During 2006, while India and China were all the rage Brazil’s exchange traded fund (ETF), iShares MSCI Brazil Index (EWZ), was up 45%. Carl Delfeld’s main concern is if Brazil’s economic recovery is sustainable or just another stage in the economic cycle. He says most of Brazil’s stock market growth is not due to economic growth but rather a result of the commodity boom. Inflation is low and an annual average growth rate of 2.6% is a crawl.  But the trade surplus is at $46 billion after paying off it’s debt. Brazil’s interest rates are high, but dropping, so the next factor will be if the president Luiz Inacio Lula de Silva can serve a prosperous second term.

The main problems Brazil faces in building a base for solid economic growth is directing spending to infrastructure projects; fair regulation; removing corruption in the labor force; increasing education standards and bringing down the 50% tax burden levels. Delfeld believes that even if Brazil takes incremental actions to better these issues, EWZ will continue its upward trend. The ETF was up 41% in 2006, and is down 4% this year.


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.