Brazil announced over the weekend it had conducted $3.2 billion in business with China during April — a 12-fold increase in Sino-Brazilian trade from 2001. April also marks the second consecutive month that the U.S. has ranked No. 2.

What’s the trade? Iron ore. Brazilian officials say the Chinese have been buying the stuff hand over fist since the start of 2009.

As one consequence, Brazil’s stock market, the Bovespa Index, is outpacing the American equity rebound. Brazil’s version of the Dow has recouped the majority of its crisis losses. Check it out:

Brazil and China are just two areas of rich investment opportunity we’ll be focusing on with the new BRIC report we conceived with our Indian partners last week in London. Specific details on the report are forthcoming.

“The Brazilians are gearing up for the first battle of the next war,” says Byron King. “They intend to survive as a prosperous, industrialized country in the 21st century, despite intense future competition across the world for energy fuels and other natural resources.

“Down in Brazil, they’re in something like national rapture at the prospect of drilling up the deep pre-salt hydrocarbon plays in the offshore basins. The estimates are that the deep basins off Brazil hold between 20-100 billion barrels of oil. Maybe more.

“The entire nation of Brazil, apparently, revels in the prospect of investing over $120 billion in offshore development in just the next eight years. They have a plan. It’s their moonshot. The Brazilians believe that the offshore environment will bring their industries firmly into the modern era. Brazil wants to be a world power in the 21st century. And the oil? Well, of course they have plans for that oil.

“Petrobras has plans to emplace HUNDREDS of subsea systems on the deep ocean bottom to bring that oil into production. The Brazilians will lay thousands of miles of underwater pipeline, with all the associated ship support and other equipment that entails.

“The Brazilians are not living in the frozen past. They’re not hostage to paralyzing myths. The Brazilians envision a future for their nation, and they’re acting on it. They see hundreds of deep-water oil wells pulling petroleum out of the crust from many miles down and piping it ashore to their refineries and industries. Indeed, Brazil plans to win that first battle of the next war. And it’s cutting the steel with which to do it.”

Source: China Takes Another #1 Title From the U.S.

More from Money Morning:

Like most other markets, Brazil has been battered by the credit crisis – the BOVESPA index is currently down 28% in October alone and no less than 52% from its peak as recently as May. It now appears to represent excellent value, with a historic Price/Earnings (P/E) ratio of only7.0.

But are Brazil’s prospects good enough to justify investing there?

Brazil was included in the “BRIC” (Brazil, Russia, India and China) group of rapidly emerging markets that Goldman Sachs Group Inc. (NYSE:GS) created in 2003. At that time the country didn’t deserve the distinction. Long-term growth since the 1970s had averaged less than 2% per capita, and the country had barely avoided bankruptcy in 2002. Every time the world had experienced a credit crunch, Brazil had been caught up in it, chiefly because of the country’s enormous international debt load.

Brazil got lucky. First, socialist President Luis Inacio “Lula” da Silva proved to be surprisingly moderate, not much to the left, economically, of previous Brazilian governments, perfectly willing to welcome foreign investment and generally friendly to the United States. Also, in 2003, energy and commodity prices began their long climb as part of a worldwide commodities rally that saw prices peak at astronomical levels earlier this year.

Since Brazil was not an oil exporter, there was no one single source of new wealth that the government could seize. Instead, revenue flowed to mining companies, the oil company Petroleo Brasileiro SA, better-known as Petrobras (ADR: PBR), and numerous agri-business operations that benefited from the rise in agricultural prices. It didn’t hurt at all when in November 2007 Petrobras discovered about 36 billion barrels of oil in an offshore Brazilian field.

Even Brazil’s ethanol program, which had been a hopeless boondoggle for a generation since it started during the oil crisis of 1979-82, suddenly became the envy of the world, as rising oil prices made Brazilian sugarcane the world’s cheapest and most economically and ecologically efficient source of newly fashionable ethanol. With oil prices down in the $20-a-barrel range, the ethanol-from-sugar program was a typical example of misguided Third World government planning. But at $140 a barrel, it was a bonanza.

Even at $60 a barrel, it is still a useful diversification from petroleum.

Brazil’s debt position improved after 2002 in three ways:

• The outstanding amount of debt has been reduced through modest repayments.
• Its ratio to gross domestic product (GDP) has dropped sharply, as GDP in dollar terms has shot up with the revaluation of the Brazilian real against the dollar.
• And its interest costs have dropped with Brazil’s improving creditworthiness and the generally low level of global interest rates.

Brazil’s ascension to “investment grade” status in spring 2008 appeared to cement the improvement in place; its public sector debt to GDP ratio in June 2008 was around 40%, lower than Britain’s, for example.

The financial crisis and economic downturn of 2008 has made life more difficult for Brazil. Oil and other commodity prices have sharply declined, reducing the value of Brazil’s exports. The real has declined over 30% against the dollar, increasing Brazil’s foreign debt, which is mostly dollar-denominated.

The Brazilian stock market’s decline will undoubtedly have a substantial negative wealth effect, making it more difficult for Brazilian entrepreneurs to finance new projects. On the other hand, a forecast by The Economist has Brazil still growing at 4.6% in 2008 and 3.4% in 2009, with consumer prices rising 6.0%. The Central Bank of Brazil has a good grip on inflation, with its Selic short-term rate at no less than 13.75%, while it is injecting funds into the banking system to battle the global liquidity shortage.

