Published:
April 14, 2008
Until this decade, investing in Latin America was similar to a
canoe trip on the Amazon River: a potentially rewarding journey
-- but watch out for piranhas! A country's stock market
reflects its economy, and most Latin American economies were
characterized by instability, unpredictability, and wild
boom-and-bust cycles.
But since the turn of the century, we've witnessed a sea change
in Latin America. Thanks to the confluence of several positive
factors, the region's largest economies have become paradigms of strong,
stable economic growth -- and its stock markets have
surged as a result.
Several factors have contributed to the change: stable,
economically rational governments; increased exports thanks to
globalization and trade liberalization; and rising commodity
prices. With these positives as a backdrop, Latin American
stocks have delivered some of the world's highest returns this
century . . .
|
Country |
Total Return
Since 1/1/2000 |
| Argentina |
+353.7% |
|
Brazil |
+256.7% |
| Chile |
+201.0% |
|
Mexico |
+392.9% |
| U.S.
(S&P 500) |
+3.3% |
|
*Data
as
of March 31, 2008
|
As
you can see, if you're ignoring Latin America's investment potential, then
you're missing out on some of the most compelling economic growth
stories on the planet.
Many regions throughout Latin America are
enjoying a large-scale economic renaissance, falling inflation and
increasing political stability. And going forward, this
should power tremendous returns for the well-placed investor.
In fact, some Latin American
economies are now as admirable as any in the world. Just consider the case of Brazil .
. .
Latin America's Fastest-Growing Economy
Brazil has become the model of economic success for Latin
America. The region's largest country is blessed with a
wealth of natural resources and a diversified industrial base.
And its government finally has policies in place to help the
country take advantage of these blessings -- notably, inflation
has fallen to +3-4% a year,
versus a double-digit rate several years ago.
The worldwide increase in commodity
prices has been a huge boon to Brazil. Home to some of the
world's most fertile land, Brazil is a major producer of
agricultural products, many of which are in high demand throughout
the world. The nation's ample natural resources also include significant deposits of
iron and manganese, major offshore oil reserves, and of course, the Amazon
Rainforest.
Brazilian oil production
currently stands at 1.8 million barrels per day, up close to half
a million barrels per day since 2001. That's one of the fastest
rates of production growth in the world outside OPEC. With global
oil demand in a long-term uptrend and new supplies ever-harder to
find, Brazil's oil trove is a major positive.
In addition, Brazil benefits from a thriving industrial sector that includes
the fairly low-cost production of cars, steel, airplanes and
chemicals. Brazil is also benefiting from fast-growing services
industries -- its banking and telecom sectors are performing particularly
well. And finally, the nation's export economy remains
strong -- exports have risen by about +15% per year over the past five
years
All of these factors have helped Brazil's
economy post significant growth. The nation's gross domestic
product (GDP) now exceeds $1 trillion, ranking Brazil among the
world's ten largest economies according to the World Bank.
And recent economic indicators show Brazil is
continuing to deliver impressive growth despite the U.S. economic slowdown: in the fourth
quarter of 2007, the Brazilian economy grew +6.2%, its fastest pace in
several years. Going forward, Brazil should continue to post
annual GDP growth of at least +4-5% in the coming years -- about
2X or 3X greater than what we're likely to see here in the United
States.
Brazilian
Stocks Deliver +937% Gains for U.S. Investors
Investors have been quick to recognize
Brazil's transformation from an economic backwater into one of the
world's leading economies, and as a result, the Brazilian stock market has
boomed: the Bovespa Stock Index has gained +440.8% over the past five years, and it's up +33.1% over
the past year. It has
also held strong despite the recent global sell-off -- Brazilian stocks have
actually jumped +13.5% since late January.
In addition, the Brazilian currency --
the real -- has soared against the U.S. dollar in recent years and
remains a great candidate to continue to rise. Brazilian interest
rates are high -- 11.25% for the benchmark government bond yield
-- which encourages investors around the world to purchase reals.
Keep in mind that when the Brazilian real gains against the U.S.
dollar, it boosts the value of Brazilian stocks -- and their
dividend payments -- when translated back into dollars. This
currency effect provides a nice boost for U.S. citizens investing
in Brazil.
When you include the currency impact, U.S. investors have earned
sensational returns by investing in Brazil . . .
|
Five-Year
Total Returns
|
|
Country |
What
Local Investors Earned |
What
U.S. Investors Earned |
|
Brazil |
+440.8% |
+936.6% |
|
United
States |
+70.9% |
+70.9% |
|
Data
from April
2003 - April 2008
Source:
Bloomberg
|
|
Bottom line -- I believe we're still in the early
innings of a major bull market in Brazil. And as its economy continues
to grow, corporate earnings will follow suit. Brazilian stock valuations are
also attractive now: the Bovespa trades
at less than 12 times earnings, which is inexpensive given the
country's growth prospects.
Capturing 10.1% Yields in Brazil
There are many compelling reasons to
invest in Brazil. Aside from economic growth and capital
gains, the nation is also delivering abnormally high dividends,
and many individual stocks in Brazil are now dishing out yields of
6%, 8% . . . even 10% or more.
That's where my premium newsletter --
High-Yield
International -- comes in. It's the only
newsletter of its kind devoted exclusively to finding
high-yielding securities in today's best-performing foreign
markets.
In my April 2008 issue, I profiled some of the most attractive
dividend payers in the Brazilian market, including a rock-solid
electric utility that is expanding throughout the country.
Thanks to strong
economic growth and massive infrastructure investments, Brazilian
electricity demand is
booming, helping this firm deliver +21%
revenue growth and an impressive 8.2% yield. I
also featured
a Brazilian telecom that sports an
enticing 10.1% dividend
and has delivered total
returns of +476% over the
past five years. And this attractive high-yield play
now trades at less than ten times analysts' earnings estimate for
2008 -- a screaming bargain.
If you'd like to learn the names of these companies -- plus
receive a steady stream of foreign stocks, funds and other
investing ideas with abnormally high dividend yields each and
every month -- then I'd like to extend you a personal invitation
to try my premium international investing newsletter . . . High-Yield
International.
Visit
this link to learn more.
Nick Lanyi
Editor
High-Yield International
About High-Yield International
High-Yield International is
a monthly investment newsletter focused on bringing subscribers the
highest-yield securities in the world. By focusing solely on those securities
trading outside of the United States, this newsletter offers a host of relatively
unknown investment options that you probably won't find coverage of anywhere
else.
Many of these securities provide investors with annual dividend yields of 10%,
15%, even 20% or more, while also outperforming the major U.S. averages.
About Nick Lanyi[includes/bios/lanyi.htm]
|
