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Friday January 20, 2012
Street Smart bets on Brazil
by Sy Harding, editor Street Smart Report Brazil continues to impress as a country and an economy, due in no small way to its government’s multi-year efforts and determination to make it an important global presence. Brazil is the fifth largest country in the world by geographical area and population (190 million). It’s long been known for its dirt-poor city slums, which are appalling. But its booming economy of recent years has increased the purchasing power of its population and moved an estimated 20 million out of poverty. The increasing purchasing power of its population, and pent-up demand for goods, is an important factor in its solid economy and relative protection from the woes of the world. The country is blessed with an abundance of natural resources, including huge and growing reserves of oil and gas, is the world’s largest producer of sugarcane, coffee, and tropical fruit, and has the largest commercial cattle herd. Over the years Brazil’s government has undertaken several timely measures that are probably the envy of many global central banks. Among them, the Brazilian government strived to pay off debts before the credit crisis hit. Brazil’s stock market plunged in 2010 when its government began tightening measures to slow its over-heated economy. The Bovespa Index declined 45% to its early October low. It began rallying strongly off that low, triggering a buy signal on our momentum reversal indicators, and we believe Brazil’s economic growth prospects support the buy signal. The IMF estimates that Brazil, having passed the United Kingdom last year to become the world’s sixth largest economy, will next pass France, the world’s fifth largest economy, by 2015. It could happen even sooner. We believe Brazil is again presenting a buying opportunity, and we like the iShares Brazil ETF (EWZ). Learn more about this financial newsletter at Sy Harding's Street Smart Report. 
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