With the recent Operation Carwash scandal that has plagued Brazil’s elite, many international observers are wary of putting their hard-earned capital into a seemingly volatile market. But the maxim of “buy low, sell high” still applies to South America’s largest country. Assuming Brazil’s leadership can find a way to right the ship and grow the economy once more, investors in Brazil may have found the best time to purchase shares in Brazilian ADRs, country-themed ETFs and foreign exchange.
Igor Cornelsen, a top Brazilian investment banker, wrote an article in 2014 that still offers excellent advice on where to put your money in the Brazilian market. He makes three main points in the article, which we will explore below.
Firstly, learn as much as you can about the country from local people. Though the country’s middle class has been hard-hit by the Carwash fiasco, they know what their families and their friends are buying. Investors should do their due diligence and listen to the country’s citizens.
Investors should also be aware that Brazil has many protectionist policies to protect their fragile economy. Be prepared to deal with unwieldy regulations, but also know that investing in the right sectors can lead to great returns for your portfolio.
And though Brazil does not have the same level draconian foreign currency controls as Venezuela, they do exist and can be difficult to work around. Finding a bank that specializes in dealing with foreign currencies is key if one desires to trade in reais.
Ultimately, investors would be wise to heed the advice of Igor Cornelsen and do a great deal of research before taking a position in the country’s companies or currency at the present time. But if they do, they will find that they made the right decision.
Read more about Igor Cornelsen: http://xrepublic.net/2016/10/26/igor-cornelsen-explains-why-investors-should-look-to-brazil/