The largest ETF that invests in Brazil has gathered nearly $900 million in fresh assets in September after the country announced a stimulus package designed to jumpstart the sluggish economy. Also, some highly-respected investors and hedge fund managers say Brazil is their favorite choice in emerging markets.

Last month, Brazil announced a $66 billion stimulus to improve infrastructure and stoke investment. [Brazil ETFs Strengthen on Stimulus Measures]

The economy has slowed, which is reflected in the poor performance of iShares MSCI Brazil (NYSEArca: EWZ), which is down about 3% year to date and holds $10.2 billion in assets.

Still, some high-profile investors such as George Soros and Ray Dalio are bullish on the long-term outlook for Brazil.

Dalio, head of hedge fund firm Bridgewater Associates, added over $100 million to the Brazil ETF in the second quarter, his largest purchase, according to The Motley Fool.

“Like so many other countries around the world, Brazil is experiencing declining economic growth. But when investors like Dalio are going in, others should follow,” Jonathan Yates wrote in the article.

In a recent speech to a gathering of bankers in San Paulo, former president Bill Clinton said, “If I were just sitting in a room betting on the future of rising countries, I’d bet on Brazil first,” according to the report. [ETF Chart of the Day: Brazil]

Small-caps on fire

One bullish signal is that Brazil small-cap ETFs are outperforming in 2012. For example, Market Vectors Brazil Small-Cap (NYSEArca: BRF) and iShares MSCI Brazil Small Cap (NYSEArca: EWZS) are up 11.6% and 19.3%, respectively, year to date.

In fact, Brazilian small-cap stocks have risen to their most expensive level in three years versus large-cap shares, Bloomberg reports.

Brazil is one of the so-called BRIC countries along with Russia, India and China.

Jim O’Neill at Goldman Sachs, who coined the term BRICs, is upbeat on Brazil’s economic growth potential.

“For starters, he thinks the steps Brazil is taking to jumpstart its economy–from lowering energy costs and improving the tax environment–justifies ignoring the country’s recent economic slowdown. O’Neill doesn’t think the slowdown will last long and thinks the country can grow by 4-5%,” Barron’s reports.

“As often with Brazil, the mood has swung too far to the other side of reality…Within a few months, that mood will be back,” O’Neill wrote in a note.

Brazil will host the 2014 World Cup and 2016 Summer Olympics.

iShares MSCI Brazil

The opinions and forecasts expressed herein are solely those of John Spence, 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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