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Brazil's Bright Future



June 03, 2009 – Comments (0)

If you've read Francis Fukuyama's Falling Behind, then you know that the problem that's dogged Latin America for centuries has been political instability and inconsistent respect for property rights. That latter reputation is the reason why, as Joshua Goodman reports on Bloomberg today, Brazil's "nation’s currency plummeted 60 percent, and its borrowing costs tripled to 24 percent" with the 2002 election of former Marxist Luiz Inacio Lula da Silva.

Fast forward 7 years, and Lula has been an enormous success. Brazil's market is up, investors are excited, the country has taken a position of economic leadership in Latin America, and Lula has turned out to be a centrist who has forged good relationships with the developed countries such as the US as well as with other emerging nations such as China and Turkey. And these countries are very happy to forge friendly relations with Brazil given that it is an enormous potential market for their exports as well as a country that is rich in natural resources. in fact, World Politics Review today called Lula the "diplomatic leader" of Latin America.

Of course, as happens in democracies, Brazil is now preparing to replace Lula with two candidates who have the same potential to freak out investors as Lula did in 2002. And though both seem to claim that they will continue Lula's policies, elections are always a bit of a wildcard. If you're an investor in Brazil or a potential investor in Brazil, take some time to check out these links to understand the two candidates and what their leadership could mean for Brazil. After all, Latin America has long been a continent of false starts. Though we're pretty optimistic at Global Gains about the Brazilian market going forward, that doesn't mean there won't be volatility.

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