With continued economic growth, modest inflation, and stock prices at bargain levels for U.S. investors, Brazil is well worth considering. There are more than 30 Brazilian companies with full American Depository Receipt (ADR) listings on the New York Stock Exchange, plus 40 to 50 more traded on the over-the-counter market.  A few attractive examples you might want to look include:

Banco Itau Holding Financeira SA (ADR:ITU). This stock features a Price/Earnings There are three large banks listed on the New York Stock Exchange: The other two are the other two are Banco Bradesco SA (ADR: BBD) and Uniao Bancos Brasile SA (Unibanco) (ADR: UBB). However, Itau is the cheapest of the three, though only slightly.

Companhia Vale do Rio Doce, now referred to only as Vale (ADR: RIO). This is one of the true global blue chips. It has a market capitalization of almost $56 billion, and its stock has fallen by fully 75% since May. It is an iron-ore company with ancillary operations in gold, nickel, copper and other metals, and its shares are trading about four times projected 2008 earnings. The stock features a 5.0% yield. As one of the world’s low cost producers of iron ore, it should bounce back once conditions become more clear.

Petroleo Brasileiro SA, better known as Petrobras (ADR: PBR). Petrobras is one of the few emerging market oil companies with access to modern technology and willingness to work with the oil majors. Down by 60% in the last five months, the stock’s prospective P/E ratio is now only 5.5. It has a dividend yield of 1.3%. Petrobras remains a fairly low cost oil producer, since its production comes from conventional, albeit offshore sources.

Companhia de Saneamento Basico, also known as Sabesp (ADR: SBS). This is the water-and-sewage system for Sao Paulo. Now that’s a growth business, and is one that’s not dependent on commodity prices or on rapid Brazilian economic growth. The shares feature a P/E ratio of only 3.1 and a yield of 8.0%. This one must surely be a bargain; it has very little dependency on the economy.

Votorantim Celulose e Papel SA (ADR: VCP). This is a pulp-and-paper company, with a prospective P/E ratio of 6.0 and a dividend yield of 9.5%. Trees grow fast in the tropics; VCP benefits from that!

Finally, you should consider the Brazilian ETF, the iShares MSCI Brazil Fund (NYSE: EWZ). The fund was more than $5 billion in size at Sept. 30, and currently trades at a P/E of about 7.0 with a dividend yield of 3.0%.

As I said, Brazilian stocks are currently in the bargain-basement category, and well worth a look.

PS. Andrew Gordon at Investor’s Daily Edge recently said that Brazil was well placed to weather the current financial crisis. Read why Brazil is the best of the BRICs here.

Source: Six Profit Plays From South of the Equator

Brazil’s economy is booming. Brazilian companies are breaking-out onto the world stage. And its share market has been the best performer among the world’s twenty biggest this year.

The Bovespa Index is up by 13% since the beginning of 2008. Compare that to the FTSE – it’s fallen 5.6% since the start of the year!

The Brazilian stampede: Rich investors are piling in!

But here’s the most telling thing…

The majority of the action in Brazilian shares has NOT been happening in Sao Paulo… but in New York. In fact, the value of Brazilian shares traded in the U.S. has surpassed the daily average in Sao Paula since the beginning of this year.

The average daily trading in Brazilian American Depositary Receipts (ADRs) was $4.07 billion so far this month through May 26, topping the previous record in January of $3.99 billion. In the same period, trading on the Bovespa stock exchange in Sao Paulo averaged $3.59 billion a day.

Why is this significant?

It shows huge foreign interest in Brazilian shares – and with very good reason…

Brazilian companies have become global leaders in key industries.

Companhia Vale do Rio Doce is now the world’s biggest iron-ore producer. State-owned oil company, Petrobras, overtook Mircrosoft to become the world’s sixth-biggest company by market capitalisation last week. Petrobras is sitting on the Western Hemisphere’s largest oil discovery in three decades. Possibly even the third-biggest oil field in the world!

These are names that are going to become much more familiar to us in the decades ahead.

Brazil isn’t just an emerging oil giant… it’s also the biggest producer of the only truly commercially viable alternative to oil – sugar-based ethanol.

In fact, it produces so much of the stuff that the country has been dubbed the “Saudi Arabia of ethanol”.

But Brazil isn’t just a commodities play either…

It has a strong services-based economic sector as well. In fact Profit Hunter rode the country’s banking boom to healthy profit last August through our investment in Banco Itau. [Note: Past performance is no indication of future results]

A five hundred year growth story

Brazil has seen fantastic growth in recent years.

Measured in 1990 dollars, the entire Brazilian economy was worth about $400 million in 1500 A.D. That would have put the country at about number 325 on this year’s Times Rich List. By 1900, that had grown to $12.2 billion – respectable, but hardly impressive.

The real economic boom began in the 20th century.

By 2000, Brazil’s economy had reached $975.44 billion – a massive gain of 7895% since the beginning of the century. And Brazil is perfectly placed to keep up that pace into this century as well.

The IMF predicts the country’s economy will grow 4.75% this year, despite the global economic slowdown.

That’s three times faster than the UK’s expected to grow!

Here at Profit Hunter we’re in no doubt the Brazilian growth story still has a long way to run. And we’re looking for the next under-the-radar play on this amazing economy.

The best way to profit from Booming Brazil

The easiest way to ride this boom would be to get in through an ETF that tracks the Bovespa Index. But that isn’t the smartest way in.

You see, one result of all the trading in Brazilian shares in New York could be to divert investment away from the Brazilian market itself.

That’s been good for the companies, but it might act as a drag on the Bovespa Index going forward.

Instead, we’re looking at a ‘backdoor’ way to get into this story.

That’s not easy when you’ve got the whole world trying to pile into this market. But we’ll keep looking, and we’ll let you know very soon.

Manraaj Singh
Editor
Profit Hunter

Source: Brazil, The World’s Best Performing Stock Market