The Brazilian Boom

Jeff Manera, July 07, 2008

The credit crunch and housing crisis has been a big story in the U.S. markets for months. Foreclosures are happening left and right, and banks are still trying to mop up the mess by raising capital. While it seems like the situation can't get any worse, I still don't think that we have hit a bottom with the housing crisis. I think that we'll see home prices rebound back to the pre-bubble prices we saw in 2002 and 2003.

So there are still housing problems to come in the U.S., but keep in mind that not every country's housing sector is suffering like ours is. In fact, Brazil's housing sector is booming right now, and it's offering some excellent investment opportunities. Let's take a closer look.

A big factor in rising above inflation problems and budgetary deficits is Brazil's president, Luiz Inacio Lula da Silva. Because of steps that he has taken, the country's currency has stabilized vs. historic periods -- Indeed the local currency, the "real," is near a nine-year high against the U.S. dollar! And with exchange rates like that, Brazil is attracting more foreign investment.

With cash flooding into the country, Brazil's economy is clocking with a 4.5% GDP. And not to mention, Brazil's middle class is growing. Investing in impressive growth like this is a great way to profit from emerging countries. And as Brazil's growth continues, I think that the country will be come a powerful economic force.

Since the country's middle class is growing, Brazil is expanding and that means that construction, particularly housing, is booming. And that's why there's opportunity in Brazil's housing industry.

Also supporting this trend is the fact that interest rates have been reduced in Brazil. Lower interest rates effectively allow Brazilian banks to offer fixed-rate home loans for the first time. So those who couldn't afford a home before are now able to purchase a house.

Plus, a recent change in Brazil's housing laws now allows banks to repossess defaulting properties far easier than before. Before, Brazilian banks were very hesitant about underwriting loans. Now, they're much more willing to write loans because they are protected by this new law, and they are able to repossess a home if payments aren't made..

So, with banks more willing to loan money, and more Brazilians able to afford their own homes, you can see how the Brazilian housing market is growing quickly. Just look at the numbers: home mortgages grew 88% in the first four months of 2008 compared to the same period last year.

Now that you see how Brazil's housing sector is a great place for investment, I'm sure you're wondering which company is best to invest in. Right now, I think the best way to profit from the explosion in housing in Brazil is in the homebuilding sector.

In G³ Global Options, I recommend investing in one of the top homebuilders in Brazil. This company is the only Brazilian homebuilder with an ADR that we can easily trade -- but I would still probably choose it as an investment over its competitors even if we had direct access to their shares.

And this company is now newbie to the field: iy has been in operation for five decades and completed close to 1000 commercial and residential projects. And it helps that the company has a ton of buildable land in its inventory ready for development, and a good number of projects already under construction.

To learn more about this company and my specific buy-below price, as well as more about Brazil's economic growth, visit the G³ Global Options website.