That headline is phrased in the form of a question because
times are tough for Brazil
That much has been
well-documented in recent weeks
. A 1.6 percent gain on Friday was still not enough to turn the
iShares MSCI Brazil Capped Index Fund (NYSE:
) positive for the week, but that pop did reduce EWZ's
year-to-date loss to about five percent.
has problems, plenty of them in fact
. Namely, the struggles of Petrobras (NYSE:
) and Vale (NYSE:
), the ETF's two largest holdings. With that in mind, investors
looking for exposure should probably steer clear of EWZ in the
The EGShares Brazil Infrastructure ETF (NYSE:
) does have a 5.7 percent weight to Vale, but even with that,
BRXX potentially holds promise for investors. Emphasis on
"potentially." On nearly double its average daily volume, BRXX
gained 1.5 percent Friday, trimming its year-to-date loss to just
1.2 percent in the process.
To be sure, BRXX, like its Brazil ETF brethren, has a legacy
of frustrating investors. In August, the Brazilian government
announced a $66 billion infrastructure program
aimed at boosting the economy
while preparing the country for the 2014 World Cup and the 2016
Summer Olympics. Since August 14, BRXX is down more than five
Still, some notable investors see opportunities in Brazil. In
recent blog post
, famed emerging markets investors Mark Mobius of Franklin
Templeton Investments highlighted his recent visit to Recife in
Brazil's northeast Pernambuco state.
"Recife will be one of the 12 cities playing host to the 2014
FIFA World Cup Brazil, so many were also hard at work on
infrastructure and construction projects there," said Mobius.
Mobius and his team visited some burgeoning projects in
"We also visited the enormous 13,500 hectare construction
project in the Port area, which includes an oil refinery and
petrochemical complex in addition to many subsidiary and
supporting industrial projects," he said. "Construction began in
2006 and is still not yet complete. From our bird's eye view of
the enormous construction site, we saw lots of activity, but
completion this year seems ambitious given how much remains to be
It is just one man's view, but Mobius is one of the more
astute emerging markets investors around and it certainly goes
without saying infrastructure spending is going to be a
significant part of Brazil's domestic economy over the next
On the other hand, BRXX's track record cannot be ignored. The
ETF is up less than three percent since its February 2010 debut.
By the time BRXX debuted, investors already knew that Brazil
would be hosting the aforementioned global sporting events.
In theory, BRXX should be the ideal way with which to play the
obvious theme of necessary Brazilian infrastructure largess.
Maybe the ETF will eventually deliver on that front, but it has
not yet done so.
Another issue to consider with BRXX is the ETF's utilities
exposure, which is nearly a third of the fund's weight. As if
investors' treatment of Petrobras and Vale is not bad enough,
Brazilian utilities have been savagely repudiated
Like Petrobras and Vale, Brazilian utilities are being
adversely impacted by government policies. Recently, the
government forced utilities to either cut power prices or return
contracts to be re-auctioned when they're completed, Bloomberg
As for BRXX, patient investors will like the
5.62 percent index dividend yield
, though chart-watchers will want to see this ETF hold above $21
for a few sessions before pulling the trigger.
For more on ETFs, click
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