Brazil has surpassed Great Britain as the sixth largest economy in the world. Exchange traded funds pegged to Brazil have had a tough year, but their longer-term performance record on steady economic growth remains solid.
The iShares MSCI Brazil (NYSEArca: EWZ) is down about 25% year to date, but sports a three-year annualized return of about 24%, according to Morningstar.
“Brazil has beaten the European countries at soccer for a long time, but beating them at economics is a new phenomenon. Our world economic league table shows how the economic map is changing, with Asian countries and commodity-producing economies climbing up the league, while we in Europe fall back,” Douglas McWilliams, chief executive for the Center for Economics and Business Research, said.
According to Brazil’s finance minister Guido Mantega, if the economic trajectory does not weaken, the country might become “the world’s fifth-largest economy by 2015,” taking France out of fifth place. Brazil is anticipated to grow twice as fast as the European nations, reports Mayara Vilas Boas for Bloomberg. [Is Brazil ETF A Smart Investment?]
The latest CEBR report gave credit to a number of factors that have strengthened Brazil’s growth: The country is rich in commodities such as iron ore and coffee, the government maintains prudent fiscal management, and the currency has strengthened giving Brazilians more purchasing power. [ETF Chart of the Day: Brazil]
Brazil has the most stability from a geopolitical standpoint than any of the other BRIC nations. [BRIC ETFs in Focus]
The Brazil ETF, which was launched in 2000, holds assets of more than $9 billion. The ETF has high trading volume with about 16 million shares trading hands a day on average, according to Zacks Investment Research. [Brazil ETFs: More in Store for 2011]
Investor interest in Brazil has been so solid that providers have launched small-cap focused funds to access specific corners and sectors of the economy’s growth. For instance, the Market Vectors Small-Cap ETF (NYSEArca: BRF) is focused on consumer and industrial companies. The iShares MSCI Brazil Small Cap Index Fund (NYSEArca: EWZS) is weighted heavily in consumer discretionary firms, industrials and financials.
iShares MSCI Brazil
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.