The iShares MSCI Brazil Capped ETF (NYSEArca: EWZ) is one exchange traded fund that confirms the old maxim “There is no such thing as a free lunch.”

Over the past month, EWZ, the largest ETF tracking stocks in Latin America’s largest economy, is down 1.7%. That does not sound dreadful, particularly when measured against the ETF’s recent track record, but what appears to be a docile decline has been anything but for EWZ investors.

From Oct. 27, the day after Brazil’s runoff election that saw President Dilma Rousseff narrowly win a second term, through Oct. 31, EWZ surged nearly 10%. From Oct. 31 through Nov. 17, EWZ would give up all of those gains and more as the specter of another Rousseff term set in.

Making matters worse, Jefferies said last week Brazil is vulnerable to losing its already tenuous grasp on an investment-grade credit rating. Jefferies said Brazil could lose its investment-grade rating in two to three years. In March, Standard & Poor’s lowered Brazil’s sovereign debt rating to BBB-, the lowest investment grade. At that time, market observers viewed a downgrade of Brazil to junk status as unlikely. [Brazil Could Lose IG Rating]

However, EWZ has managed a gain of 5.1% this week, confirming that if nothing else, the ETF is volatile even when compared to other emerging markets funds. That is a fact. EWZ has a three-year standard deviation of almost 25.6%, or more than 1,000 basis points higher than that of the MSCI Emerging Markets Index.

Throw in the dour state of Brazil’s economy, the nearly 27% one-month decline for Petrobras (NYSE: PBR), EWZ’s largest holdings along with other factors and it is safe to say there “easy money” and EWZ rarely go together.

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