Shipwrecked Portuguese could use Brazilian aid

Posted on: April 5, 2011 in: Economic Growth with 0 comments

London’s Financial Times offers a novel solution to Portugal’s debt crisis: annexation by its former colony, Brazil. Despite Portuguese outrage, the FT has a point. If it absorbed Portugal, Brazil’s GDP and debt would rise by 10%. Portugal, from being the poorest in old Europe, would be part of a country with a future – a stable government, a growing economy, a trade surplus, and hard cash in a solvent bank – all things Portugal sorely lacks. Like its economy Portugal’s stock index, the PSI 20 has been flat all year.

Not Brazil. iShares’ EWZ (one of the largest of all ETFs with $13 bln in assets) holds large caps like Petrobras and miner, Vale. These two firms are 37% of the ETF. EWZ is up 6.5% in one year.

For firms tied to Brazilian’s prosperity, there is the Brazil Small Cap (BRF). Heavier on consumer and industrial sectors, in one year it has earned 30%. BRF is recovering from a stumble (see chart) but it is still not cheap. High inflation may also hurt it. But further out, BRF is a winner.

BRF Charts

Brazil Small Cap ETF

archerETF Metrix BRF
Category EM Markets
Benchmark MSCI Brazil
Total Holdings 66
52 Week High $59.77
Recent Price $55.76
52 Week Low $35.74
Avg Daily Volume 0.35 Million Shrs
Avg Daily Volume ($) $19.34 Million
Total Market Cap $909.90 Million
ETF Annual Fee 0.71%
ETF Trading Currency USD
ETF FX Exposure BRL
Annual Volatility Not Available
Correlation to S&P 500 77.07%
Return to Risk Ratio Not Available
Use of Leverage No
Use of Futures No
6 month Return 7.67%
1 Year Return 30.10%
2 Year Return Not Available
3 Year Return Not Available
Dividend Yield (TTM) Not Available

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