International Living Postcards--your daily escape -
http://www.internationalliving.com/
Brazil has had some good fortune lately. Just two weeks ago, Standard
and Poor=92s upgraded the entire country and nine of Brazil=92s banks to
=93investment grade.=94
Almost immediately, pension funds and hedge funds from around the
world poured money into this BRIC nation. In fact, Brazil sold over
$500 million in bonds to these hungry investors. That doesn=92t even
count the investment assets that poured into Brazil=92s stocks, real
estate, etc.
Brazil=92s tax revenue also jumped 13% last month alone. Household
income has increased, unemployment has gone down, and their booming
real estate market has all added new money into the government=92s
coffers.
Brazil has made huge strides in recent years. Just 20 years ago,
Brazil was an entirely different country.
The largest economy in South America was drowning in debt. The
Brazilian currency, the real, was practically worthless. And even in
the 90s, Brazil was still trying to get its act together and dig
itself out of years of debt.
Today, it=92s a completely different story. For the past decade,
Brazilian officials have capitalized on its expanding commodities and
completely rebuilt the economy from the inside out.
And now, Brazil is one of the hottest emerging markets on the planet.
I believe Brazil will continue to soar for years to come. I say that
because Brazil=92s economy expanded 6.2% in just the fourth quarter
alone (when other economies around the world were slowing). That's the
highest growth rate since 2004.
Brazil=92s currency, the real, has now gained 28% against the buck in
the last four years. That=92s the very best performer of the top 16
currencies of the world.
And right now, things have never been better for Brazil. Petrobras,
Brazil=92s state-owned oil company, is hiring another 14,000 engineers,
geologists, and drillers as they tap into the biggest crude discovery
in the Western Hemisphere since 1976.
In fact, this latest =93oil find=94 may allow Brazil to overtake all of
OPEC=92s output with the exception of Saudi Arabia. So this will be
huge. It will provide a huge base going forward for Brazil to divert
some of their oil money into other viable investments.
Money just keeps pouring in as the demand for Brazil=92s bonds, stocks,
and commodities continues to pump money into their economy.
So what will Brazil do with all this new found money? Brazil=92s
reserves have already doubled since 2006 to a whopping $195 billion.
Not bad for a country that had trouble paying its debts just a few
years ago.
Brazil=92s policymakers have considered many options lately. Rather than
touch their $195 billion in reserves, they have decided to start a $20
billion Sovereign Wealth Fund (SWF). This new SWF would take this new-
found wealth and diversify it into many different investments.
What=92s the plan now? First, Brazil=92s policymakers will use the
proceeds from the recent bond sale to pay off more expensive debts.
Then they=92re planning to build their Sovereign Wealth Fund. They=92ve
already announced they=92re investing at least part of that $20 billion
in U.S. dollars.
Brazil=92s policymakers are also planning to use part of this money to
buy rivals overseas, fixed income assets, and finance companies
seeking to invest in their operations.
Brazil is becoming more solid all the time. And as they diversify
their income streams, Brazil=92s leaders will just create a brighter,
more stable future for themselves.
I find it interesting that they feel buying dollars at this point in
time is a worthwhile investment. You only buy things because you think
they will go up in value...as far as investments are concerned.
Even the epic dollar bear Jim Rogers agrees there could be a short-
term dollar rally. He estimates that it may only last about a year.
He=92s going to use that dollar rally to finally exit his dollar
denominated assets.
He also stated another reason why the U.S. dollar may rally for about
a year: America is a huge agriculture producer. The world is in dire
need of agricultural commodities, so our American farmers are going to
pick up the slack where the economy has fallen.
So in the near term you can see that both Brazil and Jim Rogers are
betting on the greenback.
Now in the longer run, Rogers believes the commodity dollars
(Australian dollar, New Zealand dollar, and the Canadian dollar) will
do better than those that aren=92t commodity ex****ters during this
commodities boom. In fact, he especially emphasized his Aussie dollar
position (and since Brazil is also a =93commodity currency,=94 I believe
it will prosper right along with these others that Rogers has
listed).
So don=92t get me wrong, over the years, the dollar will have problems.
But in the next few months, there's money to be made by investing in
dollars and Brazil knows it.
Sean Hyman
For International Living
|
