater emerging market risk.

President Luiz Inacio Lula da Silva is confident that Brazil’s economy will grow by 5% in 2010 and expects foreign reserves to reach $300 billion, further signaling a recovery for the Latin American country, reports Alex Lawler for Reuters .(Why Brazil is worth considering).

Brazil’s strong pace of recovery is another signal that the rapidly growing country has emerged from a recession; it posted 8%-10% growth in the third quarter, reports Industry Week. (Read about how Brazil’s middle class will help to benefit ETFs).

For more stories about Brazil, visit our Brazil category.

• iShares MSCI Brazil Index (NYSEArca: EWZ): up 120.8% year-to-date

• Market Vectors Brazil Small Cap (NYSEArca: BRF): up 29.5% since inception

Some fear that this so-called “mindless money” is being thrown at these markets, distorting valuations and pumping up a potentially monstrous bubble. (Find out how bubbles form and how to avoid them). Several markets, such as Brazil and Peru, are up 100% this year.

Jason Zweig for The Wall Street Journal reports that as money pours into the ETFs, they must mechanically match their holdings to those in the emerging-market indexes. That forced buying drives up stock prices, attracting still more new money into the ETFs, spiraling stock prices even higher.

One issue is that holdings in emerging market ETFs might be too concentrated and not fully reflect the real economy. For example, the manager of iShares MSCI Brazil (NYSEArca: EWZ) notes that Brazil’s market has been top-heavy for years. Two big companies dominate the market.

Even if these assets have led to distortion, ETFs may soon become forced sellers anyway, Zweig notes. Tax rules state that ETFs can’t allow their assets to become over-concentrated in a handful of holdings. In general, they can’t keep more than 25% of their money in a single stock, and at least half of their assets must be in securities that each account for no more than 5% of total holdings.

As a result, the inflows emerging market funds have seen lately could compel some of the largest ETFs to begin selling holdings to come in under the 25% limit. (Why emerging markets should be represented in your portfolio).

For more stories about emerging markets, visit our emerging markets category.

Although the pace may eventually slow down, Barron’s reports that emerging markets still have room left to grow in the long haul. And for the time being, they may be the place to hide out as developed markets still work toward normalcy. In the near-term, growth rates in developed nations are expected to be lackluster, and much less robust than those in the developing world’s. (What you’re missing when you’re not globally invested).

Countries that are resource rich and developing are stockpiling cash and shoring up their balance sheets for a strong recovery and a growth spurt unlike any seen before. Earnings and  economic activity have been revived. Morgan Stanley feels that earnings in emerging markets have bottomed in the third quarter and they’re now set to climb again. (Why frontier markets could be even bigger).

For more stores about emerging markets, visit our emerging markets category.

There are a variety of ways to play emerging markets. There are broad funds, such as iShares MSCI Emerging Markets (NYSEArca: EEM), Vanguard Emerging Markets (NYSEArca: VWO) and iShares MSCI EAFE Index (NYSEArca: EFA).

There are funds that focus on regions, such as Claymore/BNY Mellon BRIC (NYSEArca: EEB) and BLDRSAsia 50 ADR Index (Nasdaq: ADRA).

Finally, there are single-country funds, such as iShares MSCI Brazil (NYSEArca: EWZ) and Market Vectors Vietnam (NYSEArca: VNM).

Keep in mind that the narrower you get in your exposure to emerging and frontier markets, the higher your risk will be. Be sure to have an entry and exit strategy before you invest. (How to follow trends).

Brazil is one step closer to joining the ranks of developed nations: its middle class is growing. For a country long divided between a small, wealthy elite and a vast army of have-nots, it’s a positive development that many believed was a long shot just a few years ago. (An investment upgrade by Moodys is also proof of the stable economy).

Alibaba reports that the true definition of a middle class is hard to define. Brazil uses a five-tier system to classify population by money. The middle tier, called Class C, comprises those with household income between 1,115 and 4,807 reals per month ($641 to $2,763). (What Brazil’s foreign investment tax means). This segment has ballooned to more than half the country’s total population.

The benefits of Brazil’s bigger middle class include:

• Programs have lifted 19 million people out of poverty and into this class
• They’re grabbing status symbols such as televisions and cars; new car sales jumped 20% in September
• The middle class can press for social change, improved schools and stronger political institutions
• They put a higher premium on citizens’ rights, such as multi-party elections and free speech

Mina Kimes for CNN Money reports that unemployment is down from its March peak, wages are up, and the Bovespa index, which tracks the country’s biggest stocks, has climbed 77% so far this year.  (Seven things to like about Brazil).

For more stories about Brazil, visit our Brazil category.

• iShares MSCI Brazil Index (NYSEArca: EWZ): up 92.6% year-to-date

• Market Vectors Brazil Small Cap (NYSEArca: BRF): up 64.5% since May inception

Turkey. Turkey is rapidly developing and there’s no indication that the economy needs aid from the International Monetary Fund (IMF). Growth in the economy could likely accelerate in 2011 after a return to growth in 2010. Turkey’s market index has been driven up by the banking sector, which makes up around 40% of the market. Bank earnings have been bolstered by a series of rate cuts that have reduced interest on customers’ deposits as lending rates remain high. (Does Turkey need more support?)

