Political risk in this year’s Brazilian presidential election isn’t severe enough to faze investors. Latin America’s economy will see some healthy growth, led by the quickly-expanding Brazilian economy. Additionally, Brazil exchange traded fund (ETF) investors may now track the country’s financial sector.
Investors are finding that the current presidential election in Brazil looks less risky than most elections since the main contenders favor the market-friendly policies already in place, which include a free-floating currency, inflation control and fiscal discipline, writes Raymond Colitt for Reuters. Additionally, both candidates agree on the need for an overhaul of the country’s convoluted tax system to encourage foreign investment.
Finance Minister Guido Mantega announced that they will have a budget surplus target of 3.3% of GDP for the year.
The International Monetary Fund (IMF) recently stated that Latin America’s economy could expand a higher-than-expected 5% for the year, report Luciana Lopez, Guillermo Parra-Bernal and James Matthews for Reuters. Brazilian economists are even more bullish, predicting that Brazil’s economy will grow 7.2% this year. [Brazil ETFs: Growing, With Room for More.]
Global X Brazil Financials ETF (NYSEArca: BRAF) – the first ETF to target Brazil’s financial sector – began trading last week, notes Ron for Benzinga. The underlying index, Solactive Index from Structured Solutions AG, weights each component proportionally to free-float market capitalization. Individual holdings are capped at 10% in the highest tier and the next tier caps stocks at 4.75%. BRAF has an expense ratio of 0.77%.
Brazil’s financial sector happens to be robust and benefits from years of restructuring. Financial investments in Brazil are estimated to expand by 22% annually through 2020. Bruno del Ama, CEO of Global X Funds, says that “Brazil is establishing itself as the financial center of the region, thanks to strong macroeconomic trends over the past half decade of decreasing fiscal debt and unemployment, rising credit and industrial production.” [10 Steps to an International ETF Portfolio.]
For more information on Latin America, visit our Latin America category.
You can easily get exposure to the Brazilian economy by using the ETF Analyzer and searching “Brazil.” When you sort for performance, you’ll see that Market Vectors Brazil Small-Cap ETF (NYSEArca: BRF) is the top-performing Brazil ETF in the last six months. Others include:
- iShares MSCI Brazil ETF (NYSEArca: EWZ)
- Global X Brazil Mid-Cap ETF (NYSEArca: BRAZ)
- EGS INDXX Brazil Infrastructure ETF (NYSEArca: BRXX)
- iShares S&P Latin America Index (NYSEArca: ILF): Brazil is 61.9%
- SPDR S&P Emerging Latin America (NYSEArca: GML): Brazil is 64.3%
Max Chen contributed to this article.