The Brazilian government last week announced its largest ever stimulus package aimed at increasing private investment in an outdated transport infrastructure system of roads, rail, and air transportation.
Brazilian stocks have been hit harder than other markets in Latin America, save for the obvious fallout in Argentina.
Brazil’s policy of weakening its currency to make exports more competitive has worked – maybe too well.
These are exciting times for a market that has lost 9.5% over the last two years between a sagging currency and a drumbeat of setbacks for the local heavyweights. That’s right, we’re talking about Brazil.
We’ve heard a lot over the years about the Chinese economic miracle: whole cities to build; roads and dams and power plants for well over 1 billion people. But these stocks haven’t lived up to that promise lately.
With all the twists and turns in the global markets, one could be forgiven for thinking there is nowhere left to make money — but that is rarely the case. There is always somewhere to turn and squeeze out a profit.
Brazil is entering a four-year cycle in which it will become the focal point of billions around the world for hosting the World Cup and Olympics. Along with the greater attention of those from around the world will come greater investments in Brazil’s infrastructure to make it a showcase for both events.
As the world turns its eyes toward Brazil, Brazilians are expected to turn their investments toward roads, highways, ports and other infrastructure spending.
Utilities are sometimes considered too confusing for casual investors to get involved with, but in Brazil, a wave of consolidation could make this an exciting sector — if you can trade it!
Follow the moving parts and pick your entry point: regional power company Neoenergia is looking to buy rival Elektro in a deal that could be worth up to $4 million.
It is hard to trade Neoenergia, but you can pick up its corporate overlord, Spanish utility Iberdrola (IBDRY, quote) as a proxy. Likewise, Elektro does not trade in ADR form and is not even a major constituent of the Brazil infrastructure ETF BRXX.
(It will be a 7% component of Emerging Global’s emerging markets utilities ETF when it launches, but so far that offering is indefinitely delayed.)
Or buy into a basket of potential sellers via BRXX. The portfolio may not contain Elektria, but is 11% weighted to power companies including CPL and CIG along with several more obscure regional names.
The roll-up of Brazil’s telecom sector was a huge opportunity for investors several years ago. Rolling up the power companies could be equally exciting in the next few years.