• iShares MSCI Turkey Invest Mkt Index (NYSEArca: TUR): up 179% since low; up 101.6% year-to-date

Russia. Next year’s growth could top 2% if oil prices stay high. Greater revenues from taxes on energy companies could also ensure this year’s budget deficit is smaller than expected. Economists believe Russia’s GDP growth may gain a foothold as soon as the fourth quarter because of fiscal stimulus. Additionally, the economy will pick up speed once oil prices increase and world economies recover. The Russian economy is dominated by resources and banking. (Russia’s potential stumbling blocks).

• Market Vectors Russia (NYSEArca: RSX): up 161% since low; up 139.5% year-to-date

Brazil. Brazil could sustain average annual economic growth of 5% over the next 10 years. Low inflation and sound fiscal policy have released a tide of investment in Brazil. For now, Brazil’s small-caps are benefiting from the carry trade. Companies are hiring workers to meet growing demand for manufactured goods and new homes. In 2010, Brazil’s economy is expected to grow 4.4%; this year, growth is expected to be around 0.12%. (Seven things to like about Brazil).

• iShares MSCI Brazil Index (NYSEArca: EWZ): up 125% since low; up 114% year-to-date

India. The Indian Prime Minister’s Economic Advisory Council expects the GDP to expand 6.5% to 6.75% in 2009-10, despite a potential decline in agricultural output. Inflationary concerns may be met by tighter monetary and fiscal policies in the coming months. Factors such as capital flows, domestic demand, portfolio flows and a strong savings rate have India in a good position to continue moving forward. (Why India could strengthen).

• WisdomTree India Earnings (NYSEArca: EPI): up 138% since low; up 88.2% year-to-date

Indonesia. A young population and a falling birth rate equate to a surge in the ratio of working population to the number of dependents. Circumspect fiscal policy has left the government with enough cash for infrastructure and public services. Indonesia may enjoy a period of political stability and does not rely too heavily on exports. Declining interest rates have helped boost consumption, which is around 60% of GDP. (Five points in Indonesia’s favor).

• Market Vectors Indonesia ETF (NYSEArca: IDX): up 180% since the low; up 155.6% since Jan. 20 inception

Max Chen contributed to this article.

To understand the implications of the new tax, it’s important to understand how iShares MSCI Brazil (NYSEArca: EWZ) works.

EWZ is a “cash create” product, unlike most ETFs where delivery is taken in the form of securities. Regulations in Brazil don’t allow in-kind share creations. Cash is taken in lieu of actual shares, and the money is taken and invested in Brazil.

When a market participant (MP) wants to create more shares of EWZ, there’s a fee associated with this creation that’s already built in. This new tax may eventually become a part of the fund expenses in the event that an increase in demand for EWZ leads to the creation of more shares.

According to its prospectus, Market Vectors Brazil Small-Cap (NYSEArca: BRF) also issues and redeems creation units primarily for cash.

Anything already issued in any fund is not impacted because it’s already in the local currency.

Meanwhile, money is flooding into Brazil. About $31 billion in foreign direct investment is expected this year. In turn, this news has upped their stock market and increased the value of the currency. The risk Brazil runs is the real getting too strong, which is a new problem for a country that has usually had to deal with inflation, reports Carl Mortished for Times Online.

This is what led to the tax: the country feared losing its foreign customers and exporters raised a ruckus, hence the 2% tax. While investors and the International Monetary Fund (IMF) initially balked, for the most part investors seem to feel the positives of growth prospects in Brazil outweigh the negatives of the tax.

For more stories about Brazil, visit our Brazil category.

• iShares MSCI Brazil Index (NYSEArca: EWZ): up 116.3% year-to-date

• Market Vectors Brazil Small-Cap (NYSEArca: BRF): up 86.7% year-to-date

• WisdomTree Dreyfus Brazilian Real (NYSEArca: BZF): up 34% year-to-date

Taking advantage of a recent sovereign debt upgrade, Brazil will raise about $1 billion in issuing global bonds that mature in January 2041 at a price guidance of 5.85%, write Rogerio Jelmayer and Claudia Assis for NASDAQ. Brazil’s investment-grade rating has allowed the country to issue bonds with longer maturities and lower debt service costs. (Read more about sovereign debt here).

Demand for Brazilian debt is strong and some participants except the Brazilian Treasury to increase volume up to $1.5 billion. Brazilian companies and banks raised around $3.65 billion from overseas bonds.

• PowerShares Emerging Markets Sovereign Debt (NYSEArca: PCY): up 37.5% year-to-date; Brazil is 4.3%

Brazil pledged its support to the International Monetary Fund (IMF) as a world emergency lender, reports Antonio Rodriguez for AFP. Brazilian Finance Minister Guido Mantega stated the government will spend $10 billion in IMF bonds to augment the fund’s resources.

The IMF projects Brazil’s economy will contract 0.7% this year and grow 3.5% next year. (More information on Brazil’s performance this year can be found here).

Emerging market economies are seen as leading the current global recovery. These countries are growing more influential through the Group of 20 (G20) and potentially gaining more voting rights in the IMF and World Bank.

• iShares MSCI Brazil Index (NYSEArca: EWZ): up 100.8% year-to-date

For more information on Brazil, visit our Brazil category.

Max Chen contributed to this article.