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Expert recommends investment in Brazil

Date added: 17th September, 2010 at 14:47
(view all articles from September, 2010)

Categories: Economy

Investment in Brazil is an opportunity one expert has suggested speculators consider, describing infrastructure improvement as a "promising theme".

Writing for MarketWatch, Jonathan Burton noted emerging markets are now sufficiently wealthy to work on transportation links and it is expected private enterprise will take more responsibility for the cost and liabilities attached to the projects.

This means worries some investors may have that government spending on infrastructure improvements could disappear due to global economic weakness is "largely overdone", the specialist said.

Alec Young, international equity strategist at Standard & Poor's, told the commentator: "There's less doubt about growth and less debt at the consumer, corporate and government level."

There is a lot of potential for expansion in Brazil and other emerging markets as well, he added, while an increasingly young population is also a plus.

Mr Burton reported developing countries were forecast to plough over 100 times the amount of funds into improving their infrastructure than the US, with an estimated $6.3 trillion (£4 trillion) expected to be dedicated to the cause - part of which will be spent in Brazil.

Among the motivations behind this investment is the number of skilled jobs building new links will create, while sanitation and living quality in the nation will also be bettered, the expert explained.

Kate Moore, global equity strategist at Bank of America Merrill Lynch, told the journalist the improvements will also encourage stable growth, as more businesses at home and abroad could be attracted to the nation.

Social stability is "the best way to provide a sound economy", the industry professional added, while making changes like introducing electricity can help governments secure voters' favour in elections.

One of the main reasons Brazil and other developing countries are eager to build infrastructure, however, is the rapid expansion of their populations.

According to Mr Burton, over one million people enter cities in emerging nations every week, either through birth or migration from rural to urban areas.

In Brazil, the upcoming 2014 World Cup and 2016 Olympics, which will be held in the country, are other drivers behind infrastructure investment.

For speculators, ploughing money into emerging markets can also offer good returns, as compared to firms based in more advanced economies, shares in businesses in developing countries are both cheaper and better-performing.

Presidential elections will be held in Brazil in October and the candidate currently leading the race is Dilma Rousseff, who analysts at Bank of America told Bloomberg was likely to support public infrastructure investments.

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