Louis Basenese, Small Cap and Special Situations expert at Investment U , analyzes market forces in – and the potential of – Brazil. Louis Basenes ( Investment U ): Hundreds of millions of Chinese citizens are on a crash course with the middle class. A study from The McKinsey Quarterly supports this well-documented phenomenon, which estimates that it will take two decades before the Chinese nouveau riche reaches its full spending potential. In turn, they’re convinced that decades worth of profits are up for grabs. I’m not about to refute that claim here. But instead, I want to caution you: Don’t be blinded by the euphoria over Chinese consumers and overlook an equally compelling opportunity in another emerging market. Let’s head down to Brazil and I’ll explain why – along with the best way to profit, of course… Sizing Up Brazil’s Profit Potential Okay, I get that the scale of the Chinese opportunity – a population of 1.31 billion people, compared to Brazil’s 192 million citizens – dwarfs Brazil’s. But that doesn’t mean the profit potential is any less. On the contrary, in fact… I’d actually say it’s greater when it comes to tapping into a blossoming middle class. In this regard, Brazil boasts several notable advantages over China… It’s a democratic nation, not a communist one. Its population is much younger – the median age is 28.3, compared to 33.6 in China. Brazil is far less reliant on exports. Only 14% of Brazil’s GDP comes from exports, compared to 35% from China. It already possesses all the natural resources necessary (and then some) to support its booming economy. Meanwhile, China needs to go out and gobble up foreign assets to ensure it can keep feeding its economic machine with enough oil, gas, coal, iron ore, etc. But most important of all is the cultural difference. The Chinese are notorious savers, yet Brazilians love to spend, spend, spend. And don’t just take my word for it. As Illan Goldfajn, Chief Economist at Brazilian bank, Itaú, reveals, “If the world is looking for savers, Brazil is not much good… But if it’s looking for consumers, then we might be able to help.” Click here for the rest of Mr. Basenese’s analysis at Investment U.
Tags: analyzes-market, Brazil, brazilian, China, chinese, cultural, financial news, illan-goldfajn, international investing, Investment, louis-basenes, louis-basenese, mean-the-profit, potential, profit
Posted December 9, 2009 by under Contrarian Investing