ETF Investing in Brazil

A few weeks back, we presented the investment case for Brazil in our post The Case for a Brazil ETF.

Despite signs of slowing economies in other parts of the world, Brazil continues to deliver good news.

Some recent examples – all from May 2008:

  • “High food prices will allow Brazilian farmers to invest more and improve crop yields”
  • “As top oil exporters hit trouble, historically marginal players such as Brazil and Kazakhstan are likely to play a greater role”
  • “Brazilian-managed beverage giant InBev isn’t a household name in the U.S. now, but if it proceeds with its unsolicited bid for Anheuser-Busch, its high-octane corporate culture could easily overwhelm the iconic U.S. brewer.”
  • “Singapore state investment firm Temasek Holdings announced plans to boost its presence in Brazil to tap growth in Latin America’s emerging economies.”
  • “Brazil was raised to investment grade by Standard & Poor’s. That sparked a rally in that country’s stock market. Also helping was news that Petrobras had found one of the biggest new oil fields in the Western Hemisphere in three decades.”

As we mentioned in the last post, iShares MSCI Brazil Index Fund (NYSEArca: EWZ) is the leading ETF for gaining exposure to Brazil. Almost half of the fund is invested in Brazil’s mega-cap resources companies Petrobras and Vale. The rest of the fund is spread across banks and rising stars such as SID, a large integrated steel maker.

Other ways to play Brazil

While EWZ is the only strictly Brazil ETF, there are other ETFs that provide substantial exposure to Brazil while diversifying some of the single country and industry risks.

For example, the iShares S&P Latin America 40 Index Fund (NYSEArca: ILF) has significant holdings in Petrobras (16%), Vale (21%) and SID (5%) while also holding other Latin American leaders such as wireless giant America Movil (NYSE: AMX) and Mexican stalwarts Cemex (NYSE: CX) and Telmex (NYSE: TMX).

For investors that like the prospects of Brazilian steel, but want to shy away from exposure to financials or oil, check out Van Eck Global’s Market Vectors Steel ETF (Amex: SLX). SLX actually has a more concentrated combined exposure to Brazilian steel companies Vale (12.7%), Gerdau (5.9%), and SID (5.7%) than does EWZ.

For yet another way to gain exposure to Brazil, see our post Claymore ETF Provides 4 in 1 which covers the Claymore/BNY BRIC ETF (Amex: EEB) which is over 50% weighted towards Brazil.

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